Bloomberg News

Afghan Central Bank Nominee Says State May Recoup Bailout Cost

November 24, 2011

Nov. 23 (Bloomberg) -- President Hamid Karzai’s choice as Afghanistan’s new central bank governor says the state may recover 80 percent of the $850 million it has spent to bail out the country’s biggest commercial lender.

Noorullah Delawari, who headed Da Afghanistan Bank from 2004 to 2007, has been chosen by Karzai to return to the post, the president’s spokesman, Hamid Elmi, said by phone today. The appointment, which must be confirmed by parliament, ends a five- month vacancy that has slowed the government’s efforts to handle the collapse last year of Kabul Bank. The bank failed because of illegal loans to its shareholders, including brothers of Karzai and First Vice President Mohammad Qassim Fahim.

The International Monetary Fund agreed this month to resume lending to Afghanistan after a year’s delay caused by the bank collapse and by what the IMF said were its concerns that Afghanistan was not closely enough supervising commercial banks. An IMF statement Nov. 15 said the fund will lend $135 million to Afghanistan on the condition that Karzai’s government speed up prosecutions and efforts to recover losses at Kabul Bank, which the IMF says are estimated at more than $900 million.

“Asset recovery and legal actions against the architects of the fraud have lagged and need to be pursued more forcefully,” IMF Deputy Managing Director Nemat Shafik said in the statement.

$850 Million Loan

Delawari said the government bailed out Kabul Bank with an $850 million loan. “I feel comfortable that more than 80 percent of the money spent by the government will be recovered” when the government completes a sale of real estate and other properties it seized against the loans, Delawari said in an interview at the Afghanistan Investment Support Agency, a government department he currently heads.

“About $230 million is the value of real estate that is marketable, including properties in Dubai, and should be recoverable fairly soon,” Delawari said. Other collateral for the loans, including properties in Afghanistan, is worth about $400 million, he said.

“About $200 million we are still working on,” Delawari said.

Delawari worked for more than 20 years at U.S. commercial banks, serving as vice president of Lloyds Bank California, according to his biography on the investment agency website.

He said he will use his experience in handling loans, including those of failed companies, to reappraise “where are the weaknesses, particularly in bank supervision, to make sure that the problems that caused the failure of this bank will never occur again.”

Da Afghanistan Bank’s previous governor, Abdul Qadir Fitrat, fled to the U.S. in June, saying he had received threats over his calls for prosecutions in the case. Karzai’s office said at the time Fitrat had fled after being summoned for questioning over his role in managing the aftermath of the scandal.

--Editors: Mark Williams, Suresh Seshadri

To contact the reporters on this story: Eltaf Najafizada in Kabul at enajafizada1@bloomberg.net; James Rupert in New Delhi at jrupert3@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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