Afghanistan shores up new currency

The new bills are a thousand times more valuable

By Kylie Morris BBC correspondent in Kabul

Afghanistan has taken emergency measures to shore up its currency.

There have been suggestions that someone is printing up old money to sabotage the new note

The central bank introduced new bank notes, a thousand times more valuable than the old notes, nearly three weeks ago.

The move by President Hamid Karzai's government to introduce a new, more valuable, bank note was applauded by international observers.

But panic over the change, and a flood of old money, have dragged down the value of the afghani.

The central bank governor, Anwar ul-Haq Ahady, has announced the bank will sell $5,000,000 in the money market to try to soak up supplies of the old currency, which are dragging down the value of the new.

Reassurances

Afghanistan has long had money troubles.

Large amounts of old currency weaken the new

Under the old system, the central bank had no control over how much money was in the market.

Some war lords printed up their own cash, counterfeiting was rife, and different kinds of money altogether were used in certain parts of the country.

International donors, who saw it as vital to the new administration assuming fiscal control, welcomed the introduction of a new, more valuable, bank note.

But all has not gone smoothly.

Mr Ahady has reassured the Afghan public that all bank notes will be exchanged, although because lower denominations are slowing the conversion down the bank has asked money-changers to delay changing those notes for a few weeks.

He has also expressed concern at the appearance of large numbers of old bank notes in unopened bundles.

Dipping value

There have been suggestions that someone is printing up old money to sabotage the new note.

But the central bank governor says he has no evidence of this.

He says anyone bringing in large new bundles of old notes will be questioned as to the legitimacy of that money.

He expected that despite early difficulties in the new currency reaching all the provinces of Afghanistan, those who have not received them will do so in the next two or three days.

The statement by the governor is likely to settle nerves in the market where the value of the Afghani has sunk to 58,000 to the dollar.