Afghan bank’s losses could reach $900m
KABUL, Afghanistan — Fraud and mismanagement at Afghanistan’s largest bank have resulted in potential losses of as much as $900 million — three times previous estimates — heightening concerns that the bank could collapse and trigger a broad financial panic in Afghanistan, according to US, European, and Afghan officials.
The extent of these losses make it clear that keeping the bank afloat — something the government has said it is determined to do — would require large infusions of cash from an already strained budget.
Banking specialists, businessmen, and government officials fear that word of Kabul Bank’s troubles could even prompt a run on solvent banks, destroying the country’s nascent banking system and shaking the confidence of Western donors.
The scandal has severe political and security implications. Investigators and Afghan businessmen believe that much of the money has gone into the pockets of a small group of privileged and politically connected Afghans, preventing earlier scrutiny of the bank’s dealings.
The spotlight on how political and economic interests in Afghanistan are intertwined threatens to further undermine President Hamid Karzai’s government. The bank is also the prime conduit to pay Afghan security forces, leaving the US military, which pays the salaries, looking for new banks to process the $800 million payroll.
As Afghan regulators struggle to find out where the money
went, many officials and international monitors concede that
the missing millions may never be recovered, raising
questions of how the losses could be replaced to keep the
bank from failing.