Afghan Afghani (AFN) Definition

What Is the Afghan Afghani (AFN)?

The Afghan afghani (AFN) is the national currency of the Islamic Republic of Afghanistan. Its ISO 4217 code, AFN, was introduced in 2003 as part of efforts to stabilize the currency and reduce inflation. Prior to this change, it circulated under the symbol AFA.

As of Sept. 1, 2022, $1 USD is worth 88.23 AFN.

Key Takeaways

  • The Afghan afghani (AFN) is the national currency of Afghanistan.
  • The AFN emerged as a result of modernizing reforms that took place in 2002 to standardize the currency in the country.
  • The country has faced bouts of hyperinflation throughout its history. However, inflation has decreased in recent years and the value of the AFN has remained fairly stable.

Understanding the Afghan Afghani (AFN)

Afghanistan has undergone many changes to its currency in recent decades. In 1925, the Afghan rupee was replaced with the original afghani, which was then reformed in 2002 and issued for circulation as the AFN in 2003. The previous afghani operated under a fixed exchange rate, whereas the AFN operates on a managed floating exchange rate.

The economy of Afghanistan has endured substantial challenges. The Soviet-Afghan War, which began in 1979, raged for nearly a decade, and the country has been gripped by various civil wars since then.

Prior to the reforms put in place in 2002, there were several different versions of the AFN in circulation throughout Afghanistan. Many of these were controlled by local warlords. Therefore, until recently it was difficult to determine the value of the currency of Afghanistan, as the country lacked a universally accepted currency.

Today, the AFN is managed by Afghanistan's central bank, "Da Afghanistan Bank." Its monetary policy objective is to minimize the risk of inflation while maintaining the floating exchange rate regime. In 2002, the central bank introduced banknotes in denominations of one, two, five, 10, 20, 50, 100, 500, and 1,000 AFN. In 2005, the one, two, and five AFN banknotes were replaced with coins.

Afghanistan's Economy

Although today the AFN enjoys relatively low rates of inflation, Afghanistan has experienced severe bouts of inflation in the past. Between 1982 and 1992, hyperinflation caused the exchange rate of AFN to U.S. dollars (USD) to rise from 50.60 to 16,000.

In more recent times, inflation reached nearly 15% in 2011, and has hovered around 5% per year since.

The August 2021 takeover of the country by the Taliban and the withdrawal of U.S. and allied forces has led some analysts to fear that hyperinflation and economic stagnation has returned to the country.

According to the World Bank, economic growth in Afghanistan has been hampered by persistent political instability within the country. These factors have discouraged private investment and dampened consumer demand.

The annual growth rate of Afghanistan's gross domestic product (GDP) has hovered around 2% in recent years but dropped to -2.4% in 2020 from 3.9 in 2019. For its part, the AFN has depreciated heavily against the USD since 2012, depreciating from just under 50 AFN per USD to around 80 AFN per USD from 2019 through 2021.

Article Sources
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