US plans to free half of $7 billion frozen Afghan funds for aid, remainder to stay in US

The US government plans to free up half of $7 billion in frozen Afghan central bank assets on its soil for aiding the Afghan people, while the rest will remain in the United States pending lawsuits from victims of terrorism, sources said.

A US judge last month gave President Joe Biden's administration until Friday to come up with a plan on what to do with the frozen funds, amid urgent calls from US lawmakers and the United Nations for them to be used to address the dire economic crisis in Afghanistan.

The US government will work to ensure access to $3.5 billion of those assets for "the benefit of the Afghan people and for Afghanistan's future," said one of the sources, without providing details about how these funds would be distributed.

The multi-step plan calls for the other half of the funds to remain in the United States, subject to ongoing litigation by US victims of terrorism, including relatives of those who died in the Sept. 11, 2001, hijacking attacks, the sources said.

Washington froze the Afghan funds held in the United States after the Taliban's military takeover in August, but has faced mounting pressure to find a way to release the funds without recognizing the Taliban, who say the money is theirs.

However, some Sept. 11 victims and their families have filed lawsuits seeking to cover unsatisfied court judgments related to the attacks that killed nearly 3,000 people.

As part of the plan, Biden will sign an executive order on Friday that will require US financial institutions to transfer all Afghan central bank assets they hold into a new consolidated account held at the Federal Reserve Bank of New York, the sources said.

Afghanistan has another $2 billion in reserves, held in countries including Britain, Germany, Switzerland and the United Arab Emirates. Most of those funds are also frozen.

The United States, the largest single donor of humanitarian aid in Afghanistan, will keep working with the United Nations and humanitarian aid groups to ensure continued assistance to the people of Afghanistan, the sources said.

It is also working closely with the United Nations on mechanisms to ensure UN agencies and aid groups have the liquidity needed to support critical humanitarian assistance programs, the sources said.

Reuters reported on Thursday that the UN aims to kickstart this month a system to swap millions of aid dollars for Afghan currency that would help solve that issue.

UN Secretary-General Antonio Guterres has called for a mechanism to free up about $9.5 billion in Afghan reserves frozen worldwide, including in the United States.

US sanctions ban doing financial business with the Taliban. Humanitarian support for the Afghan people is allowed.