What it takes to replace every banknote in a country

A currency changeover is usually reported as a monetary decision, which is the smallest part of it. The decision takes a sentence. What follows is a national logistics operation with a deadline, and Afghanistan's is the one that was written up properly.

Everything below comes from a single account, and it is worth saying so at the outset: the International Monetary Fund's 2003 country report on Afghanistan, whose fifth chapter and a dedicated box set out the operation in unusual detail. The Fund was not a neutral observer of it, having provided technical assistance to the authorities throughout, so the account is both the most complete one available and an interested one. Where it gives a range rather than a figure, this guide keeps the range.

Key Takeaways

• The conversion ran from 7 October 2002 to 2 January 2003, at one new afghani for a thousand old ones.
• Two types of unofficial note were made eligible for exchange at a 50 per cent discount, close to their market discount.
• About 500 tons of new notes went out and over 2,000 tons of old ones came back.
• 47 exchange points were built, staffed by some 2,500 people, with windows separated for taking in and giving out.
• When the public feared missing the deadline the exchange rate fell sharply, and an extension reversed it.

The problem the reform was answering

Too many notes for too little value.

The International Monetary Fund's account is direct about the state of the old currency. Its value had been eroded by inflation to the point where people had to carry around large bundles of cash for anything other than the smallest of transactions, and the ratio chosen followed from that: one new afghani would replace a thousand old ones.

There was one piece of luck in the timing. Work on a new currency had already been done under the previous regime, including preliminary designs and a signed contract with a banknote printer, which had been put on hold under the United Nations embargo. With the sanctions lifted, that earlier work significantly shortened the technical lead time.

What had to be built before anybody could exchange anything

Printing, buildings, transport, staff and security, in that order.

Printing. Note issuance is normally the least eventful thing a central bank does, and the contrast with who is allowed to print a pound is instructive: there the question is which institutions may issue at all, here it was whether enough paper could be made in time. The new notes were contracted to two printers in denominations of 1, 2, 5, 10, 20, 50, 100, 500 and 1,000 afghanis, with advanced security features. Sizing the order was itself a problem, because the authorities had only a crude estimate of how many old notes existed. The face value in circulation, counterfeits included, was initially put at about 16 trillion old afghanis, reduced to about 13 trillion once the discount on unofficial notes was allowed for. Running out of new notes would have destroyed confidence, so the order was set above that at 27.9 billion new afghanis, almost 800 million notes and about 500 tons.

Buildings. The central bank had 89 branches and, on the Fund's account, most did not meet even basic requirements for secure vaults and office space. With donor assistance it set out to refurbish or construct a minimum of one currency distribution facility in each province.

The exchange network. The country was divided into seven regions, each with an area manager: Kabul, Kunduz, Mazar-i-Sharif, Herat, Kandahar, Jalalabad and Gardez. Within them 47 exchange points were established. Each consisted of one to five units, and each unit had seven windows, five to take in old currency and two to give out new. That asymmetry is the design telling you which side of the transaction takes longer.

Staff. Some 2,500 local staff were selected from the most experienced people in the banking sector, and paid considerably more than the 30 to 40 dollars a month a bank employee would normally earn, in order to motivate them and establish reliable operations.

Transport. Ground transport to the more distant locations was ruled out for security reasons. The bulk of the air transport need was met by two helicopters and one Antonov 32 provided by USAID, which also set up an air operations unit to schedule flights, each requiring clearance from the regional military air command and two days' notice.

The decision about counterfeit notes

The most interesting choice in the whole operation, and the one that shows what money is.

For political reasons, the Fund records, two types of unofficial note were made eligible for conversion, but at a 50 per cent discount, close to the actual discount at which those counterfeits traded in the Kabul money market.

Read that as a description of what had happened before the reform. The market had already worked out which notes were unofficial and had priced them accordingly, at roughly half. They were not worthless and they were not worth face value; they were worth what people would give for them, and everybody knew the number.

The authorities then adopted the market's own answer. Refusing the notes would have written off holdings that ordinary people had accepted in good faith as payment. Taking them at face value would have paid the printers of them in full. Taking them at the discount the market had already applied did neither.

That total was almost 20 per cent more than the face value implied by information from the printing companies. The Fund lists three possible reasons and does not choose between them: inaccurate or incomplete information from the printers, last-minute printing of counterfeits, or old notes being presented more than once during the conversion.

What the public did

Turned up early, then panicked, then stopped panicking.

The first two weeks were reserved for money changers, so that the central bank could collect large volumes early, with a sampling procedure under which only ten per cent of a presented amount was verified and any error rate found was applied to the whole. Demand from the general public was such that the exchange opened to everyone before those two weeks were over.

Then the schedule slipped. Many provincial exchange points opened two to three weeks after their planned date, largely because of air transport delays. In November, the Fund records, uncertainty grew among the general public about whether everyone would be able to convert in time, and the exchange rate started to depreciate sharply.

The authorities announced in mid-November that the period would be extended by a month to 2 January 2003, and following that announcement the rate quickly returned to levels close to those at the start of the exchange.

A deadline is a monetary instrument. Nothing about the currency changed in November; what changed was whether people believed they could get to a window in time, and the currency moved on that alone.

How it ended

Without incident, which is the part worth noticing.

The Fund records that the changeover was completed successfully on 2 January 2003, much earlier than many had thought possible and without any major incidents, with no last-minute rush or queues in the final days and no late arrivals after the exchange points closed. It records no major security problems or serious violations of procedure across the entire three-month period.

The Australian dollar to afghani pair deals in the currency this operation created, and what happened to it afterwards is a separate subject. The record's value is the reminder that a currency reform is only partly a decision about money. Mostly it is a question of whether 500 tons of paper can be got to 47 buildings before a deadline, and of what happens to the rate if people start to doubt that it can.

Where to look next

what has to exist for a currency to cross a border covers what a unit needs before it is accepted outside its own country, and how to read a currency pair covers how the resulting unit is quoted. For the live figures, see the AUD to AFN page.

Sources

• International Monetary Fund, Islamic State of Afghanistan: Rebuilding a Macroeconomic Framework for Reconstruction and Growth, Country Report No. 03/299 - Chapter V and Box V.1, covering the erosion of the old currency's value and the one-for-a-thousand ratio, the earlier printing contract held up by the United Nations embargo, the plan made public on 4 September 2002 and the conversion beginning on 7 October, the initial end date of 4 December and the mid-November extension to 2 January 2003, the denominations contracted to two printers, the initial estimate of about 16 trillion old afghanis in circulation and about 13 trillion after the discount, the order of 27.9 billion new afghanis at almost 800 million notes and about 500 tons, the five smallest denominations at almost 90 per cent of volume and 15 per cent of value, the 89 branches and the province-by-province distribution facilities, the seven regions and 47 exchange points with five windows in and two out, the 2,500 staff paid above the usual 30 to 40 dollars a month, the two helicopters and the Antonov 32 provided by USAID with two days' flight notice, the two types of unofficial note eligible at a 50 per cent discount close to their market discount, the money changers' first two weeks and the ten per cent sampling procedure, the November depreciation and its reversal after the extension, the 13.9 trillion official and 3.3 trillion unofficial notes exchanged for 15.6 billion new afghanis with a further 2 trillion absorbed through foreign exchange auctions, the some 19 trillion collected at about 5 billion notes and over 2,000 tons being almost 20 per cent above the printers' figures and the three explanations offered for it, and the completion without major incidents or security problems

General information about currency conversions and banknote issuance. Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.