Lodin: Kabul Bank crisis shouldn’t affect aid

KABUL’s largest private sector bank.

The crisis is close to being resolved, he said.

The International Monetary Fund stopped an expected $70 million reconstruction payment to Afghanistan over concerns about its lax financial oversight following the near-collapse of Kabul Bank, a government adviser said Friday.

The suspended payment indicates that the IMF and other international donors are dissatisfied with the halting steps Afghan officials have taken to address the continued turmoil at the bank, which handles salary payments to government workers, soldiers and police.

The Afghan government had offered a series of proposals to overhaul its financial system following the Kabul Bank crisis.

Trouble surfaced last year, as the public discovered that the bank made hundreds of millions of dollars in questionable loans to shareholders—including the elder brother of President Hamid Karzai. Some used the loans to buy luxurious mansions in Dubai, United Arab Emirates. Others used the money to invest in risky prestige projects like an airline and shopping malls in Kabul.

Many of the loans were made “undocumented,” so there was no system to ensure they were paid back.

A halt in international donations could be disastrous for Afghanistan. The UN has said some $70 million in spending for government activities could be lost without IMF support. The World Bank says 97 percent of the gross domestic product in Afghanistan is linked to spending by the international military and donor community.

The IMF, international allies and the central bank chief have called for criminal prosecutions over the loan scandal. However, an investigatory commission said that any decision on whom to charge will be made by Karzai.

Led by Lodin, the eight-member commission of the Office of Oversight for Anti-Corruption released a report last month showing that about $467 million of outstanding loans were made without appropriate documentation or collateral.  A recent USAID inspector general report estimated that fraudulent loans diverted $850 million to bank insiders.

The bank loaned a total of $912 million to 207 individuals, including cabinet ministers, parliamentarians and bank officials, the report said.

“The donors should not stop giving aid for this minor incident. They should instead help us get rid of the situation,” Lodin said.

He said the investigating committee had sent its latest report to the President, and a list of the 207 borrowers had been referred to the Attorney General’s office.

“We have appealed to the President to support Kabul Bank, where people have deposited their hard-earned money,” he said.

Lodin expressed confidence in the bank, saying the lender had the capacity to overcome its crisis. He said the issue would soon be resolved and all loans taken from the bank would be recovered.

However, Lodin also said there were some borrowers who had no money to return. Therefore, he said, a complete recovery was not possible. “In such cases, the central bank is bound to take remedial measures,” he said.

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