What is the Afghan Afghani (AFN)?
Afghan Afghani refers to the official currency of Afghanistan and is represented by ISO code AFN. It is issued by Da Afghanistan Bank, the country’s central bank, which aims to minimize the likelihood of inflation while retaining a floating exchange rate system.
In recent decades, Afghanistan experienced many modifications to its currency. The original Afghani replaced the Afghan rupee in 1925. It was reformed again in 2002 as part of attempts to support the currency and decrease inflation. The Afghan afghani circulated under the AFA symbol before 2002. The previous Afghani worked at a fixed exchange rate, while the AFN is a floating currency.
- Afghani Afghan refers to the official currency of Afghanistan and is represented by ISO code AFN.
- The original Afghani was modified in 2002 as part of attempts to support the currency and reduce inflation.
- The continuing political turmoil has slowed the economic growth of the country.
History of the Afghan Afghani
Market forces have been freely determining the foreign exchange rate of Afghan Afghani except for during World War I. However, for several years, there has been a dual exchange rate system in Afghanistan, the one set by the country’s central bank, and a free-market exchange rate dictated by the supply and demand in Kabul’s currency bazaar known as the Sarai Shahzada. While Da Afghanistan Bank tried to maintain its exchange rate similar to that of Sarai Shahzada, the difference between the official and free-market exchange rates expanded during the 1980s and the civil war afterward.
Briefly, after the Taliban seized charge of Afghanistan’s banks in December 1996, Ehsanullah Ehsan, chairman of the Central Bank of Taliban, announced that most of the Afghan notes in circulation, almost 100 trillion Afghan Afghani, were useless. As a result, the contract with the Russian company, which had been printing Afghan notes since 1992, was canceled.
Since 2001, after the involvement of the United States, the currency has been extremely destabilized. The currency traded at 73,000 Afghani per US dollar in September 2001, sharply rising to 23,000 Afghani after the collapse of the Taliban regime in November 2001 and slipping down to 36,000 Afghani in January 2002. By that time, about seven different variants of the currency were in circulation. The former governor said that it resulted in maybe “trillions” of notes to be in circulation at that time.
In 2002, the Afghani got redenominated and adopted the ISO AFN code. However, no subdivisions were released. It replaced the previous currency at two different rates – the government issues of the former President were replaced by the new ones at a rate of 1,000 old, whereas the issues of the Warlord were replaced by the new ones at a rate of 2,000 old Afghani. It was developed for stabilizing the economy and preventing rapid inflation. The currency notes were printed in Germany.
On September 4, 2002, then-President Hamid Karzai announced the new currency. It was unveiled in the market on October 8, 2002. The public received the monetary reform well since it signaled stability and security, particularly the country’s efforts to rebuild. It was the first time in several years that the single currency came under the influence of the central bank instead of warlords.
Current Afghan Afghani
All of the old banknotes were discarded by the end of 2002. The central bank released AFN notes in 1, 2, 5, 10, 20, 50, 100, 500, and 1,000 AFN denominations. All the 1, 2, and 5 AFN banknotes were replaced with coins in 2005.
The most recent reform occurred in 2014 when the 1,000 AFN banknote was modified with additional security measures to reduce the possibility of counterfeiting. The 1000 AFN note shows the Noble Shrine and the Ahmad Shah Durrani Mausoleum on the front and the rear, respectively.
As per the World Bank, continuing political turmoil has slowed Afghanistan’s economic growth. The adverse events also inhibited private spending and decreased market demand. While the AFN currently enjoys comparatively low inflation rates, Afghanistan endured extreme inflation bouts in the past.
CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful: