Afghan Afghani

The afghani is the official currency of Afghanistan and has served as the nation’s primary medium of exchange since the early twentieth century. Managed by Da Afghanistan Bank (DAB), the country’s central bank, the afghani reflects Afghanistan’s complex political, economic, and monetary history. Although subdivided into 100 puls, no pul coins circulate today. Historically tied to silver content, influenced by foreign exchange markets, and periodically reformed in response to political upheaval, the afghani remains a central element of Afghanistan’s economic identity.

Historical Background and Introduction of the First Afghani

The original afghani, bearing the ISO 4217 code AFA, was introduced in 1923 during the reign of Amanullah Khan, replacing the Afghan rupee, which had circulated since 1891. The shift marked a broader effort toward national modernisation, including the adoption of a metric system of weights to replace older regional standards. The new currency was pegged to silver, with early coins containing approximately nine grams of the metal. Conversion from the rupee was often represented as 1 afghani equal to 1 rupee and 6 paisas, based on relative silver content.
Subdivided into 100 puls, the system also included a larger unit known as the amani, corresponding to 20 afghanis. Treasury notes of Afs 5, Afs 10 and Afs 50 were introduced between 1925 and 1928, with higher denominations added in 1936. The Bank of Afghanistan later assumed responsibility for banknote issuance in 1939, replacing some lower-denomination notes with coins in the late 1950s.

Exchange Rate Regimes and Dual Market Dynamics

Afghanistan’s foreign exchange rate has generally been determined by market conditions, with the exception of isolated periods, such as during the First World War. Over time, the country developed a dual-exchange system: an official rate set by major banks and a free-market rate determined at Kabul’s Saraye Shahzada money bazaar. The divergence between these two rates tended to widen during times of political instability.
To counter seasonal rate fluctuations, the National Bank (Banke Millie Afghan) adopted a fixed rate in 1935, exchanging afghanis at Afs 4 per Indian rupee. After Da Afghanistan Bank became the central bank, fixed-rate practices persisted, though alignment with market rates grew more difficult during the 1980s.
By 1973, the currency traded at Afs 67 to the United States dollar, but the onset of civil conflict in the 1990s triggered severe depreciation. Following the 1992 collapse of the central government, various factions—including warlords, political groups and foreign actors—issued their own banknotes, resulting in widespread inflation and a lack of standardisation.

Monetary Disruption During the Civil War

The civil war of the 1990s destabilised Afghanistan’s monetary environment. Banknotes issued during Mohammed Zahir Shah’s monarchy were withdrawn from circulation by 1991, while competing political and military bodies produced their own versions of the afghani.
In 1996, after the Taliban established control over major institutions, the head of the Taliban’s Central Bank declared most notes in circulation invalid and cancelled contracts with the Russian firm that had been printing them. At the time, the exchange rate was approximately Afs 21,000 per US dollar, later devalued to Afs 43,000 per dollar. In certain regions, other leaders, such as Abdul Rashid Dostum in Jowzjan Province, briefly issued independent currencies.
By late 2001, the afghani suffered extreme volatility, trading at Afs 73,000 per US dollar in September 2001, recovering significantly after the formation of a new government under Hamid Karzai, and then falling again in early 2002. Multiple versions of notes circulated simultaneously, demonstrating the depth of monetary fragmentation.

The Second Afghani (2002–Present) and Economic Stabilisation

A major monetary reform took place in 2002 to restore stability and unify the money supply. The new afghani, designated by the ISO code AFN, replaced earlier issues at different conversion rates:

• 1,000 old afghanis = 1 new afghani for currency issued by the former Rabbani government.
• 2,000 old afghanis = 1 new afghani for notes issued under Dostum’s administration.

The notes were printed in Germany, and the reformed currency was launched in October 2002. This reform was widely welcomed as a sign of renewed security and national rebuilding. For the first time in many years, currency issuance was centralised under Da Afghanistan Bank rather than divided among competing authorities. Most old notes were destroyed by the end of 2002.
The reformed afghani immediately began trading at around Afs 43 per US dollar, appreciating by 8 per cent during early 2004, reflecting increased public confidence. Administrative measures supported its adoption, including pricing requirements for merchants and donor agencies shifting disbursements from dollars to afghanis. By 2009, the exchange rate stabilised near Afs 45 per US dollar, later depreciating to around Afs 75 by 2019.

Developments After 2021

Following the re-establishment of the Islamic Emirate of Afghanistan in 2021, access to Afghan foreign reserves was frozen and the IMF withheld the release of funds. These factors contributed to depreciation, though government measures, including a ban on foreign currency use in domestic transactions, aimed to increase reliance on the afghani.
Despite early instability, the afghani became the world’s best-performing currency in the third quarter of 2023, rising more than nine per cent against the US dollar, driven by tight currency controls, remittance inflows and restrictions on foreign exchange movement.

Coinage Across Periods

Coinage has played a varied role in Afghanistan’s monetary system. In 1952, aluminium 25-pul and nickel-clad steel 50-pul coins were introduced, followed by aluminium Afs 2 and Afs 5 coins in 1958. In 1961, further nickel-clad steel coins appeared in denominations of Af 1, Afs 2 and Afs 5, marked with Solar Hijri and Islamic calendar years.
The redenominated era introduced new coins on 11 April 2005 in Af 1, Afs 2 and Afs 5 denominations, replacing corresponding banknotes. These coins were intended to provide durable small-change options within the modern currency system.

Banknotes and Security Features

Afghan banknotes have undergone numerous revisions reflecting technological, political and economic developments.Key stages include:

• 1920s–1930s: Treasury notes of Afs 5, Afs 10, Afs 50; later Afs 2, Afs 20 and Afs 100.
• 1939 onward: Broader issuance by Da Afghanistan Bank in denominations from Afs 2 to Afs 1,000.
• 1993: Introduction of Afs 5,000 and Afs 10,000 notes; the latter featuring a hillside scene believed to depict an entrance to an underground structure near Lashkar Gah.
• 2002: Launch of new-series AFN banknotes from Af 1 to Afs 1,000.
• 2004 & 2008: Upgrades to security features to counter counterfeiting.
• 2014: Release of an enhanced Afs 1,000 note.

Exchange Rate Movement Over Time

Afghanistan’s exchange rate history illustrates the significant impact of political change, conflict and economic reform. From moderate pre-1970s stability to massive devaluation during the civil war and early 2000s, the afghani has experienced wide fluctuations. The adoption of a floating exchange regime in the early 2000s aligned the currency more closely with global market forces, while later political developments, restrictions on foreign currencies and international financial constraints have continued to shape its trajectory.