September 6, 2011 / 7:08 AM / 8 years ago

Norway freezes Afghanistan aid: report

Afghan people walk past a Kabulbank branch in Kabul September 14, 2010. REUTERS/Andrew Biraj

OSLO (Reuters) - Norway is blocking payments of 300 million crowns ($55.2 million) in aid to Afghanistan until issues surrounding the collapse of the country’s biggest private lender, Kabulbank, are resolved, a Norwegian newspaper said on Tuesday.

Kabulbank collapsed last year with outstanding loans of about $926 million, and was later taken over by Afghanistan’s central bank and split into two. The International Monetary Fund and the Afghan government are at loggerheads over how to wind up the bank, recover lost assets and strengthen the sector. The impasse has delayed tens of millions of dollars in aid.

In an interview with Norwegian daily Dagens Naeringsliv, deputy Foreign Minister Espen Barth Eide said the Afghan authorities’ failure to provide good governance was one of the biggest problems for Norway in Afghanistan.

“If Afghan authorities and the IMF do not find a solution, we will not go back to business as usual,” he said. “We will in that case find other solutions.”

The International Monetary Fund (IMF) has withheld a scheduled payment of $70 million from the World Bank-administered Afghan Reconstruction Trust Fund (ARTF).

Afghanistan relies on foreign aid for around 90 percent of its spending but many international donors say they are reluctant to channel aid through the country’s ministries because of a lack of capacity and corruption.

($1 = 5.433 Norwegian Krones)

Reporting By Victoria Klesty; editing by Elizabeth Piper

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