Monetary Policy Instrument

Da Afghanistan Bank (DAB) uses foreign exchange auction and required reserves of commercial banks as instruments to implement its monetary policy. Foreign exchange auction, sub-instruments of open market operations, are conducted through a free and transparent bidding process involving the participation of commercial banks, foreign exchange dealers (FXDs), and Money Service Providers (MSPs). Required reserves refer to the percentage of commercial banks' deposits that must be held with DAB. These reserves are currently determined based on the classification of commercial banks.