KABUL, 23 November 2021, (TON): Underscoring the need for urgent actions to prop up Afghanistan’s banks, the United Nations warned that a spike in people unable to repay loans, lower deposits and a cash liquidity crunch could cause the financial system to collapse within months.

In a three-page report on Afghanistan’s banking and financial system seen by local media, the UN Development Programme (UNDP) said the economic cost of a banking system collapse and consequent negative social impact “would be colossal.”

An abrupt withdrawal of most foreign development support after the Taliban seized power on Aug. 15 from Afghanistan’s Western-backed government has sent the economy into freefall, putting a severe strain on the banking system which set weekly withdrawal limits to stop a run on deposits.

The UNDP report said “Afghanistan’s financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing.”

Finding a way to avert a collapse is complicated by international and unilateral sanctions on Taliban leaders.