Monetary Policy Formulation and Decision Making
Da Afghanistan Bank is responsible and fully empowered to make the monetary policy decisions in Afghanistan. According to Article 2.1 of DAB Law: "The primary objective of Da Afghanistan Bank shall be to achieve and to maintain domestic price stability." Similarly, as per the article 2 of the Law, one of the basic tasks of Da Afghanistan Bank is to formulate, adopt and execute the monetary policy of Afghanistan.
Based on the articles of the Law, Da Afghanistan Bank is responsible for adoption and formulation of Monetary Policy in Afghanistan. For this purpose, Monetary Policy Committee (MPC) is established and is chaired by the Governor of DAB, First Deputy Governor acts asDeputy Chairman, members of the Supreme Council as members and Monetary Policy Director General acts as the Secretary of the Committee. The monetary policy committee closely works with the Monetary Policy Department, Market Operations Department and Financial Supervision Department.
Monetary Policy Committee is primarily responsible for setting the stance of monetary policy, which meets four times a year. MPC vigilantly monitors the developments in the economy of the country as well as in the international economic arena and set the targets for Reserve Money and Currency in Circulation and Net International Reserves.
Duties of the Monetary Policy Committee:
1. Determining the overall monetary policy framework of DAB
2. Setting the operational goals of DAB monetary policy framework
3. Approving annual quantitative targets pertaining to monetary policy’s final, intermediate and operational goals
4. Determining Afghanistan’s foreign currency regime in accordance with the provisions of Da Afghanistan Bank law
5. Devising the foreign currency policy of Afghanistan
6. Approving annual quantitative goals pertaining to the foreign exchange reserves of DAB
7. Approving the types of DAB’s monetary policy tools and the use thereof
8. Approving the types of DAB’s foreign exchange policy tools and the use thereof
9. Making decisions in regard to the continuation, restriction and suspension of overnight deposits and loans facilities
10. Setting the interest rate and the quantity of overnight deposits and loans facilities in accordance with the relevant policy/regulation
11. Determining the regime and framework for the required reserves of commercial banks
12. Determining the ratio of required reserves
13. Making a decision about granting the interest for the required reserves
14. Supervising the implementation of monetary and foreign currency policies of the country
MPC meetings are held on quarterly basis four times a year. The supreme council assigns a meeting on monetary policy issues during its quarterly meetings and its approvals are valid under the approvals of the Supreme Council. At the end of each MPC meeting, the Chairman holds a press conference to communicate the decisions made on recent monetary policy issues and macroeconomic situation as a whole.