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Bailout package for banking sector approved

Bailout package for banking sector approved

Oct 15, 2011 - 18:42

KABULinfo-icon (PANinfo-icon): The Wolesi Jirgainfo-icon on Saturday approved $51 million (about 2,430 million afghanis) for the central bank to help it overcome a financial crisis and $20 million for a railway line project.

The amount for the central bank was approved after the International Monetary Fund (IMF) stopped an expected $70 million reconstructioninfo-icon payment to Afghanistaninfo-icon due to concerns about lax financial oversight.

Previously, Parliament had refused to okay a $73 million bailout package for the banking sector's development and alleviating the Kabul Bank crisis, which almost collapsed due to mismanagement and bad loans.

But in its annual meeting last month, the IMF asked the Worldinfo-icon Bank and donor countries to resume aid to Afghanistan. The Kabul Bank crisis was triggered by huge loan payments to shareholders, with some using the money to buy luxurious mansions in Dubai. Others used the money to invest in risky prestige projects like an airline and shopping malls in Kabul.

Finance Minister Omar Zakhilwal told the lower house of Parliament on Saturday an amount of $22 million had been recovered from borrowers and the house should approve $51 million as reconstruction payment.

Approval of the amount would help the afghani appreciate against other major currencies, the minister said. Zakhilwal called IMF's assistance crucial, saying 50 countries provided aid to Afghanistan through the Fund.

Amir Khan Yar, the head of the Wolesi Jirga's Finance and Budget Commission, urged MPs to approve the amount in the larger national interest. He told the Speaker Abdul Rauf Ibrahim that 18 parliamentary panels had discussed the issue and there had been no opposition to it.

Of the 140 lawmakers present, 138 approved a package of $51 million for the central bank to help it overcome the financial crisis and $20 million for a railway line project.

Besides the rail track, Zakhilwal said the amount would be used to set up an organisation that would work for the revival of railway lines in the country with support from Uzbekistan.

Under agreements with foreign countries, he said, Afghanistan was committed to constructing railway lines from Jalalabad to Peshawar, Kandahar to Chaman and Mazar-i-Sharif to Turkmenistan.



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