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New Kabul Bank’s privatization

The Kabul Bank scandal which began in August 2010 is a stain on the country’s economic system. The scandal has not only earned bad image for the country but also pushed investors away. Even the bailout failed to address the economic crunch and restore customers’ trust over the country’s largest private bank. It is a biggest scandal in Afghanistan’s banking sector history. Several influential people were involved in the scandal. Therefore, the government failed to catch and punish the bigwigs. Sadly, the authorities were not serious to build confidence to investors. They tried to rebuild the bank’s image by adding ‘New’ to its name though the bank has nothing new to offer.

Shocked by the massive corruption under the very nose of the government, the International Monetary Fund (IMF) rejected to renew its Extended Credit Facility program with the country in 2010. This has triggered aid crisis. To renew the program, the IMF asked the government for forensic audit of the bank, reforming bank and relevant laws, trial of all those involved in the scandal, placing the bank into receivership, and $850 million bailout. The government met only two demands. The leaders have decided to privatize the bank. Only two bidders meet the criteria— a local firm and a Pakistani bank.

Inclusion of Muslim Commercial Bank (MCB) of Pakistan is proving a setback for future of the New Kabul Bank. The Finance Ministry on April 5 announced that MCB and the local firm, Join-Stock, are eligible buyers. According to director of the treasury department of the ministry, Mohammad Aqa Kohistani, the two financial firms could meet conditions to purchase the bank. Afghan government will sell the bank to a firm which can keep over $20 million in the country and possess valid banking license as well as a team of professionals.

Both, MCB and Join-Stock are interested in buying the bank. The local firm wants to deposit $168 million and invest around one billion dollars after purchasing the New Kabul Bank. The Pakistani bank is also qualified to be in the race. However, the MCB face hurdles. The Meshrano Jirga or Upper House of the Parliament asked the government to exclude MCB from the bidding process on the grounds that Pakistan was interfering in Afghanistan.

Therefore, the finance ministry is under crippling pressure. Indeed it will be a tough decision for the ministry to make. To make the decision-making easy, the ministry shall keep public interests in view. The financial cycle shall be limited to the country. Capital flow to other countries will affect the economic growth. Local firms shall be given priority. But it does not mean to leave loopholes and create ground for another scandal. Experience and professionalism shall have priority over the amount of investment. Thus, the ministry shall facilitate the local firm if it has the capacity to take over the New Kabul Bank and restore trust of the customers that it had lost. Many government officials, soldiers and policemen are customers of the bank. Therefore, keeping their information secret from foreign entities is important.

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