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Kabul Bank: Fears of further banking collapses shake Afghanistan

Corruption rife in Afghan banks, says CEO; Can fragile state survive another crash?

A top banker in Afghanistan has voiced his fears that more local lenders are running the type of pyramid schemes that toppled Kabul Bank and that threaten to bring the entire Afghan economy to a screeching halt.

Last year’s collapse of Kabul Bank with debts of up to $910 million led to the country’s largest bank being nationalized, its shareholders being stripped of voting rights, and failed loans being placed in receivership.

Afghan politicians seeking to pay for a $820 million bailout using funds from a weary international community have run into trouble in the shape of the IMF, which wants Kabul to fund the bailout using local tax revenues.

The IMF wants the administration of president Hamid Karzai to put leading managers and shareholders on trial before any more foreign development aid – virtually Afghanistan’s sole financial lifeline – enters the country. If this happens, the country could struggle to pay thousands of public-sector workers.

"There are other banks operating like Kabul Bank did, not on the same scale, but this is an issue"

Khan Afzal Hadawal, Bank Millie Afghan

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