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Government must invest more to revitalize New Kabul Bank

in Afghan Business

Government must invest more to revitalize New Kabul Bank

new Kabul BankThe fate of the New Kabul Bank (NKB) has remained undecided ever since the bank witnessed one of the worst scandals in history in late 2010.

Investigations and judicial action in the aftermath of the bank’s crisis and scandal indicated that the Kabul Bank began as “Ponzi Scheme” where almost USD 900mn was embezzled out of the bank.

A report by the Independent Joint Anti-Corruption Monitoring and Evaluation Committee noted that the failure of Kabul Bank and the subsequent government bailout represented around 5% to 6% of Afghanistan’s GDP.

Talks on privatization of the bank made the highlights of the news several times after the bank was seized by the government in 2010. But, the privatization never happened.

Officials of the New Kabul Bank have said they were ready to be part of the either sector—public or private.

Masood Mosa Ghazi, Head of the Bank, said the bank should be handed to the private sector or it should carry out its operations within the government framework without any constraints.

“After three years, we are in a situation where the government must decide whether to privatize the bank or allow its operations within the government’s framework without any constraints. If we are to be part of the government, then we must be given the license to invest and offer loans,” said Ghazi.

Ghazi said the monthly expenses of the bank reach USD 300,000 which is paid by the government. This could have an adverse effect on the country’s budget in the future, added Ghazi.

According to Ghazi, the bank lost several opportunities of preparing itself for privatization in the past 3 years.

The Council of Ministers recently rejected the bid from two companies that had participated in the bidding for privatization of the bank. The Economic Committee of the Council was then appointed to decide whether to transfer the bank to the private sector or keep with the government. A committee—comprising of representatives from the Ministry of Finance (MoF), Da Afghanistan Bank (DAB)and the New Kabul Bank—was created to come up with appropriate structure plans for the bank.

In order to avoid any complications with the privatization of the bank, the bank was denied permission to invest and give loans, according to DAB Deputy Head Khan Afzal Hedawal. This led to the current high expenses of the bank with limited turnover, added Hedawal.

In the meantime, MoF officials said the structure plans for NKB would be presented to the Economic Committee of the Council of Ministers next week.

“Our plans to whether privatize the bank or keep with the public sector are ready to be submitted to the Economic Committee. Our research indicates that the bank may grow considerably after it’s privatized. A company is willing to invest up to USD 70mn in the bank. On the other hand, if the government chooses to run the bank, then a) it is not acceptable by the economic market and b) the bank requires a huge amount of investment,” said Mohammad Aqa Kohistani, Head of MoF’s Treasury Department.

Presently, there are 3 public banks and 16 private banks operating in Afghanistan.

The public, however, starting losing trust in Afghanistan’s banking sector after the Kabul Bank scandal in 2010.

There are concerns that the fate of NKB would remain undecided until the formation of the new government.

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