Role of the Central Bank in preventing the liquidity crisis in recent years in Afghanistan

Abstract

Purpose: The purpose of this research is to examine the financial situation of Afghanistan with a special focus on the role of the central bank in reducing the liquidity crisis. The purpose of this study is to understand the challenges that Afghan banks face in maintaining sufficient funds and meeting their obligations without incurring significant losses. Methodology: To address the research objective, this study has used a mixed method. First, we analyzed the documents obtained from international organizations, we examined the liquidity situation of Afghan banks. The research method of this research is descriptive with a qualitative approach. The results of this research describe the submissions and field observations so that they can have a clear picture of the financial situation. Banking and especially liquidity, once created, provide financial reports in response. Samples in qualitative research are often referred to as participants or informants. The selection of informed people in this research has been done using a targeted sampling method and with considerations that are directly related to the submissions of international organizations (UNDP), the World Bank, Central Bank Management (DAB) and other departments. Data by monitoring the banking sector and studying the submissions of international and domestic institutions such as Vision and Mission. Results: The findings of this research show that Afghan banks are struggling with severe liquidity problems. The decrease in economic activity, lack of public trust in the banking system and limited capacity have contributed to this issue. In addition, access to physical notes is also limited. This study shows that after the Taliban took over, several Afghan banks faced a lack of funds, which led some of them to declare bankruptcy.