Editor in Chief: Moh. Reza Huwaida Friday, January 19th, 2018

The Kabul Bank Saga and another Test for Karzai’s Credibility

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The Kabul Bank Saga and another Test for Karzai’s Credibility

Exclusive for the Daily Outlook Afghanistan

I. Let us get reacquainted to our theme by recalling some most striking events occuring last year with regard to the Kabul Bank. By the very beginning of September 2010 the Kabul Bank faced a nearly complete collapse. The Afghan people were – quite correctly - running at highest possible speed to the Bank attempting to save their modest amounts of money from the largest private Bank of Afghanistan. Why that? Why this "mass hysteria" -behaviour of mostly poorly educated Afghans?

The answer is utterly simple. The Afghan people—whether educated or not—did by that time unmistakenly understand one basic information, that is, that some of the incredibly corrupt Afghan elite clan chaps have reportedly tried to get richer by means of using the money of the lower and middle class people at Kabul Bank accounts for their own private gambles! The leading figures in that dirty game, it is only fair to state, had virtually "intimate" relations with the Afghan government! Khalilulah Ferozi, the main figure of the Kabul Bank after Sherkhan Farnood, has been a top advisor of Hamid Karzai's presidential reelection campaign in 2009, and there is evidence about heavy financial injections from the Kabul Bank into the reelection campaign.
One of President Karzai's brothers was a shareholder of the Kabul Bank, so was a brother of Vice-president Fahim.

To become a member of this club of distinguished shareholders was obviously arranged in an easy going way. President Karzai's brother did not even need to pay for his approximately 8 % of the shares.
The Kabul Bank was saved from bankruptcy in September 2010 by means of an all powerful intervention of the Central Bank of Afghanistan, the da Afghanistan Bank. It is reported that the da Afghanistan Bank had to inject more than $800mln to keep the Kabul Bank alive. Its then chief executive officer Ghazi became the CEO of the Kabul Bank and now he is the chairman of the New Kabul Bank! The new staff and also governor Fitrat of the da Afghanistan Bank had indicated in the past that the overall loss of the Kabul Bank amounted to some $900mln.

II. At a press conference in April 2011 in Kabul, President Karzai touched the subject of the Kabul Bank Saga. He came along with an unambiguous statement concerning the former shareholders of the Kabul Bank: "The former shareholders can no longer be part of the Bank. They must pay all their debts in a month or face prosecution." (Tolonews, 13th April 2011, homepage).
This is a very clear statement indeed. But now the question arises what happened in the meantime? Have the former shareholders paid back their debts completely?

Also the question may be appropriate how much money does each of the former shareholders owe the Kabul Bank? This information is publicly available since the end of April, 2011. Chairman Ghazi of the New Kabul Bank informed the members of the Wolesi Jirga at the 29th April by submitting the following list of loans:
Farhood: 504 million USD (mio. USD); Ferozi: 66.9 mio. USD; Fahim: 78 mio. USD; M. Karzai: 22 mio. USD; Habibi: 39.7 mio. USD; Dawi: 37 mio. USD; Ibrahim: 9 mio. USD; Sofi Nisar: 14 mio. USD; and Zahir: 11 mio. USD.

Summing up the individual debts yields 781.6 mio. USD and this is quite a slice. In order to evaluate the potential benefit for a country like Afghanistan let us give an example. It is reported that 35-40 % of the Afghan population are poor in the sense that less than 1.25 USD per day and per capita is available for the poor people. With approximately 750 mio. USD you could finance the daily food of the poor population of Afghanistan for about 18 months!
Keep in your mind that both chairmain Ghazi as well as governor Fitrat indicated that also members of the present parliament and of the present government have received "loans" from the Kabul Bank. But they avoided to mention other names.

Let us recall the President Karzai's publicly announced deadline imposed on the former shareholders of the Kabul Bank to pay back the sum has been the May 13, 2011. Has anything happened since then? In particular with regard to the sum of money to be paid back? There are different figures around. Recently the da Afghanistan Bank indicated that some 480 mio. USD have been collected. The press did not receive any further details.

III. Suggestion: The members of the Wolesi should invite the following three persons to review the transfers of the former shareholders up the end of June 2011 to pay back the debts: Chairman Ghazi of the New Kabul Bank, the Minister of Finance Zakhilwal, and Attorney General Aloko. These persons should know whether there have been transfers to pay back individual debts to the Kabul Bank and they should inform the members of the Wolesi Jirga accurately about the facts. Also Attorney General Aloko should answer the question whether or not his office has already initiated a prosecution process with respect to those former shareholders who failed to pay back their debts completely.

At this meeting the three distinguished gentlemen should also inform the public on the total financial support of the Kabul Bank for President Karzai's reelection campaign, they also should handover a list with all politicians (and their families) having profited from "loans" and other private and business benefits of the Kabul Bank.

IV. As it happens, the political games of the corrupt clans do not stop by the time some of their members might face prosecution. Prior to the self-imposed payback deadline President Karzai appointed another committee (called the "Kabul Bank Audit team") led by one of his most loyal servants: Mr. Azizullah Ludin. As far as Mr. Ludin is concerned just recall that he is the former head of the independent Electoral Commission during the presidential race in 2009. Since that time he has been the most servile voice of Hamid Karzai. In the Kabul Bank Saga Mr. Ludin did precisely what was expected by the presidential palace.

Guessing what Mr. Ludin's real job was in heading the Kabul Bank Audit team may not be helpful. Instead let's see what he has practically done. Instead of talking about the criminal activities of the impostors Mr. Ludin invented rumours about inadequacies in international accounting practices as well as assigning a big slice of responsibility for the Kabul Bank disaster to the Central Bank of Afghanistan and its govenor Fitrat. Then, when he finally touched the status quo of the payback obligations by the two most sensitive former shareholders of the Kabul Bank Mr. Ludin demonstrated again that he is indeed his master's brave voice.

With regard to president Karzai's brother Mr. M. Karzai he concluded: "He has no problem". The audit team had accepted the view of M. Karzai that the outstanding debt was not 22 mio. USD, but rather 4.2 mio. USD. This loan has been paid back and that's it.

Now when you read carefully which kind of abstruse reasoning of the big entrepreneur M. Karzai has convinced the "audit team" that he owed 4.2 mio. USD rather than 22 mio. USD you just get sick to your stomach! In other words the "arguments" of Mr. Karzai ended up with reducing his debt by 17.8 mio. USD by means absurd points. But Mr. Ludin feels fine and certainly nobody is surprised to realize that.

What about the brother of vice-president Fahim? Do you really wish to hear, pardon, to read what a person like Mr. Ludin is prepared to accept? Well, Mr. Fahim has "pledged" enough property to cover his obligations. In other words, his real payback so far has been zero. This episode may give support to the view why it is that Afghanistan's position in the international "Corruption Perceptions Index" is number 176 out of 179!

Both the Afghan as well as the international public had to learn late at night of the June 27, 2011 that govenor Fitrat has resigned due to death threats. Being a permanent resident of the United States he has decided during a stay in the US not to return to Afghanistan. Now has ex-govenor Fitrat said the truth when he touched the subject of death threats? Hard to know but it may be recalled that as early as November 2008 two advisers of Bearing point working on Kabul Bank material received death threats. This is well documented in a memorandum to USAID from March 2011. It therefore sounds credible that Mr. Fitrat has received death threats after having revealed the list of prominent debtors of the Kabul Bank to the Wolesi Jirga by the end of April 2011.

Johan Johansen is an economist who has worked in Afghanistan.

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