IMF Rejects Afghan Plans to Resolve Bank Crisis

Posted June 17th, 2011 at 2:30 pm (UTC-5)
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Afghan and Western officials say the International Monetary Fund has rejected the Afghan government's plans to resolve the Kabul Bank crisis and that a $70 million reconstruction payment will be withheld.

Kabul Bank nearly collapsed last year when allegations of mismanagement, cronyism and questionable lending first surfaced. The bank's executives and shareholders are accused of helping themselves to nearly a billion dollars in fraudulent loans.

An IMF spokesman said Friday that donor countries had made the decision to stop the scheduled reconstruction payment and not the IMF itself.

The scandal has stalled millions of dollars in foreign aid, as donors wait until they are confident the government has taken measures to reform Kabul Bank.

In April, the Afghan government announced plans to divide Kabul bank in two, with a receivership office to isolate hundreds of millions of dollars in “bad” loans and a successor bank to take over the “good” loans and assets.

The Central Bank took control of Kabul Bank last September after allegations of corruption and mismanagement surfaced.