Afghanistan Plans Bill Trading, Bond Sales, Central Bank Says
March 15, 2010, 4:18 PM EDT
March 16 (Bloomberg) -- Afghanistan plans to allow trading in central bank bills and start selling longer-term government bonds in the coming year to diversify funding sources after receiving more than $30 billion of international assistance.
The central bank, which has more than 11 billion Afghani ($231 million) of bills outstanding, will develop its domestic debt market under a five-year plan to reduce reliance on foreign aid, Da Afghanistan Bank spokesman Aimal Hashoor said in a telephone interview from Kabul yesterday.
“These foreign funds won’t last forever,” Hashoor said. “We have to build our own borrowing resources and capital markets for the future.”
Developing capital markets will be a challenge for President Hamid Karzai in a country torn by 30 years of strife that destroyed financial institutions and businesses, according to Standard Chartered Plc. Afghanistan received $32 billion of foreign aid since the U.S. toppled the Taliban-led government in the wake of the Sept. 11, 2001 terrorist attacks, according to central bank Deputy Governor Mohibullah Safi.
Afghanistan “is at a very initial stage of developing its financial markets after realizing how critical it is for any economy,” said Sayem Ali, an economist at Standard Chartered in Karachi, the largest city in neighboring Pakistan. The country has been “flush with foreign funds since 2001 so it never felt the need to develop capital markets,” he said.
Debt Sales
The central bank raised 1.23 billion Afghanis at its last debt auction on March 9, selling 28-day notes at yields of 4 percent to 4.26 percent and 182-day bills at rates of 6.05 percent to 6.10 percent, according to its Web site. Seven parties submitted bids for the shorter-dated debt and four submitted offers for the six-month securities.
Central bank Governor Abdul Qadir Fitrat said March 12 the government plans to start selling bonds from the fiscal year starting March 31, 2011, without commenting on the likely sizes and maturities of issues.
“There will be very limited demand for these kind of investments,” said Nadi Bargouti, who manages $250 million as head of asset management at Shuaa Capital PSC in Dubai. “We all know the story in Afghanistan and this is not going to happen overnight. We still have the tribal problems, not just in Afghanistan but also in the neighboring countries.”
Iraq’s plans to raise funds from selling debt also met “weak demand” because of the political situation, he said. Iraq’s Finance Ministry won approval to sell $2.5 billion of bonds to fund electricity-generation projects on Jan. 21.
Afghanistan’s currency ended last week at 47.60 per dollar, 2.1 percent stronger than at the start of the year, according to data compiled by Bloomberg. It appreciated 7.2 percent in 2009, the first annual gain since a new currency was introduced in 2002, following the ouster of the Taliban.
Stock Exchange Planned
Developing financial markets still requires the establishment of a range of institutions and products, said Saifuddin Saihoon, an assistant professor of economics at Kabul University.
“The Afghans are more involved in the business of import and export and currency exchange, rather than trying to understand banking and financial market products,” Saihoon said.
The central bank plans to start a national stock exchange in Kabul by 2013 to provide investment opportunities for domestic and overseas investors, Hashoor said.
Da Afghanistan Bank’s economic strategy coincides with plans for the Afghan National Army and Afghan National Police to take control of the country’s security within five years. The U.S. plans to have 100,000 troops in Afghanistan by the end of this year before commencing a withdrawal of its forces in mid- 2011.
March 15, 2010, 4:18 PM EDT
March 16 (Bloomberg) -- Afghanistan plans to allow trading in central bank bills and start selling longer-term government bonds in the coming year to diversify funding sources after receiving more than $30 billion of international assistance.
The central bank, which has more than 11 billion Afghani ($231 million) of bills outstanding, will develop its domestic debt market under a five-year plan to reduce reliance on foreign aid, Da Afghanistan Bank spokesman Aimal Hashoor said in a telephone interview from Kabul yesterday.
“These foreign funds won’t last forever,” Hashoor said. “We have to build our own borrowing resources and capital markets for the future.”
Developing capital markets will be a challenge for President Hamid Karzai in a country torn by 30 years of strife that destroyed financial institutions and businesses, according to Standard Chartered Plc. Afghanistan received $32 billion of foreign aid since the U.S. toppled the Taliban-led government in the wake of the Sept. 11, 2001 terrorist attacks, according to central bank Deputy Governor Mohibullah Safi.
Afghanistan “is at a very initial stage of developing its financial markets after realizing how critical it is for any economy,” said Sayem Ali, an economist at Standard Chartered in Karachi, the largest city in neighboring Pakistan. The country has been “flush with foreign funds since 2001 so it never felt the need to develop capital markets,” he said.
Debt Sales
The central bank raised 1.23 billion Afghanis at its last debt auction on March 9, selling 28-day notes at yields of 4 percent to 4.26 percent and 182-day bills at rates of 6.05 percent to 6.10 percent, according to its Web site. Seven parties submitted bids for the shorter-dated debt and four submitted offers for the six-month securities.
Central bank Governor Abdul Qadir Fitrat said March 12 the government plans to start selling bonds from the fiscal year starting March 31, 2011, without commenting on the likely sizes and maturities of issues.
“There will be very limited demand for these kind of investments,” said Nadi Bargouti, who manages $250 million as head of asset management at Shuaa Capital PSC in Dubai. “We all know the story in Afghanistan and this is not going to happen overnight. We still have the tribal problems, not just in Afghanistan but also in the neighboring countries.”
Iraq’s plans to raise funds from selling debt also met “weak demand” because of the political situation, he said. Iraq’s Finance Ministry won approval to sell $2.5 billion of bonds to fund electricity-generation projects on Jan. 21.
Afghanistan’s currency ended last week at 47.60 per dollar, 2.1 percent stronger than at the start of the year, according to data compiled by Bloomberg. It appreciated 7.2 percent in 2009, the first annual gain since a new currency was introduced in 2002, following the ouster of the Taliban.
Stock Exchange Planned
Developing financial markets still requires the establishment of a range of institutions and products, said Saifuddin Saihoon, an assistant professor of economics at Kabul University.
“The Afghans are more involved in the business of import and export and currency exchange, rather than trying to understand banking and financial market products,” Saihoon said.
The central bank plans to start a national stock exchange in Kabul by 2013 to provide investment opportunities for domestic and overseas investors, Hashoor said.
Da Afghanistan Bank’s economic strategy coincides with plans for the Afghan National Army and Afghan National Police to take control of the country’s security within five years. The U.S. plans to have 100,000 troops in Afghanistan by the end of this year before commencing a withdrawal of its forces in mid- 2011.