Bank Alfalah exits Afghanistan

Bank Alfalah has decided to exit its operations in Afghanistan amid persistent political, economic and regulatory challenges in the country, a move that reflects both country-specific risks and a broader strategic shift underway across Pakistan's banking sector.

According to a statement and market commentary, the decision comes against the backdrop of frozen Afghan foreign reserves, uncertainty surrounding international recognition of the Taliban-led government, and prolonged disruptions to cross-border trade and financial flows.

Banking sector analyst Asad Ali of Topline Securities said that, given the prevailing conditions in Afghanistan, the bank's decision was pragmatic and largely expected.

"Amid ongoing challenges in Afghanistan, including frozen reserves and uncertainty over international recognition, the bank has decided to exit its operations in the country," he told The Express Tribune. "The Afghanistan business was limited in scale, comprising only two branches, and the decision is not expected to have a material impact on the bank's balance sheet."

He added that the move should not be viewed in isolation. "Globally, banks are reassessing cross-border operations, particularly in high-risk jurisdictions. Afghanistan's situation is one factor, but there are internal strategic reasons as well. If you look at other banks, you will see the same trend - many are closing or have already closed their foreign subsidiaries," he said, pointing to heightened compliance costs, tighter global regulatory scrutiny and capital allocation priorities.

On January 7, 2026, Bank Alfalah moved closer to formally exiting the Afghan market, where it has operated since 2005. The State Bank of Pakistan and Da Afghanistan Bank have granted in-principle approval to Ghazanfar Bank to commence due diligence for the acquisition of Bank Alfalah's Afghanistan operations. This follows an earlier, unsuccessful attempt to divest the unit in 2019 and signals a more definitive step toward disengagement from the Afghan financial system.

The bank's exit coincides with a critical phase in Pakistan-Afghanistan economic relations. Secretary of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry (PAJCCI), Muhammad Shoaib, said the bilateral economic relationship is at a "very sensitive juncture," marked by a prolonged border crisis and a visible withdrawal of Pakistani financial institutions from Afghanistan.

Since October 10, 2025, major trade crossings, including Torkham, Chaman-Spin Boldak and Ghulam Khan, have remained largely closed following deadly military clashes and escalating security tensions. The three-month-long standstill has effectively paralysed bilateral trade and transit activity, severely disrupting supply chains.

Approximately 12,000 containers and thousands of trucks carrying transit goods are reportedly stranded at Karachi Port and along various border points. Traders are incurring heavy financial losses, with daily demurrage and detention charges estimated at $150 to $200 per container.

The impact has been particularly severe for Pakistan's export-oriented sectors. The 2025-26 citrus (kinnow) season has been described by exporters as "completely damaged," as Afghanistan typically absorbs around 60% of Pakistan's citrus exports. With the Afghan transit route blocked, exports to Russia and Central Asian states have also stalled, leaving large quantities of produce unsold. Exports of potatoes and bananas to Central Asia have similarly come to a halt, while cement and pharmaceutical manufacturers have seen a key regional market effectively disappear.

Afghanistan, meanwhile, is facing its own economic fallout. Essential imports ordered from global markets remain stuck in Pakistan, contributing to supply shortages and rising food prices, including tomatoes, grapes and apples, in Afghan markets. Seasonal Afghan exports such as pomegranates, grapes and coal have also been restricted, resulting in significant revenue losses for local producers.

In response to the prolonged closures, Afghanistan has accelerated efforts to bypass Pakistan by developing alternative trade routes. Afghan traders are increasingly using Iran's Chabahar port and overland corridors through Uzbekistan, Turkmenistan and Tajikistan. Iran and Afghanistan have also agreed to boost rail freight capacity on the Khaf-Herat line. Despite tensions with Pakistan, Afghanistan's total trade volume reportedly reached around $14 billion in 2025, suggesting that alternative routes are partially offsetting the disruption.

Addressing the border situation, DG ISPR Lt Gen Ahmed Sharif recently stated that Pakistan's trade and cross-border movement are restricted due to security concerns, emphasising that national security remains the state's top priority.