Rupee vs Afghani: Why is Afghanistan’s currency stronger than Indian, Pakistan's rupee despite crisis?

Afghanistan is India's neighbour and is known as one of the world’s poorest and most unstable countries. The country, now led by the Taliban, is currently making headlines due to clashes with Pakistan. Dozens of people on both sides have been killed amid border clashes between the two countries. Besides the clash with Pakistan, Afghanistan is also under the spotlight for its currency -- the Afghan Afghani (AFN). But why?

Afghani vs Indian rupee

The Afghan Afghani (AFN) is now stronger than the Indian Rupee. According to XE.com, 1 AFN equals INR 1.32. This means earning 1 lakh AFN in Afghanistan is equivalent to roughly INR 1.33 lakh in India. This comes as a surprise to many, as Afghanistan is a country with a struggling economy. However, despite the success of the Afghani, Afghanistan remains mired in persistent poverty and a distressing human rights situation.

Why is Afghanistan’s currency stronger than the Indian, Pakistani rupee?

1. It is due to the strict currency policies of the Taliban regime, which took power in 2021. It banned the use of US dollars and Pakistani rupees, cutting foreign currency demand drastically.
2. The Taliban regime also imposed rules requiring most transactions to be done in Afghani.
3. With limited imports, exports, and foreign currency in circulation, the local currency remains stable.
4. Afghanistan’s economy is small and largely isolated.
5. With minimal industrial activity and investment, the Afghani stays stable simply because all domestic trade is conducted in it.

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Afghanistan-Pakistan clashes

Pakistan, on October 15, said a 48-hour ceasefire has been agreed with Afghanistan, amid border clashes between the two countries that have killed dozens of people on both sides. The ceasefire came hours after state-run PTV News reported that Pakistan conducted 'precision strikes' in Afghanistan’s Kandahar province and capital Kabul, killing dozens of foreign and Afghan operatives.