Afghanistan running out of cash as poll deadlock drags on

KABUL Sat Aug 16, 2014 3:58am EDT

1 of 2. Afghanistan's presidential candidate Ashraf Ghani (L) speaks with rival candidate Abdullah Abdullah (R) at his side during a news conference at the United Nations compound announcing a deal to audit all of the votes cast in the recent Afghan presidential election in Kabul, July 12, 2014.

Credit: Reuters/Jim Bourg

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KABUL (Reuters) - The Afghan government is running out of funds despite an influx of millions of dollars in aid as a deadlock over who won the election drives a sharp decline in revenues, already suffering from the drawdown of thousands of foreign troops.

The government faces difficulty paying salaries next month and has once more gone cap in hand to donors for help, a senior finance ministry official said on condition of anonymity, because of the sensitivity of the topic.

The U.S. embassy in Kabul confirmed Afghan officials had briefed them about their difficulty paying salaries and funding programs in coming months, but did not detail how donors planned to respond.

"While the U.S. and the donor community... are working closely with Afghan authorities to avoid any major disruptions in critical services...resolving this situation requires action by Afghan authorities first and foremost," a State Department official said.

Foreign powers have poured billions of dollars of aid into Afghanistan since the fall of the Taliban in 2001, but the country's next leader is unlikely to receive the same levels of financial support.

The size of the gap to date is unclear, but the most recent data on the finance ministry's website shows domestic revenue in the first six months of 2014 fell 27.5 percent short of a target of 60.2 billion Afghanis ($1.1 billion).

The ministry said current figures were not yet ready, although the senior official indicated the budget shortfall stands between $500 and $600 million.

"If the election goes wrong we’ll not be able to manage, we will face huge problems beyond our control," said finance ministry spokesman Abdul Qadir Jaillani.

Presidential candidates Abdullah Abdullah and Ashraf Ghani have been locked in a bitter struggle for power for months, over accusations of mass fraud and rivalry between their camps that has pushed the country to the brink of a civil war.

"Our humble request from the finance ministry is for both candidates to reach an agreement to avoid a further decrease in revenue and the economy," Jaillani added.

Jaillani denied salaries were at immediate risk, although a host of projects to build and maintain roads, schools and clinics had been suspended for lack of cash, although he warned that resources were running low.

U.S. Secretary of State John Kerry has twice flown to Kabul in the past month to defuse the electoral crisis, but cracks are already showing in the framework agreement signed during his last visit a week ago.

Abdullah was the clear winner in the first round held in April, while a preliminary count showed Ghani won the run-off vote in June. An audit of all eight million votes cast as part of an earlier deal is underway, but proceeding slowly.

Outgoing President Hamid Karzai has set a deadline at the end of August to inaugurate his successor, but electoral officials fear the audit could drag on into September.

A month into the process, only about a third of the votes have been audited and it is unclear what fraction marked for recount will be excluded from the final tally.

NATO will discuss Afghanistan at a summit in Wales on Sept 4 and 5. Who, if anyone, will represent the country has become an increasingly pressing and awkward question as NATO seeks to bring the 13-year war to an end.

Western nations had hoped the summit would be the crowning moment of their achievements in Afghanistan after 13 years of war. Instead, last week the alliance warned it would be forced to withdraw completely unless a new leader emerged soon.

"The budgetary and economic situation is another reason to quickly conclude the election audit and install a new government of national unity that is capable of addressing Afghanistan's challenges," the U.S. State Department official added. A second conference to decide on aid for other government and civilian needs is set for November.

"These are vital conferences for our country," Jaillani said. "If the election is not resolved by then it will affect the outcome of the conferences and have a negative impact overall on the economy."

(1 US dollar=55.5300 Afghani)

(Editing by Clarence Fernandez)

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