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Central & South Asia
Scandal-tainted Kabul Bank to be sold off
Afghanistan responds to IMF pressure over financial institution at centre of corruption scandal.
Last Modified: 28 Mar 2011 17:31
A run on the bank was halted only after an injection of government funding [EPA]

Afghanistan's Kabul Bank is to be broken up and sold off at the demand of the International Monetary Fund, according to sources in Afghanistan.

Diplomats in Kabul said on Monday that government approval for placing Kabul Bank into receivership would be given in the coming days and that the process would be complete within two weeks.

The IMF has demanded that the bank be wound up and has made clear that a possible financial assistance programme for Afghanistan would be dependent on the bank being closed down or sold.

The UN warned last month that international donors "may have to suspend or redirect their assistance" if the government failed to reach an agreement with the IMF.

Kabul Bank came close to collapse last year and was taken over by Afghanistan's central bank following claims that former executives had granted themselves huge under-the-table loans.

US media reports have said Kabul Bank's former executives used depositors' funds to buy property including seafront mansions in Dubai, one of which was made available at no cost to Mahmoud Karzai, the Afghan president's brother.

A run on the bank was only halted after government assurances and injections of public money.

Corruption case

The Afghan government of Hamid Karzai, the Afghan president, has long been beset by accusations of corruption.

In an interview in the Washington Post on Saturday, Mohammad Mustafa Mastoor, Afghanistan's deputy finance minister, said that the bank's deposits and performing loans would be separated from loans unlikely to be repaid.

"We need to know how much the loss is so we can determine how to respond to the losses," he said. "This will lead to the strengthening of our banking system."

Afghanistan's central bank has said the bank is now stable and has argued that putting it into receivership might cause a run on it and other banks.

One Western diplomat based in Kabul said that negotiations on the bank would be concluded during the annual World Bank conference in Washington from April 11-18.

Separately on Monday, Inayatullah Qasimi, Afghanistan's former transport minister, was reportedly arrested on corruption charges.

The AFP news agency quoted a spokesman for the attorney general's office as saying that Qasimi, who was appointed minister in 2004 and served for less than two years, will face trial for misuse of public funds.

He is the first former member of Karzai's administration to face such charges.

Source:
Agencies
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