Bank crisis hits Afghanistan
Sep 10, 2010
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The financial crisis reached Afghanistan this week with a run on Kabulbank, Afghanistan's biggest bank. Last week Kabulbank's chief executive and chairman, who are major shareholders, resigned under orders from the central bank. They were ousted amid reports that they had used the bank's money to invest in Dubai property, with losses allegedly outweighing the bank's assets. The news triggered a four-day bank run. That slowed early this week as the bank's liquid assets began to run low and the central bank promised to protect depositors' money. Kabulbank has over one million customers, who include many soldiers.
What the commentators said
With plenty of aid money, Afghanistan had hitherto dodged a Western-style banking crisis, said James Lamont in the FT. Now, due to corruption, it's got one. "This is probably the only bank in the world where the shareholders give loans to themselves," said Haroun Mir, director of Afghanistan's Centre for Research and Policy Studies. The chairman, Sherkan Farnood, sank $140m into Dubai's property market and lost most of it when the market collapsed, reported The New York Times. Meanwhile, The Washington Post said that the brother of president Hamid Karzai made almost $1m on a Dubai deal financed with Kabulbank money. This mess symbolises the "shaky post-Taliban order", said Andrew Higgins in the FT, with its "crony capitalism that enriches politically connected insiders". And it will compound a broader problem, added Lamont – confidence in the government's economic management is ebbing away.
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