Counterfeit money being dumped on Afghanistan

Pakistan's military is the prime suspect in this sophisticated caper.

Afghans Alarmed at Spread of Fake Banknotes
By Abdol Wahed Faramarz
March 3, 2012
Institute for War and Peace Reporting

Latest versions are so sophisticated and hard to spot that some Afghans suspect a plot to undermine their monetary system.

A new wave of counterfeit Afghan banknotes has arrived in Afghanistan, undermining confidence in the local currency and disrupting the money market, officials say.

President Hamid Karzai wants to reduce the use of foreign currency, but Afghans interviewed by IWPR say they are reluctant to use afghani banknotes as long as convincing forgeries are around. Economists warn that the volume of extra money in circulation could lead to inflation.

Although counterfeit afghanis are nothing new, the new notes are of higher denominations before, and so well made that even experienced currency traders have trouble spotting them.

Previous forgeries tended to be 50 and 100 afghani notes, worth about one and two US dollars, respectively, but newer counterfeits circulating for the last four months have face values of 500 and 1,000 afghani.

“Although money changers have machines that can identify forged banknotes, they are still sometimes deceived. They therefore have to check each and every banknote, which takes time,” Amin Jan Khosti, head of the Independent Union of Currency Traders at the Shahzada money market in Kabul, told IWPR.

At the Shahzada market, 55-year-old Mohammad Naim was angry after losing 600 dollars by exchanging them for counterfeit afghanis. A friend abroad sent the cash to the impoverished labourer to help him pay off his debts.

But when he tried to repay the money in afghanis, the notes proved to be worthless.

“The lenders wouldn’t take the money, as they said it was forged. Now I can’t find the person who changed the money for me,” he said. “The government should compensate me for my loss. The central bank should exchange these banknotes for me. How am I at fault? Why can’t the government prevent this kind of corruption?”

In a bid to strengthen the afghani, President Karzai issued a decree in late 2011 urging government agencies and officials to avoid using foreign currency. Pakistani rupees and Iranian rials have been in common use since the early 1990s, and the American dollar has been used for almost all major transactions since 2001.

Kabul residents said they were wary of local banknotes due to the proliferation of forgeries.

Maria, who works for a private company, said she no longer wanted to use afghanis.

“When there were no forged afghanis on the market, I used to change my salary [from foreign currency] into afghanis and deposit them in my bank account. Now I want to open a US dollar account because afghanis aren’t reliable,” she said.

Officials say the forgeries are made outside Afghanistan, and some believe neighbouring Pakistan may be deliberately using them to undermine the economy.

Afghan central bank governor Nurullah Delawari were coming in from neighbouring states, although he declined to say which ones.

“These banknotes have been made by a very skilled group using advanced technology. They are trying to bring the banknotes into the Afghan banking system,” he said.

According to Sayed Masud, an economist who lectures at Kabul University, “This has been done to destabilise the economy and decrease people’s trust in the afghani so that it loses value against foreign currencies, particularly the Pakistani currency.”

Pakistan’s embassy in Kabul declined IWPR’s request for a comment on the forgeries.

The head of the central bank’s media office, Emal Hashor, said the institution had written to the interior ministry, provincial governors and police chief, and border officials asking them to take action against the influx.

At the Kabul money market, Khosti said people should use established currency exchanges rather than people in the street.

Experts say people can avoid the forged notes if they are alert to the warning signs. Delawari said the key was the gold-coloured foil strip, which on a bogus note fails to reflect seven colours.

Currency trader Daud said the fakes were also darker in colour and smoother than genuine afghanis, particularly around the central bank seal.

Restaurant owner Mojahed said the reverse of the fake 500 afghani note lacked a thin line, while the fraudulent 1,000 afghani bill is missing a “1,000” in the left-hand corner,

“I have been presented with such banknotes several times,” he said.

Abdol Wahed Faramarz is an IWPR-trained reporter in Kabul.