Global Policy Forum

News reports indicate that IMF officials advising Afghanistan want to delay the introduction of the new local currency. Could it be that — by "dollarizing" Afghanistan — the International Monetary Fund is secretly scheming to make that country a protectorate of the United States?

There is no doubt that the "afghani" — the long-suffering Afghan currency — will have to go. At present, it is next to worthless. In order to buy one U.S. dollar, you need to put up nearly 5,000 afghani. An even bigger problem is that the currency has been counterfeited so often that most Afghani merchants no longer bother to accept it.

The doctor's orders

"Dollarization," of course, is when a country uses money that was printed and minted in the United States as its own currency. The afghani's weakness is why the IMF is advising Afghanistan to replace it with the dollar. The IMF sees it as a "temporary" measure that may last up to two years. But it may be more than merely an economic prescription. In fact, it may be an insidious geopolitical plot on the part of the IMF.

You see, according to international folklore, the Fund is dominated by Europeans — who sincerely dislike what has emerged as the new model of international conflict management.

New world conflict management

It goes as follows: The U.S. military, with some help from the British, bombs to bring about the peace in Afghanistan, or elsewhere. Europe (and Japan) then get stuck with the reconstruction bill. This has happened before, of course. In former Yugoslavia, for instance, the financing required to rebuild Kosovo and Serbia has come mainly from European pockets.

Failed Argentine strategy

The IMF has tried a variation of this "dollarization" strategy before — especially in crisis-ridden Argentina. In that case, it encouraged the Argentine government to stick with its currency regime — which pegged the local peso to the U.S. dollar on a one-to-one basis — to the bitter end. Clearly, the IMF wanted Argentina to junk the peso — and adopt the greenback as its own currency. That move would have landed the Argentine economy in the disciplining hands of the U.S. Treasury and the Federal Reserve. But, in the end, for all the soothsaying, the Argentines opted for devaluation — and a debt default — instead. That would be quite an irony indeed. The dollar is already the de facto currency in the Gulf States. Afghanistan and Pakistan would only be following suit.

The Europeans, for their part, hope that dollarizing Afghanistan will force the Bush Administration to put up more of its own dollars — which will help rebuild the country's non-existent economic and social infrastructure. After all, at a recent Tokyo Conference, Washington offered less than $300 million in aid commitment for Afghanistan's reconstruction.

Against that backdrop, for the United States to give war-torn Afghanistan its very own currency would represent a more potent gift than the aid funds pledged to the country. And, of course, letting Afghanistan have the buck might allow the United States to realize a true geopolitical aim — quietly keeping the euro out of Central Asia.

The 51st state?

Bringing the dollar now to Afghanistan would eventually make the country America's responsibility. It might also bring neighboring Pakistan into the U.S. dollar club as well — as Afghanistan's dollars slip across the border. In fact, dollarization might become a regional trend.

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