The decline
in Iran's national currency has brought unrest and protests in Iran. But the
rial's inflation has also wreaked havoc in neighboring Afghanistan.
Cross-border trade threatens to collapse.
At the
bazaar in Herat in western Afghanistan, the mood is heated. The decline in
Iran's currency, the rial, has unleashed great unrest on this side of the
border. Herat is the wealthiest city in Afghanistan, thanks largely to its
fluid, cross-border transactions with Iran. Oil, Water, and foodstuffs in
particular are imported from their next-door neighbor.
Yet Iran's
currency crisis now threatens Herat with ruin. For business people in the city,
Iranian inflation is nothing short of a financial death sentence, said Haji
Khush, a merchant in Herat. "The drop in the rial has done damage to all
of us," he said. "We had to give everything up and are just sitting
at home now. All of our money is gone." Whether wares, fuel, or currency
exchange, everything had collapsed, he added.
Cash in
suitcases
 |
| The Afghan government has imposed limits on currency exports |
Many
Iranians have tried to escape their currency's runaway inflation by bringing pillow
cases stuffed with rials to Herat, where they hoped to exchange them for US
dollars.
"In
one case it was around 140,000 euros [US $180,000] that someone tried to bring
over the border in a suitcase. We seized it," said General Sher Ahmad
Maladani of the Afghan border patrol.
In west
Afghanistan, both rials and US dollars are popular shadow currencies, more
popular even than the country's own cash, the "Afghani." Given that
the Herat market has been positively flooded with rials, the Afghan dealers are
now finding themselves sitting upon large piles of Iranian cash - cash that is
losing value every hour.
To avoid
losing all of their dollar reserves, the Afghan government has levied a $1,000
ceiling as the maximum allowable to be shipped over the border into Iran. But
experts like Mir Barez Hossaini, professor of economics at the University of
Heart, doubt the government's measures will protect the Afghan market from
collapse.
"We
have a long border with Iran that can't really be controlled," he said.
"The state's measures will not have much of an effect, but they are legal
and the state has the legitimacy to enact them."
Under
current conditions he thought smuggling would boom.
Falling
rial, rising prices
It is in
western Afghanistan, in the provinces of Herat, Nimroz and Farah which border
Iran, where the rial circulates in the largest quantities. In some areas the
rial is even used exclusively. But if the dollar continues to rise, people will
stop utilizing the rial as a second currency, said Hossaini. He believed
western Afghanistan markets would collapse, sending prices sky high. Jan Agha
Farahi, a merchant from Herat, reported of already-dramatic exchange rates.
"Earlier,
when Iranian dealers received loans from us, the money was at least worth
something," he said. "For a million rials I got 40,000 Afghani. Now
that'd be 15,000. People are getting angry."
Since
Islamic law prohibits profiting from interest on debt and loans, Afghan dealers
have to look toward other sources of income. Many of them have relocated their
activities directly to Iran. For dirt-cheap prices they can by goods there and
sell them in Afghanistan.
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