- KABUL, Afghanistan: Afghanistan’s president said Monday he is working to reform the beleaguered Kabul Bank but that foreign advisers share a large part of the blame for the country’s banking crisis and will face criminal investigation along with the bank managers and shareholders.
The nation’s largest private lender nearly collapsed last year under allegations of mismanagement, cronyism and questionable lending that implicated many members of the Afghan elite with ties to the government.
The fiasco has led many international donors to question the stability of Afghanistan’s financial system just as the country is trying to take on more responsibility for security and development. Some Western allies are holding back aid until it is clear the banking system is solid.
Afghanistan’s central bank has since taken over the institution but has not yet said if it plans to sell off Kabul Bank, which plays a key role in the Afghan economy by handling payrolls for government workers and security forces.
A US government report issued this month said that in the case of Kabul Bank, “fraudulent loans were used to divert $850 million to insiders. This amount reportedly represented 94 percent of the bank’s outstanding loans.” Karzai told reporters that all bank shareholders have been removed and those who do not return lent funds will face criminal investigation.
However, he also blamed the crisis on international advisers who issued reports saying the bank was functioning normally. He said the government is investigating these outside advisers and auditors and will follow up any indications of misconduct with a criminal trial.
“Hundreds of millions of dollars have been paid to these individuals and organizations to help the banking system of the country and they failed in their task,” Karzai said.
Karzai also said that the Afghan government is moving forward with a process to formalize the country’s relationship with the United States as international military forces turn more control over security to Afghan troops.
Karzai said the Afghan government is in the final stages of a proposal to the US, which he pledged will put the Afghan government in control of funding and national priorities.
“We have tied up their hands and feet,” Karzai said of the proposed rules for the United States operating in Afghanistan.
