Afghanistan takes first steps towards capital market launch

Kabul, September 20, 2004 - Afghanistan took its first steps towards a capital market with an auction yesterday of capital notes which will allow the country’s banks to determine a market-driven interest rate. “This is an important step for us. It is the beginning of a capital market for us,” Central Bank governor Anwar Ul-Haq Ahady told reporters.

The overnight rate of the Da Afghanistan Bank Capital notes was set at 3.5 percent and the one-month lending rate at 3.6 per cent. The two winning banks were the local Millie Bank and Pashtany Bank. Previously bureaucratic and political decisions rather than market forces, Ahady said, set the country’s interest rates. The notes are the first short-term capital instrument in the embryonic banking system and will sharply increase liquidity. The launch of overnight, 30-day, 90-day and 180-day capital notes, which are guaranteed by the central bank Da Afghanistan Bank, will allow the nation’s 10 commercial banks to lend money easily to each other.