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Report: Norway Suspends Aid to Afghanistan Over Corruption

Norweigen diplomat and former UN envoy in Kabul, Kai Eide, presents his memoir, High Stakes in Afghanistan, in Oslo, Norway, November 2, 2010. (file photo)

Norway has frozen $55 million in aid to Afghanistan until the scandal surrounding the collapse of corruption-ridden Kabul Bank is resolved.

Norwegian Deputy Foreign Minister Espen Barth Eide said Tuesday that a "lack of good governance" on the part of Afghan authorities is the primary reason for the aid suspension. Eide made his comments to Norwegian daily newspaper Dagens Naeringsliv.

The International Monetary Fund and Afghan government are currently in a dispute over how to resolve the crisis surrounding Kabul Bank, Afghanistan's biggest private lender. The bank is on the verge of bankruptcy after nearly collapsing last year over of mismanagement, cronyism, and questionable lending.

Several high-profile bank officials, including the brother of Afghan president Hamid Karzai, have been accused of taking out more than $900 million in loans that were never repaid.

The IMF has also said it will withhold financial aid to Afghanistan until the issue is resolved.

Some information for this report was provided by AFP and Reuters.