US Mulls Afghan Bank Bailout

Officials with the Kabul Bank have announced a cash withdrawal limit of $1,000 per customer today as large numbers of depositors swarmed the bank and fear of a full-on bank run rose. The US Treasury Department is said to have assigned a team to “investigate” the matter, but a panic could cripple the banking industry and spark US intervention.

Amid the panic the Afghan government insists that it will back the bank’s deposits entirely, but the run seems to be continuing and it is unclear how able they would be able to cover a major failure without international, presumably American, funding.

With all the political fallout from bank bailouts within the United States, the prospect of the US government going abroad and bailing out a struggling bank or even a struggling banking system in a foreign country, even an occupied one, would be a matter of considerable controversy.

At the moment the Afghan government insists the well connected bank, which is partially owned by President Hamid Karzai’s lesser known brother Mahmoud, is solvent, but a number of bad investments in foreign real estate and iffy loans made to “insiders” within the notoriously corrupt government leave its future very much in doubt.

Though officials tried to downplay the risk even if the banking sector does collapse, insisting that only about 5% of Afghans even have bank accounts, the fact that these five percent are almost exclusively allies and contractors to the occupation forces and people in the employ of the government is no small concern. With many Afghan security forces using these banks to cash their paychecks, the already enormous rate of attrition could soar even further, imperiling NATO’s designs on building up a massive Afghan military to fight its battles.