U.S. Treasury allows money transfer to Afghanistan

Signage is seen at the United States Department of the Treasury headquarters in Washington, D.C. U.S. August 29, 2020. REUTERS Andrew Kelly File Photo Andrew Kelly File

WASHINGTON, Sept 2 Reuters - The United States has told financial institutions that they may process personal remittances to Afghanistan, a Treasury Department spokesperson said on Thursday, a move taken in parallel with steps to ensure the continued flow of humanitarian aid.

The decision to allow money transfers could provide some relief for the Afghan economy, which is near collapse after moves by the United States and other countries to halt foreign aid and freeze some $9 billion in Afghan assets after the Taliban takeover on Aug. 15.

Many Afghans rely heavily on incomes from outside of migrants. The remittances amount to an estimated $789 million in 2020 or just over 4% of Afghanistan's gross domestic product, according to World Bank data.

Western Union WU.N, World's largest money transfer firm, and MoneyGram both suspended such services after the Taliban takeover, shutting down a major source of funds that many families rely on to pay for food.

The guidance from the Office of Foreign Assets Control in response to all questions over the past week paved the way for those service providers to resume operations in Afghanistan, but also applies to other banks and financial institutions, said the spokesperson.

Western Union said on Thursday it was resuming money transfer services to Afghanistan, saying the decision was in line with a U.S. push to allow humanitarian activity to continue.

Treasury issued a license on August 25 to allow the United States and its partners to continue to facilitate humanitarian aid, including the delivery of food and medicine despite U.S. sanctions on the Taliban.

Typically, most of the payments sent by migrant workers to Afghanistan have come from Iran, Saudi Arabia, Britain, Germany and the United States.

Afghanistan's economy is primarily dependent on cash and there are few banks, which makes remittances so important. Sanctions in place against the Taliban could make private financial institutions reluctant to handle private remittances, despite the Treasury guidance, financial experts said.

Reporting by Grant McCool; Editing by Andrea Shalal and Angus MacSwan.