Tag: Da Afghanistan Bank

BearingPoint Afghans

Sometime around 2004 or 2005, the US Agency for International Development (USAID) contracted BearingPoint (now part of Deloitte Consulting) to recruit and mentor approximately 80 young Afghan college graduates into Afghanistan’s central bank (DAB) and Finance Ministry. These young Afghans worked in DAB and the Finance Ministry for two years while being trained and mentored by BearingPoint experts. Following these two years they were offered regular jobs in these two institutions. While some moved on to higher paying jobs elsewhere most of them stayed with DAB and the MOF. Over the years that followed they rose within these institutions, and in DAB headed many of the departments including the position of Second Deputy Governor. Working with and watching the progress of these young Afghans was one of the most enjoyable and gratifying assignments in my career with the International Monetary Fund. They were smart, honest, and dedicated to improving life in their country (including their own). They were, and I hope still are, the hope for a better future for Afghanistan.

The elected Afghan government under which these BearingPoint Afghans worked has now been toppled by the Taliban, a group that harshly ruled Afghanistan from 1996 until displaced by an American-British invasion in November 2001.  Back in 1996: “Gaining control over most of the country, the Taliban impose their rule, forbidding most women from working, banning girls from education, and carrying out punishments including beatings, amputations and public executions. Only three countries officially recognize the Taliban regime: Pakistan, Saudi Arabia and the United Arab Emirates.”  “Afghanistan conflict timeline”

The Taliban in 1996 claimed to impose Sharia Law on Afghanistan. “Sharia” translates to ‘the way’ in Arabic and refers to a wide-ranging body of moral and ethical principles drawn from the Quran and from the sayings and practices of the Prophet Muhammad. The principles vary according to the interpretation of various scholars who established schools of thought followed by Muslims who use them to guide their day-to-day lives. Many Muslim-majority countries base their laws on their interpretation of the principles of Islamic law but, despite this, no two have identical laws.”  “Taliban and Sharia Law in Afghanistan”

The Taliban imposed a very severe version of Sharia that has not been embraced by very many Muslims. It was particularly restrictive on the activities and rights of women. Twenty years later Afghanistan is a different place, and the Taliban sounds like a different organization.

“KABUL, Afghanistan (AP) — The Taliban vowed Tuesday to respect women’s rights, forgive those who fought them and ensure Afghanistan does not become a haven for terrorists as part of a publicity blitz aimed at reassuring world powers and a fearful population.

“Following a lightning offensive across Afghanistan that saw many cities fall to the insurgents without a fight, the Taliban have sought to portray themselves as more moderate than when they imposed a strict form of Islamic rule in the late 1990s. But many Afghans remain skeptical — and thousands have raced to the airport, desperate to flee the country.

“Older generations remember the Taliban’s previous rule, when they largely confined women to their homes, banned television and music, and held public executions. A U.S.-led invasion drove them from power months after the 9/11 attacks, which al-Qaida had orchestrated from Afghanistan while being sheltered by the Taliban.”  “Afghanistan Taliban Kabul”

So, what should American policy be toward the forthcoming Taliban or Taliban lead government? What does the Taliban pledge to “respect women’s rights consistent with their version of Sharia Law actually mean? We should deploy every diplomatic tool possible to encourage/pressure the new government to live up to its promises. Former President Karzai, current CEO Abdullah Abdullah and others are currently in discussions with the Taliban leadership over terms for an inclusive government.

The alternative of nonrecognition, once there is a government to recognize, is to encourage and even support civil war. Or, God forbid, to send our troops back (there is not much chance that our NATO allies would be conned a second time into join us there again). And how did that work out for us last time? Our over used weapon of economic sanctions harms the public we should be trying to help. Our inhuman sanctions on Cuba and Venezuela are imposing horrible pain on the their citizens with little impact on their governments. “Evidence-costs and benefits of economic sanctions”

In a recent Washington Post oped Nikki Haley argued that we should not recognize the Taliban government no matter what. “Nikki Haley-America must not recognize Taliban” I respected Ms. Haley when she was Governor of South Carolina but I eventually got over her when she embarrassed us while Ambassador to the UN. “The future of Israel and Palestine” Her unqualified attack on the Taliban firmly ties her to those who were responsible for our Afghan disaster in the first place. The new Afghan government may turn out to be as bad as the previous Taliban government, but we should do everything possible to prevent that.

The U.S. has suspended currency shipments purchased by Afghanistan’s central bank. Afghan assets (foreign exchange reserves, etc.) deposited abroad have been frozen including “its” access to reserves at the IMF. These may appear to be rejections of a new government, but they are not. There is no new government yet and those holding Afghan assets must keep them safe until their new owners are clearly and properly identified. The situation is much like the bank in which you have deposited money, freezing your deposits when you die until the new lawful owner is determined. There is an unavoidable, awkward period of uncertainty. It is not too late to reverse our mistake in closing our Embassy and running out while at the same time accusing the Afghan Army of behaving the same way.

It is also not true that nothing was accomplished these past 20 years. Our military leaders may have failed in their task of building a reliable Afghan Army, but many others, myself included, did not waste our time by helping Afghans build better institutions (see the story of the BearingPoint Afghans I started this article with above). See the discussion of this issue by Jonathan Rauch: “The  Afghanistan war was a partial success”

No one knows what the Afghan government will look like or which way it will go, but we all (except for the war mongers) have an interest in promoting its success, especially the hopeful, new generation of Afghans. “Can US work with Taliban”    “What do Taliban’s really want?”

And we must resist the siren calls of those who think that we can and should impose our vision and institutions on the rest of the world. We must keep our Army home to defend our homeland rather than messing with other people’s business. Our defense industries have profited enough.

My travels to Afghanistan

Afghanistan: Rebuilding the Central Bank after 9/11 — My Travels to Kabul

By Warren Coats

Kindle and paperback versions available at:  “Afghanistan-Rebuilding the Central Bank after 9/11”

Watching the collapse of the twin Trade Towers in New York on September 11, 2001 on the TV in my hotel room in Bratislava, I never imagined that I would be in Kabul several months later and spend 212 days there spread over 19 trips from January 2002 to December 2013 to help modernize Afghanistan’s central bank–Da Afghanistan Bank (DAB). I learned more than I taught and share the highlights in this book. I became friends with many wonderful Afghan people, and bonded with my IMF team members. DAB was almost completely rebuilt. Watching its eager young staff mature into effective managers was a joy. Whether it will last in Afghanistan’s uncertain political and cultural environment is an open question.

I learned as much as I could about Islam and its internal struggle to denounce Islamism (radical Islamic fundamentalism). I share details of the collapse of Kabulbank, Afghanistan’s largest bank, and the corruption surrounding it and its resolution. The IMF’s presence and work in Afghanistan was not without tragedy. The IMF’s resident representative, in whose guest facilities we stayed, was killed in a terrorist attack. And I learned much about walls.

Previous Books

One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina

by Warren Coats (2007)   Hard cover: One Currency for Bosnia

Zimbabwe: Challenges and Policy Options after Hyperinflation

by Warren L. Coats (Author), Geneviève Verdier (Author)  Format: Kindle Edition

Zimbabwe-Challenges and Policy Options after Hyperinflation-ebook

Money and Monetary Policy in Less Developed Countries: A Survey of Issues and Evidence

by Warren L. Coats (Author, Editor), Deena R. Khatkhate (Author, Editor)  Format: Kindle Edition

Money and Monetary Policy in LDCs-ebook

My Prayers for Afghanistan

As of today (Monday September 29, 2014) Afghanistan has a new government headed by two very capable men, Ashraf Ghani, President, and Abdullah Abdullah, Chief Executive, of a new unity government. It is the first democratic change of government in Afghanistan’s history. It was not easy for Afghanistan to get to this place, and it is not clear whether the compromise, unity government, will hold together and work constructively together. The election, though bravely participated in by a large majority of Afghan people, was messy. And Afghanistan has a long way to go to achieve the norms of a peaceful, just, and prosperous 21st century country.

The best organization of the governance of Afghanistan’s ethnic and tribal groups (Pashtun, Tajik, Hazara, Uzbek, Aimak, Turkmen, Baloch, Pashai, Nuristani, Sadat, Gujjar, Arab, Brahui, Pamiri, etc.), if there is a “best,” is still evolving. The traditional ways of tribal life need to adjust to the standards of liberal democracies, which provide more space for individual expression and diversity and govern interactions under the rule of law. It is not easy today for the single breadwinner of an extended family to explain why he is not able to provide a job for his nephew, for which the nephew is not qualified. Merit based employment and promotion are among the concepts upon which the well-being of modern economies depend.

But Afghanistan faces more difficult challenges. The deadly insurgency of a relatively small band of terrorists (Taliban), who wrap their vicious immorality in the name of Islam (to the shame of real Muslims), continues and must be contained to the more manageable level of criminality that every society sadly must deal with. Afghanistan also suffers from the serious cancer of corruption, which has been feed and nurtured by the billions of dollars of foreign financial aid given with the aim of fighting the Taliban and establishing modern, liberal institutions. This is a paradox, not unlike over medicating a human cancer patient. The flow of foreign money is a magnet that attracts and feeds corruption, but without it the patient is likely to die. The over medication must be reduced, but finding the right balance will not be easy.

Afghanistan’s new President promises to give the fight against corruption, which will be long and hard at best, his highest priority. Referring to Sherkhan Farnood and Khalilullah Ferozi, the founders of Kabulbank, which had quickly grown to be Afghanistan’s largest bank when it collapsed in 2010 when the public and the authorities discovered that they had lent virtually all of its almost one billion U.S. dollars worth of deposits to themselves, Ghani stated that: “I will prosecute the two culprits. This will be the first sign that I am not going to tolerate impunity,” he said. “The Afghan public is sick and tired of corruption, we are not going to revive the economy without tackling corruption root, stock and branch.” I pray that he succeeds. Few things are as important for Afghanistan’s future than dramatically reducing corruption.

The hope for a better future for Afghanistan, however, rests, as always, with its young. I have worked in many struggling countries and have always met a few dedicated and intelligent people there. However, Afghanistan is blessed with a large number of unusually talented young men and women determined to make their country a better place. The extensive corruption over their heads will make that difficult. For some, the pressures and temptations of such ill-gotten wealth will overcome their nobler ideals. But I am praying that enough of these fine young people will be strong enough to persevere in their commitment to the rule of law and a better society. Their battle has not been and will not be easy. But I have been impressed by their determination and commitment to what is right. It has been a great pleasure to work with them. While Afghanistan’s new leaders will be able to send Afghanistan in a better direction if they choose to, my hope for this beautiful country rests with the new generation now moving up through its institutions.