The Afghan government has so far recovered only a small percentage of the hundreds of millions that were embezzled from Kabul Bank.
Under the gun from the International Monetary Fund (IMF), the Afghan government has been working to recover hundreds of millions of dollars in assets taken from its largest private lender, Kabul Bank. But over the past six months its efforts have yielded a mere fraction of losses that some have estimated to be as high as 900 million.
“Only 70 million dollars of the money owed from Kabul Bank has been returned and about 100 million dollars in assets have been evaluated,” said Aziz Shams, spokesperson for the Ministry of Finance, in an interview with www.bamdad.af.
“In total, 350 million dollars of the bank’s debts have been identified and are scheduled to be returned,” he added.
But that would still leave more than 500 million dollars in assets that have disappeared without a trace.
The Acting Chairman of the Central Bank, Mohebullah Safi, had already announced that the bank owned property valued at more than $200 million.
“Some properties of the bank that amount to more than 200 million dollars have been identified, and this is aside from the assets the bank has in Dubai,” he told the Lower House of the Parliament in September.
The Kabul Bank scandal has presented the Afghan government with one of its biggest headaches of the post-Taliban period. Triggered by investigative reports in the Western media, the crisis broke in August, 2010, when the bank reported $300 million losses, and word spread that its two top officials, Chairman of the Board, Sherkhan Farnoud and Chief Executive Officer, Khalilullah Ferozi had been fired for financial mismanagement.
The story sparked a run on the bank by anxious depositors, who rushed to try and save their money. More than $180 million was withdrawn in just two days. A major crisis was averted only by a massive influx of public money from Afghanistan’s Central Bank.
The scandal was compounded by high-level government involvement: two of the bank’s largest shareholders, Mahmoud Karzai and Hasseen Fahim, are brothers of the Afghan president and first vice president, respectively.
In February the IMF advised that Kabul Bank should be put into receivership, and threatened a cutoff of funding if the Afghan government did not take action. In June, close to $1 billion in international aid to Afghanistan was put on hold, because the IMF did not find Kabul’s response satisfactory.
Shams: “In total, 350 million dollars of the bank’s debts have been identified and are scheduled to be returned."
The Afghan government was fast running out of money for even its most basic needs.
On Saturday, September 17, Omar Zakhilwal Finance Minister briefed Parliament on the situation.
“The Afghan government will run out of money in two months if IMF stops giving money to Afghanistan,” he said.
But Parliament, mired in its own internal problems, was not able to respond.
The government took some steps to avert a crisis. In response to IMF demands for transparency, it detained Farnoud and Ferozi, although rumors have circulated widely that the two men were later released.
This, insists Shams, is simply not true.
“They are in custody,” he said. “But based on Afghan laws, they can be let out to sell their properties, until they convicted by the courts.”
But the very clear impression remains that Kabul Bank represents the worst of Afghan government corruption.
Abdul Qadir Fitrat, who headed Afghanistan’s Central Bank at the time of the crisis, fled the country in June, saying that his life had been threatened because of his investigation. Fitrat had named Mahmoud Karzai and Hasseen Fahim as two of those responsible for Kabul Bank’s problems.
Abdul Qadir Fitrat, Ex-head of Afghanistan’s Central Bank
He is now in the United States, where he has legal residency. The Afghan Attorney General has said that Fitrat was involved in the Kabul Bank crisis, and is insisting that he be sent back to Afghanistan.
Although Afghan officials say that Fahim is under investigation, no action has yet been taken against the brother of First Vice President Marshal Mohammad Qasim Fahim. Mahmoud Karzai, brother of President Hamid Karzai, has vigorously denied any wrongdoing, and is not being investigated, according to Afghan officials.
On October 15, the Lower House of Parliament, the Wolesi Jirga, passed a bill that would inject $825 million into the Central Bank, to recapitalize it after its resources were depleted by the Kabul Bank scandal. A $51 million tranche was approved to be paid out immediately.
This has smoothed the way for international donors to turn the financial tap back on – the IMF has agreed to withdraw its sanctions and extend a new line of credit to Afghanistan.
Recently, an IMF delegation visited Kabul and agreed to give $129 million to Afghan government over the three next years. But this decision was taken by IMF staff level officials and must be confirmed by the IMF executive board. It is anticipated that the IMF will review this agreement in mid-November.
“All of IMF’s conditions were met by the Parliament’s approval of $51 million for Kabul Bank,” said Shams. “The Afghan government has renewed its contract with the IMF.”
At the same time, Parliamentarians say that their approval of the money should not be seen as a sign that Kabul Bank’s shareholders have been granted immunity.
“Even though we approved $51 million in the budget to pay Kabul Bank’s debts, it does not mean we want to close the file,” said Obidullah Ramin, an MP from Baghlan province.
