you will know what is Da AFghanistan Bank and what are the main benefits of the local currency enforcement.

1. Prepared by:
Taj Mohammad Tamkeen
Cell:0788889195
Mailing add: taj_tamkeen@yahoo.com

2. DAB – Early YearsDAB – Early Years
• The Da Afghanistan Bank (DAB) was
established by a Royal Decree of King Zahir
Shah in SY 1318. At that time, the Central
Bank function was to print money and to cover
budget deficits.
• For many years, operated as commercial
bank, taking deposits, providing loans, and
trade financing
• Largely dormant during Taliban years

3. DAB – CurrentlyDAB – Currently
• 381/1382: Transformed into Central Bank of
Afghanistan under Article 12 of the
Constitution
• Currently, 46 active DAB branches and 6
regional offices (active across all 34
provinces)
• In 1382, the Law on DAB and the Law on
Banking was adopted through Presidential
Decree. The new laws modernize the
banking and financial sector system.

4. MandateMandate
Mission:
• The DAB mission is to foster price stability and
build a robust financial system in Afghanistan.
Vision
• As Da Afghanistan Bank is a monetary
institution and upholds international best
practices in fostering price stability and
building a robust financial system conducive to
macro-economic stability and broad-based,
sustainable economic growth in Afghanistan.

5. Core FunctionsCore Functions
The current DAB Law stipulates the core DAB
functions as follows:
to achieve and maintain domestic price stability
to foster the liquidity, solvency & proper
functioning of a stable market based financial
system & to promote a safe, sound and efficient
national payment system
to support the general economic policies of the
government of Afghanistan & to contribute to
sustainable economic growth

6. Specific ResponsibilitiesSpecific Responsibilities
• And some basic tasks that DAB is exclusively
responsible are:
• To formulate, adopt and execute monetary
policy.
• to formulate, adopt & execute the foreign
exchange policy & exchange arrangements
• Holds and manages the official foreign
exchange reserves of Afghanistan.
• Prints and issues Afghani banknotes and
coins.
• Acts as banker and adviser, and as fiscal
agent of the State.

7. Continued…Continued…
• Licenses, regulates and supervises
commercial banks, foreign exchange
dealers, money service providers, payment
system operators, security service providers
and security transfer system operators.
• Establishes, maintains and promotes sound
and efficient systems for payments, for
transfers of securities issued by the State or
DAB, and for the clearing and settlement of
payment transactions and transactions in
such securities.

8. DAB StructureDAB Structure
Supreme Council
Executive Board
Governor of
DAB
2nd Deputy
Governor
Chief Finance
Office
Market
Operation
Risk
Management
1st Deputy
Governor
Internal Audit
Department
Financial
Supervision
Department
Chief
Information
Office
Financial
Intelligence Unit
Security
Department
Monetary
Policy
ADIC
General
Council
Information
Technology
Bank
Operation
Human
Resource
General
Services
Currency
Distribution
Management
Branch
Management
Foreign Trade
Reconciliation

9. Supreme CouncilSupreme Council
• The Supreme Council consists of seven
members, all members are appointed by
President. The term for each member of the
Supreme Council is five years.
• Supreme council is to make all decision and
policies of administration and operation of
DAB

10. Executive BoardExecutive Board
The Executive Board consists of :
• The Governor, the First Deputy Governor, the
Second Deputy Governor, and Comptroller
General or others appointed by the Supreme
Council for terms of five years.
• The Executive Board is responsible for all
matters concerning the administration and
operation of DAB that are not assigned by law
to the Supreme Council or to the Comptroller
General.

11. Continued……Continued……
• Comptroller General is one of Executive
Boards member that also performs as a
Director General to the Audit Department and
over all is responsible for periodic audits of the
administration and operations of Da
Afghanistan Bank, in order to ensure
observance of the laws and regulations that
apply to DAB

12. DAB DepartmentsDAB Departments
Following departments report directly to the 1st
deputy governor:
• Monetary Policy
• Financial Supervision
• Risk Management
• Market Operation
• Communication & Information Office
• Finance & Accounting

13. Continued….Continued….
Following Departments have to report directly
to 2nd
Deputy Governor:
• Information Technology
• Banking Operation
Banknote issuance & coins
• Human Resource
• General Services

14. Continued….
There are 4 departments that they report directly
to the Governor.
• Internal Audit
• General Council
• FINTRACA
• Afghan Deposit Insurance Corporation

15. Price Stability is Important, ButPrice Stability is Important, But
What Does It Mean?What Does It Mean?
Price Stability is important because:
• Protects poorest and most vulnerable segment s of
society.
• The vagaries of inflation hurts the poor more than
the rich.
• Facilitates planning by businesses and
households, and fosters a willingness by investors
to provide long-term financing.
• Price stability is a precondition for achieving high
and sustainable rates of economic growth which
will raise incomes across all segments of society.

16. Instruments of monetary policyInstruments of monetary policy
Methods used by central banks to change the
amount of money in circulation
• 1. Open-market operations
• 2. Reserve requirements
• 3. Discount rates
• 4. Printing money
• 5. Direct instruments

17. 1. Open-market operations1. Open-market operations
• Central banks conduct open-market operations
when they buy government bonds from or sell
government bonds to the public.
• When they buy government bonds, the money
supply increases
• When they sell government bonds, the money
supply decreases
• Foreign exchange market intervention also
affects the money supply

18. 2. Changing the Reserve2. Changing the Reserve
RequirementRequirement
• The reserve requirement is the amount (8%) of
a bank’s total deposits that may not be loaned
out to its customers
• Increasing the reserve requirement decreases
the money supply.
• Decreasing the reserve requirement
increases the money supply.

19. 3. Changing the Discount Rate3. Changing the Discount Rate
• The discount rate is the interest rate the
Central Bank charges commercial banks for
loans (Overnight Credit Facility).
• Increasing the discount rate decreases the
money supply
• Decreasing the discount rate increases the
money supply

20. 4. Printing money (Bad Idea)4. Printing money (Bad Idea)
• The Central Bank can create money by
extending loans to the government
• How? By buying bonds from the government
that issues them
• Inflationary finance
• Open-market operations are less inflationary
than printing money
• Hence the need for efficient financial markets
that facilitate trade in bonds

21. 5. Direct instruments (Bad Idea)5. Direct instruments (Bad Idea)
• Ceilings on interest rates
• Create excess demand for credit
• Prone to abuse
• Inefficient and unfair
• Quotas on credit
• Essentially the same effects as ceilings on
interest rates

22. Local currency enforcement process
• AFN is our national currency.
•Monetary reforms took place in 2002
•Ex-president karzai issued a decree for local currency
enforcement
•13th
approval of the Afghan cabinet regarding local
currency enforcement
•Article 33rd
also stresses on local currency enforcenment
•Commission were fining sellers to avoid foreign currencies
in transactions.

23. Local currency enforcement benfits
• money is encircled in cic
•Expand economic activities
•Smash away the foreign currency from the territory
•Velocity gets normal
•Cic doesn’t mean to spend but it means to make available
the money whenever needed.
•Proves the real characteristics of money(general
acceptability)

24. Questions?