01 The Hour
10:00
Wednesday 25 August 2021, Kabul
A former soldier had been in the line outside the bank for four hours and had still not reached the building. He had 20,000 afghanis in the account, about 232 dollars, earned in the army. The banks had been shut for ten days.
Beside him stood another man from the security forces, who said he did not know whether this would be the last salary he would ever draw. Clock times below appear where the record carries them. The rest of the sequence is dated to the day.
02 The Sequence
13 Aug The acting governor of the central bank later said he had been told on the Friday that there would be no further shipments of dollars into the country.
15 Aug Banks in Kabul largely shut on the afternoon, before the president left the country and the Taliban entered the city. In the preceding days, tens of thousands of people had gone to branches and cash machines to take out what they could.
18 Aug Ajmal Ahmady, by then out of the country, set out on Twitter where the reserves were: around 9 billion dollars in all, some 7 billion of it held as cash, gold, bonds and other investments at the US Federal Reserve. A US administration official confirmed that nearly 9.5 billion dollars of central bank assets had been frozen and cash shipments stopped. The IMF said the country could not access Special Drawing Rights or other Fund resources, and that 310 million SDRs would be allocated on its behalf.
25 Aug Banks began to reopen, drawing crowds of hundreds. One man in the line spent four hours to withdraw 150,000 afghanis, about 1,742 dollars, and said he did not expect the banks to keep pace with the rush. Outside the New Kabul Bank in Shahr-e-Naw, the crowd broke the windows of the corridor leading into the building. The World Bank announced the same day that it was halting its assistance.
28 Aug The central bank instructed banks to limit each customer to 200 dollars or 20,000 afghanis a week. The order followed protests in Kabul over the closure of the banks.
29 Aug The acting head of the central bank told bank officials in Kabul that the weekly limit was a temporary solution and that banks would return to normal operations gradually. Apart from the main branches of Kabul Bank and Azizi Bank, the others were still shut.
2 Sep Western Union resumed transfers into the country, and MoneyGram did the same. Its regional president told Reuters that the reopening of the banks had given the company the confidence to restart, since the transfer firms rely on banks to dispense and collect funds.
4 Sep Sarai Shahzada, the largest money exchange market in Kabul, reopened over the weekend after nearly three weeks shut, and hundreds of people came through it.
3 Nov The central bank doubled the cap to the equivalent of 400 dollars a week, or 1,200 a month, and said money deposited from that day could be withdrawn without restriction. The day before, foreign currency transactions had been banned.
03 The Hidden Dependency
On paper the position was comfortable. The IMF put the central bank's international reserves at 9.5 billion dollars in its June 2021 review, which Reuters calculated as import cover of more than fifteen months, against the three months usually treated as a safe minimum.
The dollars that circulated inside the country arrived another way. Ahmady wrote that given the size of the current account deficit, the bank had relied on obtaining physical shipments of cash every few weeks, and that the amount of such cash remaining was close to zero after the shipments stopped.
Reserve adequacy was counted in months of imports, and what ran out was the consignment of banknotes.
04 What Still Worked
Two main branches
At the end of August, the main branches of Kabul Bank and Azizi Bank were open while the other banks were not. They were where the weekly limit could actually be drawn.
Remittances inbound
From 2 September, Western Union paid out transfers into the country in dollars or afghanis, at selected locations mostly around Kabul. Transfers out of the country stayed suspended.
The exchange market
Sarai Shahzada reopened in early September. Office owners there said the market held close to 400 exchange offices with counterparts in 120 countries.
05 The Plumbing
The Plumbing 23 August 2021
A general allocation of Special Drawing Rights is not a transfer of money. The IMF Board of Governors approved an allocation equivalent to about 650 billion dollars on 2 August 2021, effective on 23 August, credited to member countries in proportion to their existing quotas in the Fund.
The Fund's own description of the instrument is precise. The SDR is neither a currency nor a claim on the IMF. It is a potential claim on the freely usable currencies of members, and it can be exchanged for those currencies. The holder needs a counterparty.
06 The Pattern Library
1 When one retail withdrawal channel closes or fails, demand concentrates on whichever channel is left open, and the capacity of that channel sets what a depositor can obtain.
Observed: Northern Rock 2007, Cyprus 2013, India 2016, Greece 2015, United States 1933, Argentina 2001, Lebanon 2019, Worldpay 2026, TSB 2018, Visa Europe 2018, Afghanistan 2021.
2 A currency replacement can require physical modification of each cash dispensing machine before the new notes can be issued, so the machine estate returns to service site by site rather than at once.
Observed: India 2016.
3 Withdrawal limits imposed on a domestic banking system can be written to exempt cards issued outside it, so one machine dispenses under two rules according to where the card was issued.
Observed: Greece 2015.
4 Domestic payment and deposit channels can continue operating while cross-border payment routes fail, with the central bank standing in as the intermediary for payments to and from the country.
Observed: Iceland 2008.
5 When the institutions that convert payment instruments into cash are closed, wages and checks already received cannot be spent, and merchants and carriers extend their own credit in place of the missing conversion.
Observed: United States 1933.
6 A public employer short of the national currency can pay wages in an instrument it issues itself, which then circulates alongside the currency it stands in for.
Observed: Argentina 2001.
7 Withdrawal restrictions can be imposed by individual institutions and their trade association rather than by statute, so the limit differs from bank to bank and no law governs it.
Observed: Lebanon 2019.
8 A cash withdrawal ceiling set in nominal units has to be raised alongside the note denominations that pay it, because the ceiling can only be dispensed in the notes that exist.
Observed: Zimbabwe 2008.
9 A payment outage can hit card authorisation and merchant funding as separate faults, so acceptance at the terminal is restored while the money owed to the merchant arrives a day late under its own incident notice.
Observed: Worldpay 2026.
10 A retailer that loses electricity can go on trading by taking cash and rationing goods by hand, so the counter outlasts the checkout system that normally prices and settles the basket.
Observed: Texas 2021.
11 A systems migration can leave account records readable but wrong, including presenting one customer's account to another, so a working login is no guarantee that the balance on the screen belongs to the person reading it.
Observed: TSB 2018.
12 Two processing sites that can each carry the whole load can still fail together when the failure is partial rather than complete, because the failing site is not isolated quickly and goes on sending synchronisation traffic to the site that was meant to take over.
Observed: Visa Europe 2018.
13 The cash circulating in a country can depend on periodic physical shipments of foreign banknotes, so an interruption of the shipments empties the counters while the reserves that stand behind them remain recorded abroad.
Observed: Afghanistan 2021.
Changed today: Entry 1 gained Afghanistan 2021, where the banks closed on 15 August and the demand landed on the few branches that opened from 25 August, with what a customer could obtain set first by the queue and then by a weekly cap of 200 dollars or 20,000 afghanis. Entry 13 added, on cash that arrives in a country by periodic shipment.