KABUL, Afghanistan (AP) — Afghanistan got a new line of credit Tuesday from the International Monetary Fund, which said the struggling government had taken steps to address governance and accountability issues that surfaced during the Kabul Bank crisis.
The IMF said it had approved a three-year $133.6 million loan for Afghanistan, which had been without IMF backing for more than a year.
The decision reassures international donors — some of whom had withheld aid while waiting for the IMF to give Afghanistan a new stamp of approval after the bank scandal. It comes just weeks before an international conference on Afghanistan scheduled for Dec. 5 in Bonn, Germany.
The IMF suspended its credit program for the country because of mismanagement at Kabul Bank — the country’s largest private financial institution — which made more than $800 million in fraudulent and questionable loans.
Kabul Bank became a symbol of the country’s deep-rooted corruption. The case is being closely followed by Afghans and international donors because it is a test of government officials’ pledge to root out patronage and graft and to show accountability to world financial institutions such as the IMF.
Axel Schimmelpfennig, the IMF’s country director, told reporters in a conference call that the bank operated like a "Ponzi scheme" that resulted in "fraud of an unprecedented scale for a country such as Afghanistan."
He said that while there was still work to be done, the IMF approved the new loan because Afghan authorities had made strides in reforming banking oversight, getting millions of dollars in Kabul bank loans on restructured repayment schedules and working to increase revenue for the government, which runs largely on international aid.
He also noted that Afghan lawmakers agreed last month to reimburse Afghanistan’s central bank up to $825 million it cost to bail out the Kabul Bank. The lower house passed a bill to provide up to $825 million over the next eight years — a sum that could decrease depending on how much loan money is recovered.
That recapitalization partly satisfied IMF conditions to extend new credit to Afghanistan, but the IMF also asked the Afghan government to strengthen oversight and regulation of the banking sector and work to improve revenue collection. The Afghan government has vowed to prosecute anyone accused of criminal activity related to the bank.
Criminal investigations against the bank’s top two executives, several bank officials and others are under way. The two bank executives are Sherkhan Farnood, the former chairman of Kabul Bank and a world-class poker player, and Khalilullah Ferozi, the former chief executive officer. They were held in detention for a few months, but recently were given freedom for part of each day to work with officials to recover the lost money.
Farnood and Ferozi each had owned 28 percent of the bank’s shares. President Hamid Karzai’s brother, Mahmood Karzai, was the bank’s third largest shareholder with 7 percent. Haseen Fahim, a brother of one of the nation’s two vice presidents, also owned shares of Kabul Bank. Afghan officials have said that Mahmood Karzai and Fahim had repaid most of what they borrowed from the bank.
The Kabul Bank has been split into a "good bank" — now being run by the Afghan Finance Ministry — and a "bad bank," which is saddled with hundreds of millions of dollars in bad loans. Schimmelpfennig said the Afghan government hopes to put the "good bank" up for sale in the middle of next year.
In October, the Afghan Finance Ministry said that of the more than $800 million in fraudulent loans issued by Kabul Bank, more than $70 million has been recovered; $350 million in loans have been restructured for repayment; and $110 million in assets associated with the loans have been seized and transferred to the government. Some of the questionable loans were used to buy luxurious mansions in Dubai and invest in risky prestige projects like the airline and shopping malls in Kabul.
