Afghanistan’s Hamid Karzai blames foreign advisers for near-collapse of Kabul Bank


Afghanistan President Hamid Karzai talks during a news conference at the presidential palace in Kabul. (Kamran Jebreili/Associated Press)
April 11, 2011

— Officials responsible for the near-collapse of Afghanistan’s largest bank last year will be prosecuted, President Hamid Karzai said Monday, and he laid a significant portion of the blame for the crisis on Western advisers, saying they should have alerted his government earlier to the bank’s problems.

Karzai said at a news conference that all former shareholders of Kabul Bank — including his brother Mahmoud Karzai and a brother of the vice president — have had their connections to the bank severed and that “all wrongdoers, whoever violated the law,” will be “dealt with legally.” The president also said his government is investigating the role of foreign advisers working with Afghanistan’s banking system.

“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,” Hamid Karzai said.

Kabul Bank gave out hundreds of millions of dollars to Karzai’s political allies and bank insiders to finance their companies and luxury real estate, without the expectation of repayment.

The Central Bank last year seized control of Kabul Bank, prompting a run on deposits and forcing the Afghan government to bail it out to stave off collapse.

The crisis has brought fresh scrutiny to the nation’s financial system. Without reforms, foreign aid could be cut back, with donor nations fearing their investments could be squandered, according to U.S. officials. The International Monetary Fund has delayed renewing its credit line to Afghanistan, pending changes to the financial system.

The Afghan government has yet to prosecute any of the bank’s executives or shareholders.

Central Bank officials have agreed to put Kabul Bank into receivership and separate its deposits and performing loans from those loans that are not likely to be repaid.

The U.S. embassy did not have an immediate response to Karzai’s criticism of the banking advisers.

For months, U.S. officials have been frustrated with the response by the Afghan government to Kabul Bank’s problems.

“The Afghan government’s inability — thus far — to respond adequately and prosecute those responsible for the Kabul Bank financial crisis has given donors concern about the efficacy of donor resources,” the White House said in a report this month.

The report added, “The Afghan government’s failure to implement measures recommended by the IMF to deal with Kabul Bank have led to an impasse between the Afghan government and the IMF on a new program.”

Joshua Partlow is The Post’s bureau chief in Mexico. He has served previously as the bureau chief in Kabul and as a correspondent in Brazil and Iraq.
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