About Monetary Policy
Monetary policy involves using monetary instruments to influence money supply in the economy aiming at overall domestic prices' stability, which is the primary objective of Da Afghanistan Bank. According to article 62 of Da Afghanistan Bank Law, Da Afghanistan Bank (as the central bank) shall be responsible for the formulation, adoption and execution of the monetary policy of Afghanistan. From the perspective of Da Afghanistan Bank, the best and more practical way to achieve the primary objective is to control liquidity level in economy.
By achieving its primary objective, Da Afghanistan Bank has increased the confidence of investors to use their existing financial resources for the production as well as creation of more employment, and through this way, it can lead to sustainable economic growth. Also, the stability of this index has an impact on the economic decisions of the households and is considered one of the fundamental and determining factors of the savings. Therefore, DAB has adopted maintaining price stability as its primary objective in order to be able to support economic growth. Currently, DAB is undertaking its activities under the framework of targeting monetary variables, where domestic price stability is as the primary objective of monetary policy and managed floating regime as the exchange rate regime. DAD is struggling to achieve its objectives for monetary variables using monetary policy instruments.