Source: NY Times

In a bid to fend off the threat of a nationwide financial crisis, the Afghan government scrambled to shore up Afghanistan’s largest bank on Saturday after lines of frantic depositors mobbed the bank for a third day.

The efforts, which an Afghan official said could include the injection of Afghan government funds into the privately owned Kabul Bank, are meant to head off the run on the bank by its customers, who have withdrawn more than $200 million in the past few days amid fears of a wider economic collapse.

Officials said the Afghan government had not decided whether it needed to bail out the bank. But the Afghan Central Bank has pulled in funds from abroad, including $300 million that had been held in the United States Federal Reserve Bank, to have money on hand to guarantee the bank’s liquidity, American officials said.

A small team of advisers from the United States Treasury Department was in Kabul providing technical assistance, but American officials said no United States funds would be involved in the effort to rescue the bank.

The panic began last week when the Central Bank ousted the bank’s chairman and the chief executive officer, after discovering that the bank had lent hundreds of millions of dollars to allies of President Hamid Karzai and poured money into risky real estate investments in Dubai.

The crisis threatened to undermine confidence in Afghanistan’s fledgling financial system, which was built under American guidance after the collapse of the Taliban government in 2001. Among the clients of the bank is the government, which pays the salaries of about 250,000 public employees through the bank, including those of security officials and the military.

Continue Reading…

Advertisements