The Taliban has banned the use of foreign currencies in Afghanistan, a move that could further disrupt an economy on the brink of collapse.

"The economic situation and national interests in the country require that all Afghans use Afghani currency in their every trade," the Taliban said.

The economy is struggling due to the withdrawal of international financial support after the Taliban took control.

The US dollar has been used widely in Afghanistan's markets.

Dollars are also often used for trade in areas bordering Afghanistan's neighbours such as Pakistan.

"The Islamic Emirate instructs all citizens, shopkeepers, traders, businessmen and the general public to henceforth conduct all transactions in Afghanis and strictly refrain from using foreign currency," Taliban spokesman Zabihullah Mujahid said in a statement posted online.

"Anyone violating this order will face legal action," the statement said.

Assets frozen, funds stopped

After the Taliban seized control of the country in August, billions of dollars of Afghanistan's overseas assets were frozen by the US Federal Reserve and central banks in Europe.

"We believe that it's essential that we maintain our sanctions against the Taliban but at the same time find ways for legitimate humanitarian assistance to get to the Afghan people. That's exactly what we're doing," Deputy United States Treasury Secretary Wally Adeyemo told the US Senate Banking Committee last month.

The Taliban has called for the release of Afghanistan's assets that are being held overseas as the nation faces a severe cash crunch.

Afghanistan has also been hit by the exodus of foreign aid. Grants from overseas previously financed three quarters of its public spending.

Earlier this year, the International Monetary Fund (IMF) said Afghanistan will no longer be able to access its resources, while the World Bank also halted funding for projects in the country.

Last month, the IMF warned that the country's economy could shrink by 30% this year, pushing millions into poverty and causing a humanitarian crisis.

The fund also said that Afghanistan's economic woes could fuel a refugee crisis impacting neighbouring countries, Turkey and Europe.

The country is also suffering from a severe drought, which has ruined much of its wheat crop and sent prices soaring.

The United Nations World Food Programme has warned that millions of Afghans could face starvation due to a combination of the drought, conflict and Covid-19.

However, although Western powers have said that they want to avoid a humanitarian disaster in Afghanistan, they have refused to officially recognise the Taliban government.