News / Asia

Kabul Bank Scandal Tests Afghan Stability

Central Bank Governor Abdul Qadir Fitrat (File Photo)
Central Bank Governor Abdul Qadir Fitrat (File Photo)

Multimedia

Audio

Afghanistan’s largest lender, Kabul Bank, is embroiled in a corruption scandal threatening billions of dollars in international aid. The International Monetary Fund says its support to the country depends on whether officials can fix the problems that led to the bank’s collapse and government takeover last year.

The situation got even more complicated this week. Afghanistan issued an arrest warrant for Central Bank governor Abdul Qadir Fitrat, after he fled to Washington and resigned his post.

In an interview with VOA, the former central bank chief said he feared his life was in danger from those he tried to prosecute for "stealing millions" from Kabul Bank.

Abdul Qadir Fitrat speaks with VOA's John Walker in Washington:

But the Afghan government says Fitrat is the guilty party, and was involved in massive fraud at the bank.

VOA’s Kate Woodsome spoke with Martine van Bijlert, the co-director of the Kabul-based Afghanistan Analysts Network, about the scandal, the bank’s history, and its impact on the future of Afghanistan.

Listen to the Interview:

Abdul Qadir Fitrat told VOA there’s evidence showing a complex Ponzi scheme, designed to drain millions from Kabul Bank and flow to corrupt individuals. Is this a legitimate claim?

“Well, basically, it’s clear that the Kabul Bank didn’t operate like a normal bank. The shareholders borrowed or took large amounts of money from the bank, and invested that in very shaky investments. So some of that is still there and some of that has been lost. Basically, they used it as a private investment fund, which is not the normal way of running a bank.”

Fitrat says he’s in danger for accusing the bank’s shareholders, including the brothers of the Afghan president and vice president, of corruption. Does he have a reason to be scared?

“In Afghanistan, everything’s personal. And so if you go public and you smear someone’s name, because that’s the way it’s being seen, that’s taken very personally. Basically Fitrat briefed parliament on the research and the investigation they had done, and he named the biggest borrowers in the bank, and that included the brothers of the president and the brother of the vice president.

They were not very pleased that they were presented as corrupt individuals. Whether that goes as far as really putting his life in danger, I am not so sure. But he was very much under a lot of pressure.”

He was also under a lot of pressure from the international community to clean up this bank.

“It was very important for the international community. It actually became the main point in the negotiations between the IMF [International Monetary Fund] and the Afghan government. And the IMF is still not satisfied with how much the Afghan government has moved on this case. It’s withholding an agreement, which is making other donors withhold funds, so it’s really a big deal.

The U.S. is very closely involved in this sector. They’ve been the force pushing for resolving the banking crisis. They pushed Fitrat very hard to go public in parliament. They really want this out in the open and sorted out. It’s just very complicated because there are possibilities that a very large part of the political class is involved in this somehow. There’s been a report that said USAID, that’s been supporting the banking sector, should have been much more proactive. It’s become a very complex problem wherein actually everybody who’s involved has some blame.”

Kabul Bank handles about 80 percent of the government payroll, including salaries for policemen and teachers, so it’s really a part of sort of the running of the government. How stable is it, and what’s the potential fallout from this scandal?

“Well, what happened is that they split the bank into sort of a good running part, which is the part that handles the salaries at the moment, and then the part which holds all the loans which should never have been given. And that part is in receivership and they’re trying to get as much back from those loans as they can.

So, in principle, the good part of the bank should be stable at the moment. It’s going to probably be sold at some point, but for the moment it’s being run under the Central Bank and the Ministry of Finance. But in general, the banking system in Afghanistan is very shaky. It’s not been well regulated. That’s also why this could have happened. And it’s just not very well established yet, so there is a bit of nervousness that if any other banks get into trouble or if there are any other big media issues, it could really shake the Afghan economy.”

The bank had an unusual start. It was founded in 2004 by an international poker player, Sherkhan Farnood.

“It was founded by someone who didn’t have experience in the banking center, but he did have experience in the Hawala sector, in the informal money transporting sector. This is part of the lack of regulation within the banking system that people with no prior experience could set up large banks like that and play such a central role in the Afghan economy.”

Afghanistan has issued an arrest warrant for Fitrat, who has U.S. residency. How is this going to affect the already strained U.S.-Afghan relations?

“It’s going to be very interesting to watch who’s going to be the new head of the Central Bank. Because it’s such an important issue for the United States, they will find it very important that it’s someone they can work with; that it’s someone who’s seen as professional and proactive and who will want to clean up the banking sector. There has been sort of a history of appointing people to spite the U.S. or the international community, or to annoy them.

In the negotiations about the IMF agreement, the Minister of Finance has come out saying, ‘I’m sorry I’ve done everything I’ve needed to do. They’re still not happy, it’s a waste of my time.’ So that could become very contentious. On the issue of Fitrat and his extradition, I think the U.S. is going to be looking very carefully at what the allegations are and how much they may or may not be true. There could be truth in them, it could also be a form of retaliation. I’d be surprised if the U.S. extradites him.”

You May Like

Video For West Ukraine City, Conflict Far Away Yet Near

Physically and culturally close to Western Europe, Lviv feels solidarity with compatriots in country’s east but says they need to decide own future More

West African Women Disproportionately Affected by Ebola

Women's roles in families and the community put them at greater risk for contracting the disease, officials say More

Video NASA's MAVEN Spacecraft Arrives at Mars

Mars Atmosphere and Volatile Evolution craft will measure rates at which gases escape Martian atmosphere into space More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA’s MAVEN Probe Enters Mars Orbiti
X
September 22, 2014 9:20 PM
NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video NASA’s MAVEN Probe Enters Mars Orbit

NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video For West Ukraine City, Conflict Far Away Yet Near

The western Ukrainian city of Lviv prides itself on being both physically and culturally close to Western Europe. The Russian-backed separatists in the eastern part of the country are 1,200 kilometers away, and seemingly even farther away in their world view. Still, as VOA’s Al Pessin reports, the war is having an impact in Lviv.
Video

Video Saving Global Fish Stocks Starts in the Kitchen

With an estimated 90 percent of the world’s larger fish populations having already vanished, a growing number of people in the seafood industry are embracing the concept of sustainable fishing and farming practices. One American marine biologist turned restaurateur in Thailand is spreading the word among fellow chefs and customers. VOA Correspondent Steve Herman reports from Bangkok.
Video

Video Chinese Admiral Key in China’s Promotion of Sea Links

China’s President last week wrapped up landmark visits to India, Sri Lanka and Maldives, part of a broader campaign to promote a new “Maritime Silk Road” in Asia. The Chinese government’s promotion efforts rely heavily on the country’s best-known sailor, a 15th century eunuch named Zheng He. VOA's Bill Ide reports from the sailor’s hometown in Yunnan on the effort to promote China’s future by recalling its past.
Video

Video Experts Fear Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid