Taliban preparing to reveal new Afghan government amid economic turmoil

Taliban official Ahmadullah Muttaqi said on social media a ceremony was being prepared at the presidential palace in Kabul, while private broadcaster Tolo said an announcement on a new government was imminent.

The Islamist movement's supreme leader, Haibatullah Akhundzada, is expected to have ultimate power over a governing council, with a president below him, a senior Taliban official told Reuters last month.

The legitimacy of the new government in the eyes of international donors and investors will be crucial for Afghanistan's economy, which is likely to collapse following the Taliban's return to power, analysts said.

The supreme Taliban leader has three deputies: Mawlavi Yaqoob, son of the movement's late founder Mullah Omar; Sirajuddin Haqqani, leader of the powerful Haqqani network; and Abdul Ghani Baradar, one of the founding members of the group.

An unelected leadership council is how the Taliban ran their first government which brutally enforced a radical form of Sharia law from 1996 until its ouster by U.S.-led forces in 2001.

The Taliban have tried to present a more moderate face to the world since they swept aside the U.S.-backed government and returned to power last month, promising to protect human rights and refrain from reprisals against old enemies.

But the United States, the European Union and others have cast doubt on such assurances, saying formal recognition of the new government - and the economic aid that would flow from that - is contingent on action.

"We're not going to take them at their word, we're going to take them at their deeds," U.S. Undersecretary of State Victoria Nuland told a news briefing on Wednesday.

"So they've got a lot to prove based on their own track record ... now they also have a lot to gain, if they can run Afghanistan, far, far differently than they did the last time they were in power."

Gunnar Wiegand, the European Commission's managing director for Asia and the Pacific, said the European Union would not formally recognise the Islamist group until it met conditions including the formation of an inclusive government, respect for human rights and unfettered access for aid workers.

"There is no doubt among (EU) member states and in the G7 context: we need to engage with the Taliban, we need to communicate with the Taliban, we need to influence the Taliban, we need to make use of the leverages which we have," he told members of the European Parliament in Brussels.

"But we will not rush into recognising this new formation, nor into establishing official relations."

Humanitarian organisations have warned of catastrophe as severe drought and the upheavals of war have forced thousands of families to flee their homes.

Afghanistan desperately needs money, and the Taliban are unlikely to get swift access to the roughly $10 billion in assets mostly held abroad by the Afghan central bank.

The Taliban have ordered banks to reopen, but strict weekly limits on withdrawals have been imposed and there are long queues at banks.

"Everything is expensive now, prices are going up every day," said Kabul resident Zelgai.

Afghanistan's real gross domestic product is expected to shrink by 9.7% this financial year, with a further drop of 5.2% seen next year, said analysts in a report from Fitch Solutions, the research arm of ratings agency Fitch Group.

Foreign investment would be needed to support a more optimistic outlook, a scenario which assumed "some major economies, namely China and potentially Russia, would accept the Taliban as the legitimate government", Fitch said.

The new, Taliban-appointed central bank head has sought to reassure banks the group wants a fully functioning financial system, but has given little detail on how it will supply funds for it, bankers familiar with the matter said.

While the Taliban are cementing control of Kabul and provincial capitals, they are fighting with opposition groups and remnants of the Afghan army holding out in mountains north of the capital.

Senior Taliban leader Amir Khan Motaqi called on the rebels in Panjshir province to surrender, saying "the Islamic Emirate of Afghanistan is home for all Afghans", referring to the Taliban-run state.

Opposition leader Ahmad Massoud, son of a former mujahideen commander who fought against the Taliban in northeastern Afghanistan in the late 1990s, told CNN his forces were fighting for a "decentralised state where power is equally distributed between the different ethnic and sectarian groups".