KABUL, Afghanistan — One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.
Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated. But he predicted that if Afghan depositors continued to withdraw their money at the current rate, Kabul Bank would almost certainly collapse, undermining confidence in the nascent financial system the Afghans have been trying to build with American help.
“If this goes on, we won’t survive,” Mr. Frozi said in an interview. “If people lose trust in the banks, there will be a revolution in the financial system.”
Afghan leaders promised to guarantee deposits in an attempt to arrest the panic, which began earlier this week when the country’s top banking officials demanded the resignations of Mr. Frozi, the bank’s chief executive, and the bank’s chairman, Sherkhan Farnood.
Afghan and American officials say the two men presided over the bank in a reckless and freewheeling manner, doling out millions to allies of President Hamid Karzai and pouring money into risky investments that crashed.
The bank’s troubles — and the corruption associated with them — are posing a direct challenge to the country’s fledgling financial system, which was built under American guidance after the collapse of the Taliban government in 2001. Kabul Bank, which counts a brother of President Karzai among its politically connected shareholders, illustrates the intertwining of political and economic interests in Afghanistan. Afghan and American regulators said the bank’s political connections had shielded it from scrutiny until now.
If the loss of confidence spreads beyond Kabul Bank, it seems almost certain to strain the resources of the Afghan government — and make it more likely that the United States will be forced to intervene. There were no indications yet that the panic was spreading, but American and Afghan officials said other Afghan banks might face similar troubles.
It brings a tear to my eye to see that we have infused American free market values so quickly in Afghanistan.
Can charter schools run by the Taliban and Jihadis for Education Reform (JFER) be far behind?