Afghanistan: The 51st American State?

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. Another problem is that the currency has been counterfeited so often that most Afghani merchants no longer bother to accept it.

“Dollarization,” of course, is when a country uses money printed and minted in the United States as its 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, the Fund is dominated by Europeans, who dislike the new model of international conflict management.

The American military — with the help of the British — bombs to bring about the peace in Afghanistan. Europe (and Japan) 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.

The IMF has tried a variation of this “dollarization” strategy before — in Argentina, to be precise. 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 lap 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.

Bringing the dollar to Afghanistan would 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.

It would be quite an irony. Already, the dollar is a de facto currency in the Gulf States as well. Afghanistan and Pakistan would only be following suit.

The Europeans, however, 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.

Giving war-torn Afghanistan its own currency would be a more potent gift than the aid funds pledged to the country. Yet, passing the buck to the United States might well be worth the price — quietly keeping the euro out of Central Asia.