Dollar plans sends Afghan currency tumbling
KABUL, Afghanistan (CNN) -- A suggestion that Afghanistan temporarily dollarize its economy has sparked chaotic scenes on the informal currency exchanges in Kabul, wiping about 25% off the value of the Afghani currency.
As moneychangers scrambled to offload their Afghanis, furious bargaining pushed the currency from a steady 29,000 to the dollar to a low of 50,000, before staging a slight recovery.
The proposal to introduce the U.S. dollar as a temporary currency was made by a visiting delegation from the International Monetary Fund earlier this week.
Warren Coates, assistant director of the IMF's monetary and exchange affairs said the dollar might serve as a stopgap currency while Afghanistan re-establishes its central bank and introduces a new currency.
Introducing a new Afghani could take two to three years officials say.
Currency traders in the Kabul markets that serve as Afghanistan's trading houses have reacted angrily, worried that their piles of Afghanis may soon be worthless.
"It will be a big loss for all the Afghan people, rich and poor alike," said one trader.
"The Afghans have a lot of local currency stored up. Nobody wants the dollar to replace the Afghani."
It doesn't help that there are several versions of the Afghan currency in circulation.
Some traders accuse Russia of printing vast quantities of Afghanis for its Northern Alliance allies.
For years the Afghani's value against the dollar and the Pakistani rupee has been set by hearsay -- from conversations in the streets, to hurried cellphone conversations with Afghan merchants in neighboring Pakistan.
The haphazard system has seen the Afghani soar and plunge in the months since September 11.
Following the attacks on New York and Washington it traded at about the 73,000 level for several weeks before surging to 23,000 when the Taliban abandoned Kabul in November.
It ultimately leveled off at 28-30,000 to the dollar in early January.
That was until the IMF stepped in, sending moneychangers in the Afghan capital frantic and underscoring the massive task ahead in bringing monetary stability to Afghanistan.
-- CNN's Time Lister in Afghanistan contributed to this report
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