The United Nations on Monday issued a warning about the severe consequences of a possible collapse of the Afghan banking system.

“If the economic cost of a banking system collapses, its concomitant negative social consequences would be colossal.

“The longer it takes to restore the financial and banking system, the longer the recovery period will be due to the subsequent lack of confidence from the viewpoint of international markets.

“This erosion is hard to repair and could take decades,” a report by the UN Development Programme (UNDP) stated.

The UN said that protecting at least part of the commercial banking system was also critical to continue the humanitarian and other basic humanitarian programmes.

On August 15, the Taliban entered the Afghan capital Kabul without a fight and have ruled since then.

The group had conquered large parts of the country after NATO started to withdraw its troops.

Other countries then cut off aid and development funds to Afghanistan and reserves of more than nine billion dollars of the Afghan central bank have been frozen.

There have been no regular dollar deliveries to the country, leading to a liquidity crisis and account holders can only withdraw small amounts of money.

According to forecasts by the International Monetary Fund (IMF), the Afghan economy could shrink by up to 30 per cent in 2021-2022.

In addition to the collapse of the economy, problems in the banking system could further reduce the likelihood of survival of small and medium-sized companies, which are crucial for the population. 

(NAN)