Sources: US, Taliban make progress on frozen Afghan reserves

The US and Taliban officials have exchanged proposals for the release of billions of dollars from Afghan central bank reserves held abroad into a trust fund, three sources familiar with the talks said, offering a hint of progress in efforts to ease economic crisis in the war-torn country.

Significant differences between the sides remain, however, according to two of the sources, including the Taliban’s refusal to replace the bank’s top political appointees, one of whom is under US sanctions as are several of the movement’s leaders.

Some experts stated such a move would help restore confidence in the institution by insulating it from interference by the militant group that seized power a year ago but which foreign governments do not recognise.

Freeing up cash may not solve all of Afghanistan’s financial troubles, but it would provide relief for a country hit by a slump in foreign aid, persistent drought and an earthquake in June that killed 1,000 people. Millions of Afghans are facing a second winter without enough to eat.

While the Taliban do not reject the concept of a trust fund, they oppose a US proposal for third-party control of the fund that would hold and disburse returned reserves, noted a Taliban government source who spoke on condition of anonymity.

The United States has been in talks with Switzerland and other parties on the creation of a mechanism that would include the trust fund, disbursements from which would be decided with the help of an international board, according to a US source who also declined to be named in order to discuss the matter.

A possible model could be the Afghanistan Reconstruction Trust Fund, a World Bank-administered fund created to get donations of foreign development assistance to Kabul, the US source added.

“No agreement has been reached yet,” said Shah Mehrabi, an Afghan-American economics professor who is on the Afghan central bank’s supreme council.

The US State Department and Switzerland’s Federal Department of Foreign Affairs declined to comment. The Afghan central bank did not respond to requests for comment.

US Special Representative for Afghanistan Thomas West, speaking at an Afghanistan-focused conference in Uzbekistan on Tuesday, welcomed the dialogue.

“We have made it clear that a future recapitalisation of the (Afghanistan) central bank and the Afghan financial system is possible provided that reasonable and serious steps are taken to professionalise the central bank, to enhance its AML/CFT (anti-money laundering and counter-terrorist financing) architecture and its independence,” he stated.

Some $9 billion in reserves have been held outside Afghanistan, including $7 billion in the United States, since the Taliban overran Kabul last August as US-led forces withdrew after 20 years of fighting the militants.

Foreign governments and rights groups have accused the Taliban of abuses including extrajudicial killings during and after the insurgency, and the movement has curtailed women’s freedoms since regaining power.

The international community wants the group to improve its record on women’s and other rights before officially recognising it.

The Taliban have promised to investigate alleged killings.

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