x Abu Dhabi, UAETuesday 16 January 2018

Afghan central bank chief flees to US

International arrest warrant issued for Abdul Qadir Fitrat over his alleged negligence in collapse of Kabul Bank last year as central bank governor claims he fled because his life was in danger.

The Da Afghanistan Bank building in Kabul: President Hamid Karzai's government dismissed the claims made by Abdul Qadir Fitrat, chairman of the bank, insisting his life was not under threat and calling him a 'runaway governor'. Massoud Hossaini / AFP Photo
The Da Afghanistan Bank building in Kabul: President Hamid Karzai's government dismissed the claims made by Abdul Qadir Fitrat, chairman of the bank, insisting his life was not under threat and calling him a 'runaway governor'. Massoud Hossaini / AFP Photo

KABUL // The Afghan Attorney General's Office said yesterday it will prosecute the chief of Afghanistan's Central Bank for his role in the collapse last year of the Kabul Bank.

The attorney general dispatched an international arrest warrant on the grounds that Abdul Qadir Fitrat, the head of the central bank since 2007, broke the law during his dealings with the bank.

The move was likely to put Afghanistan's financial future at risk, analysts say, stalling key economic assistance and international donor funds to the cash-strapped Afghan government.

Mr Fitrat told the Associated Press he fled to the US last week. He has permanent residence there and he said he left Afghanistan because he had received death threats.

AP reported he was staying at a hotel in northern Virginia.

He resigned as central bank governor from US soil, saying his life was "completely in danger" and prompting an Afghan government spokesman to say the resignation amounted to treason.

"Part of the Kabul Bank crisis was his responsibility because of his negligence and irresponsible performance," the Afghan President Hamid Karzai's chief spokesman, Waheed Omar, said. "It's not suitable for an Afghan official to run away and make excuses such as this."

Mr Fitrat made off with US$18,000 (Dh66,000) in advance salary, the Attorney General's Office said. It was unclear, however, if US authorities would heed the Afghan government's call to extradite the banker.

The saga surrounding the Kabul Bank kicked off last September when depositors learnt the country's premier private lending institution lost some $300 million in risky or fictitious loans allegedly to its 16 well-connected shareholders .

The amount of squandered loans has since risen to nearly $900m, or nearly half of the Afghan government's annual revenue, most of which is believed to have been poured into precarious property investments in Dubai by the bank's top officials.

Kabul Bank also played a key economic role in Afghanistan. It has been handling payrolls for thousands of government workers and the security forces across the country.

For ordinary Afghans, the majority of whom live on less than $2 per day, the bank has become a symbol of cronyism and corruption among the country's political and economic leaders.

After considerable pressure from the US and the International Monetary Fund (IMF), Afghanistan's central bank, which sets monetary policy and regulates private banks, intervened last year with some $820m to bail out the failing institution.

The central bank announced last month it recovered approximately $480m of the original loans. Mr Karzai announced his government was dissolving the bank in April, splitting it into two separate institutions for good loans and bad loans.

But Afghan investigators, part of a special panel appointed by Mr Karzai, say central bank officials should still be held accountable for failing to correct Kabul Bank's practices earlier.

In March, the US Agency for International Development (USAID) cancelled a contract with the US-based development contracting firm Deloitte, saying the company did not notify the central bank about early signs of fraud at Kabul Bank.

USAID is Afghanistan's largest development actor, implementing lucrative projects to boost the Afghan government as foreign troops are set to withdraw.

For his part, Mr Fitrat says he is being targeted for political reasons. Afghan politicians are afraid they will be exposed as having connections with the bank, he said.

While Mr Karzai pledged to prosecute those responsible for the losses, investigators have yet to bring charges against some of the bank's worst offenders.

At least two of Kabul Bank's top officials, the chairman ,Sherkhan Farnood, and the bank's chief executive, Khalil Feroozi, have had their passports seized by the government.

Mr Feroozi was recently seen at one of Kabul's upmarkete restaurants.

International donors and financial institutions also remain unconvinced of Mr Karzai's intentions to carry through with the Kabul Bank investigations.

The World Bank is withholding some $70m in reconstruction funds, on the grounds of the Afghan government's inadequate response to the country's deepening financial crisis.

The IMF is refusing to renew the country's main credit programme, halted last September.

Analysts say it is a litmus test for how the Afghan government might fare after the international community pulls out.

At least 97 per cent of Afghanistan's annual gross domestic product, about $15 billion, according to the World Bank, comes from spending related to the international military and donor community presence.

While the Kabul Bank's chief executive, Mr Feroozi, sat earlier this week in the plush garden of a restaurant in the city, one Afghan patron made clear his disdain for the tarnished banker.

"You see this man?" the patron said, within earshot of Mr Feroozi. "He destroyed Afghanistan."