Dubious loans as funds take flight
The US and its allies have long had concerns about allegations of corruption and poor governance relating to the government of Hamid Karzai, Afghan president, writes James Blitz. But no recent event has triggered as much anxiety as the disappearance of hundreds of millions of dollars from the privately owned Kabul Bank.
The bank has been in turmoil since late last year when it was discovered that some of its shareholders, who include relatives or backers of Mr Karzai, had borrowed from it without collateral or documentation. The money was allegedly invested in property in the United Arab Emirates and in risky domestic projects such as an airline and shopping malls.
A commission set up by Mr Karzai to investigate the scandal issued its report last week, which did little more than blame regulators. The inquiry led by Azizullah Lodin, the head of Afghanistan’s anti-corruption office, did not specify who had been responsible for taking out the loans. According to news reports, Mr Lodin said “three or four” sitting cabinet members had received dubious loans. But he did not name the individuals concerned and also absolved Kabul Bank’s two most politically prominent borrowers – Mahmoud Karzai, the president’s brother, and Abdul Hassin Fahim, brother of the powerful first vice-president.
The commission made clear that it was up to the president to decide whether anyone should be prosecuted. Those involved in the international mission in Afghanistan – the US, Nato, the UN and the European Union – are watching what action he will take.
“How the Karzai government deals with the entire Kabul Bank issue is going to be a litmus test of where he stands on economic governance and on accountability,” says one senior western figure in Kabul. “Anything up to $900m has disappeared from the bank. We do not know how that money has disappeared and who has responsibility for it. The Karzai government needs to make sure that the shareholders who robbed the bank are liable for prosecution.”
Western diplomats say the scandal has created uncertainty among donor governments and investors as they consider future funding for the Afghan economy. US President Barack Obama has told Mr Karzai that US funds would not be used to bail out the bank.
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