afghanistan acts to curb flight of capital
Last Updated : GMT 01:55:14
Arab Today, arab today
Arab Today, arab today

Afghanistan acts to curb flight of capital

Arab Today, arab today

Arab Today, arab today Afghanistan acts to curb flight of capital

Washington - Arabstoday

Afghanistan has taken new steps to combat rampant capital flight after the central bank found that the amount of dollars flown out of Kabul doubled to $4.6bn last year. Afghan officials believe many of the brick-sized stacks of $100 bills stuffed into boxes, bags and suitcases by Dubai-bound passengers belong to drug lords or criminal cartels. Western allies, who have spent billions shoring up the Afghan state, fear such flows will encourage the kind of grand-scale corruption that has alienated people from the government of Hamid Karzai, the president, and boosted support for the Taliban. The $4.6bn of declared dollar exports via Kabul airport last year was almost equivalent to Afghanistan\'s 2010-11 state budget of $4.8bn. The sum amounts to more than $150 for each Afghan citizen, in a country with average per capita income of only $1,100 (purchasing power parity) according to the World Health Organisation, or under $500 in gross income terms according to the UN. Officials suspect that large quantities of cash also leave the country without being recorded. Noorullah Delawari, the central bank governor, said he had imposed a new rule that restricts passengers to carrying a maximum of $20,000. Anyone wishing to move more money abroad will have to make a wire transfer through a bank. Mr Delawari said the rule, introduced this month, closed a loophole in Afghan law that allowed passengers to carry as much money as they liked out of the country provided they filled in a form. \"It will have a major impact on financing terrorism as well as on money laundering,\" he told the Financial Times. A new class of war entrepreneurs enriched by an economic bubble fuelled by Nato contracts and aid money have become accustomed to stashing their cash in foreign accounts and real estate in Dubai. Influential Afghans think nothing of carrying large quantities of cash out of the country. According to a cable from the US Embassy in Kabul that was later published on the website WikiLeaks, Zia Masood, the former vice-president, was once stopped entering Dubai carrying cash worth $52m and released without question. A former vice-president of Lloyds Bank in California, Mr Delawari was appointed in November, replacing Abdul Qadir Fitrat. Mr Fitrat fled to the US in fear of his life in June after naming borrowers linked to a scandal that brought down Kabul Bank, the biggest private lender. Mr Delawari said his suspicions were aroused when official records showed that SR1.5bn ($400m) left the country last year. Afghanistan has negligible trade with Saudi Arabia, although counter-terrorism officials suspect the Taliban raises significant funds from wealthy donors in the Gulf. Afghan officials believe some of the money laundered through Afghanistan is imported via Pakistan and Iran. The measures have angered some Afghan currency traders, who say they will sharply increase the cost of legitimate transactions. Mr Delawari said he had received a call from a foreign exchange dealer who had claimed Afghan currency merchants would lose $250m a year as a result of the rule. The governor said he responded by hanging up his phone. Mr Delawari said the central bank had placed monitors at the airport to help security forces enforce the new measures. But questions remain over whether criminal networks may find ways to circumvent Mr Delawari\'s rule in a country where bribery is rife and where perpetrators of financial crimes are rarely punished. Officials fear much of the money flowing out of the country is linked to the burgeoning heroin industry. The World Bank said last year that gross revenues from the opium trade were estimated to be equivalent to up to a third of Afghanistan\'s measured gross domestic product. Mr Delawari said the central bank was making progress in recovering funds from Kabul Bank, which suffered a run in 2010 that almost brought down the banking system. The bank, which has bad loans of more than $800m, has since been placed into receivership. The governor said receivers had rescheduled some $400m of loans, and seized property and other assets worth $200m. The central bank is now conducting an audit of another 10 banks and looking at ways to tighten supervision. \"We know there are some flaws, some loopholes in the law,\" Mr Delawari said. \"We have learnt a lot from Kabul Bank.\"

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