* IMF paints grim picture, support for Afghanistan in doubt
* Banking crisis muddies complicated Afghan picture
* U.S. official rejects Afghan claims
(Adds comments from U.S. Treasury, official)
By Paul Tait and Emma Graham-Harrison
KABUL, Feb 17 The Afghan government said on
Thursday inadequate foreign technical support and a bad audit
had worsened a crisis at the country's biggest private bank, a
scandal that could jeopardise Western aid to Afghanistan.
The fate of politically-connected private bank Kabulbank,
which has lost hundreds of millions of dollars, was on the
agenda at meetings between Afghan officials and a U.S. Treasury
delegation led by Deputy Treasury Secretary Neal Wolin.
The Afghan Ministry of Finance said the U.S. and Afghan
officials had agreed that the crisis was caused by poor
management and supervision but exacerbated by...weak
"Afghan and U.S. officials agreed that (the crisis)...was
compounded by the erroneous audit by PricewaterhouseCoopers, and
ineffective international technical assistance and supervision,"
a statement said.
A U.S. official with knowledge of the issues rejected the
Afghan claim that both sides had agreed the international
community contributed to the crisis.
But a Treasury statement about the meeting said only that
Kabulbank was discussed as part of wider talks on the financial
sector, and the U.S. team called for rapid action on the crisis.
"The Deputy Secretary met with Afghanistan's leadership to
discuss the importance of Afghan efforts to reform and
strengthen its financial sector and stressed the need for the
Afghan government to take swift and decisive action to ensure a
credible, effective resolution of issues related to Kabul Bank,"
the statement said.
The Afghan government and central bank have always been
responsible for supervising their own financial sector, and
aware of that role, said the official, who declined to be named
because of the sensitivity of the issue.
International support has also been aimed at the financial
sector overall rather than private banks -- focusing on issues
like money laundering and capacity building, he added.
AID AT RISK
The International Monetary Fund (IMF) has painted a grim
picture of the Afghan government's handling of the Kabulbank
crisis, diplomats have told Reuters, an assessment that could
lead to the fund ending its Afghan support programme.
The IMF and the Afghan government and central bank are at
loggerheads over what to do with Kabulbank. The IMF wants it
placed in receivership and sold quickly to stem losses but the
government wants a gradual rehabilitation and sale.
Wolin said Washington backed the IMF.
"He (Wolin) also discussed the status of negotiations
between the IMF and Afghanistan on a possible IMF program and
expressed U.S. support for the IMF's position," the statement
The government's inability to come up with a solution since
the scandal emerged last year has worried international partners
who have provided billions of dollars in aid since the Taliban
were toppled in 2001.
The crisis has worsened already tense relations between
Afghan President Hamid Karzai's government and its Western
backers at a crucial time, with the gradual handover of security
responsibility to Afghan forces to begin mid-year.
A decision by the IMF not to renew support would have a
knock-on effect among donor nations. The European Union has
already said donors will have to review their commitments if the
crisis is not resolved satisfactorily.
Aid from some donor countries and agencies depends on an IMF
programme being in place. Donors contribute about 70 percent of
the Afghan state operating budget and also spend billions in
direct aid outside of Afghan control.