The decision comes amid reports late last year that the Australian government advised the embassy's ambassador, Wahidullah Waissi, that his diplomatic credentials would not be renewed.
"I think for the community, this announcement has created a lot of fear, confusion and disappointment," Maryam Zahid, the CEO of the Afghan Women on the Move organisation, told SBS News.
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"For Afghan diaspora here in Australia, [The embassy] was more than a diplomatic platform, especially for women and elders. It was a place of connection [and] identity.