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

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt 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.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid