Tuesday, February 22, 2011

Kabul and a bank

Kabul City
What will be your expectations from the leadership of  a war-torn country? From her politicians, business heads, regulators etc regarding to their behavior, accountability? What will be your answer if the country in question is Afghanistan?

Its hard to imagine that, a country like Afghanistan devastated by decades long civil war and occupations will be back in normal state within some years. These long and continuous wars not only increased the hardships of common man but also finished almost all political institutions and financial stability of this land-locked country. But one decade should be enough for any country to show some progress, at least to make sure that the country is moving in the right path, but in the case of Afghanistan, things are totally different.

In many part of the world corruption is slowly but steadily becoming a part of governance. Even common citizens are started to acknowledge the fact. But hopes for a better tomorrow are still in air, and to preserve that hopes people from Atlantic to Arabian sea are on the streets to protest against the autocratic regimes. Effects of Jasmine revolution of Tunisia is spreading like a wild fire across the autocratic regimes from Atlantic to Arabian Sea. Two governments are already down and no one knows how many will go before it ends. 

In the case of Afghanistan, people and institutions which are supposed to show lights for others to follow are still searching in the darkness. Otherwise how can you explain the pathetic situation of a leading bank in the country?

Kabul bank, established in June 2004 is one of the most important financial institutions in Afghanistan. Its not only the largest bank in the country but also handles most of government's accounts - including the coalition funded $1.5bn annual salary payments for Soldiers, Police and other government employees like teachers. But after financial irregularities came to limelight, Kabul bank become a model- a model which exemplifies what not to do in banking.

According to reports bank's exposure to toxic assets could be anywhere between $800mn to $1bn. A huge amount compared to Afghan government's annual revenue. According to WSJ's report,

"Apart from the alleged loans and bribes to politically connected people, the bank made large donations to President Karzai's 2009 re-election campaign, Afghan and U.S. officials say. Its chairman has said he spent more than $150 million of the bank's money to buy Dubai villas in his and his wife's name. The villas were then occupied by members of Afghanistan's political and economic elite, including President Karzai's brother Mahmood, who owned a 7% stake in the lender."

Well you may be wondering, how they escaped from scrutiny till now? If WSJ reports are to be believed, for that also they found a novel way - by giving loans, bribes and other payments to senior government officials.

The results of these type of actions will be a devastating one. These type of actions will result in the loss common people's trust in banking and other political institutions. Donor agencies like IMF and other western governments -which are already under credit crunch- will think twice before pledging further monetary assistance to Afghanistan. This episode taught one more lesson - in fact an expensive one - to US and its partners.

But what about Afghan people, don't they deserve some thing more?


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