Afghan president says he’ll resolve Kabul Bank crisis

President Hamid Karzai on Monday promised to clean up scandal-plagued Kabul Bank but sharply criticized international auditors and oversight bodies, saying they are partly to blame for the massive malfeasance at Afghanistan’s biggest private financial institution.

The Afghan leader has been under intense foreign pressure to help resolve the crisis at the bank, which was driven to the brink of collapse last year after hundreds of millions of dollars in bad loans came to light. Loan recipients included some members of Karzai’s inner circle.

Many in the international community believe that Karzai has obstructed efforts to uncover the extent of the plunder and mismanagement that took place. The 7-month-old crisis threatens the flow of international aid because of donor uncertainty over whether funds will reach their intended recipients.

Afghanistan’s Central Bank has taken over running the day-to-day affairs of Kabul Bank, which was once seen as a symbol of the country’s determination to create a modern financial system. The bank’s longer-term future is clouded; the International Monetary Fund has recommended that it be placed in receivership and sold.

Speaking to reporters, the Afghan president acknowledged Kabul Bank’s woes but said international advisors had “failed in their task” of helping to build a stable financial system and oversee the bank’s dealings. He said Afghan regulators were working to recover bad loans and that his government would prosecute those who did not pay back what they owed.

Karzai’s quarrel with Western backers is the latest in a long series of disputes, many of which revolve around his accusations that the countries that supply the bulk of aid money and troops for the Afghan conflict, principally the United States, are meddling unduly in Afghanistan’s internal affairs. The West, in turn, has expressed anger and disappointment over the Afghan leader’s failure to confront corruption and cronyism in his administration.

The conflict between Karzai and his country’s patrons has grown over the last 18 months, with mutual acrimony escalating in the wake of Afghanistan’s fraud-riddled 2009 election, which ultimately handed Karzai a second term. In recent months, the president has denounced what he has characterized as Western troops’ carelessness with the lives of Afghan civilians. He also has moved to restrict the presence of private foreign security firms, and sought to restrict the channeling of aid through organizations other than his government.

In a sign of the depth of ill feeling, some Western diplomats believe that Karzai played a role in stirring protests against last month’s burning of the Koran by a Florida church — little noticed in Afghanistan at the time — with a demand that the church’s pastor be brought to justice. Those demonstrations took a violent turn April 1 in the northern city of Mazar-i-Sharif, where seven U.N. workers were killed by an angry mob that overran their compound.

Kabul Bank has benefited handsomely from its links to the circles of power. It has a lucrative government payroll contract, meaning that funds for hundreds of thousands of members of the security forces and public employees are funneled through it.

Karzai’s outburst came days before crucial meetings in Washington of the International Monetary Fund and the World Bank, which have expressed a lack of confidence in his government’s cleanup efforts. That in turn puts hundreds of millions of dollars of direct and indirect aid to Afghanistan in jeopardy.

laura.king@latimes.com