Peripheral Revision

Unfiltering history as we live it

IMF forces bargain sell-off of Kabul bank

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The central bank this year rejected the IMF’s demand that Kabul Bank be sold, saying it wanted to nurse the lender back to profitability before finding a buyer.

By Matthew Green and Fazel Reshad, Financial Times, March 27, 2011

Afghanistan’s government has agreed to wind down and sell off the embattled Kabul Bank to meet a condition imposed by the International Monetary Fund for resuming financial support to the country, an Afghan official said.

The IMF, backed by western donors, had demanded the government place the country’s biggest lender into receivership as part of a plan to shore up the financial system following the bank’s near-collapse last year.

Kabul Bank, which made huge loans to a coterie of well-connected businessmen, suffered a run in September after the central bank replaced senior managers amid corruption allegations.

Afghanistan’s government had initially resisted international pressure to liquidate the bank, fearing such a move would further damage confidence in the banking system.

But a finance ministry official said on Sunday that the government has now agreed to press ahead with the IMF’s demand that Kabul Bank be sold.

“This idea was first proposed by the IMF. The Afghan government considers it beneficial for the nation of Afghanistan and for the economy,” he said.

However, officials at Afghanistan’s central bank cautioned that no final decision on its fate had yet been made, raising the possibility of more wrangling over the lender’s fate.

The central bank this year rejected the IMF’s demand that Kabul Bank be sold, saying it wanted to nurse the lender back to profitability before finding a buyer.

The dispute emerged as a main sticking point in discussions between the IMF and Afghan government on a new support package for the country.

The IMF had been on the verge of agreeing a fresh programme to replace a previous $120m facility last year, but deferred the deal when the Kabul Bank scandal broke. The delay has threatened to complicate aid flows from donors.

http://www.ft.com/cms/s/0/ffd07b2a-5895-11e0-9b8a-00144feab49a.html#axzz1Hsw6z5f5

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Written by peripheralrevision

03/28/2011 at 4:51 am

Posted in Afghanistan

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