A credit program will be reinstated for Afghanistan, its government stated on Tuesday, by the International Monetary Fund. This should restore the stream of international aid that had been suspended due to the Kabul Bank crisis. The Kabul Bank was the largest financial institution in the country and had sustained major losses of around $300 million USD. It almost collapsed from mismanagement and bad loans.

The IMF has not backed up Afghanistan for more than a year, while some nations who had previously been donors decided to stop authorizing payments to Afghanistan. Now that credit has been reestablished, the country’s international partners can now enlist once again in its development plans. The IMF approved a three -year loan for $129 million, said the Afghan Finance Ministry.

This will permit the government to take on crucial reforms in the financial and banking sector, it will further fiscal amendments in customs and revenue departments, and public financial management will be improved.

No mention of the Kabul Bank was made by the ministry, though it is now a symbol of the corruption in Afghanistan. The matter is being scrutinized by the Afghan people and Afghanistan’s international donors because it is an indicator of the government officials’ promise to eradicate patronage and show accountability to the financial institutions of the world, like the IMF.

Last October, Afghan lawmakers said they would reimburse the central bank of Afghanistan since they bailed out the Kabul Bank. A bill was passed to grant up to $825 million, which will be dispersed for the next eight years. The money will help recapitalize the central bank.

The Kabul Bank has been divided into a “good bank” and a “bad bank”. The Afghan Finance Ministry is running the “good bank,” while the “bad bank” is riddled with bad loans worth hundreds of millions of dollars. The division and the refinancing of the Kabul Bank partly satisfied the IMF conditions to provide more credit to the country.

However, the IMF has asked the Afghan government to fortify the regulation and supervision of the bank sector and to prosecute the people blamed for the downfall of what used to be the country’s largest bank. Seventy million dollars has been recovered out of over $800 million in falsified loans given out by the Kabul Bank, says the finance ministry.

Three hundred and fifty million of the amount has been restructured for repayment, while $110 million in the assets related to the loans were held and transferred to the government. Some of the fraudulent loans were used to buy mansions and invest in malls and other risky projects. Criminal investigations have begun for many bank officials and the top two executives of the Kabul Bank, Sherkhan Farnood and Khalilullah Ferozi.

The two executives each used to own 28 percent of the bank’s shares, while President Hamid Karzai’s brother owned 7 percent of the bank’s shares and was the third largest shareholder. Afghan officials claim that Karzai’s brother and Haseen Fahim, a shareholder and brother to one of Afghanistan’s vice presidents, have repaid most of what they borrowed from the bank.

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