The heart-breaking attack on Ukraine by Russian troops has distracted our attention from the tragic misrule (or failure to properly rule) of the Taliban in Afghanistan. An Afghan official I worked with over the last twenty years, who was able to leave Kabul on one of those final fights at the end of August 2021, sent me the following report on conditions in Kabul. I am not revealing his name for his safety and the safety of his family.
“The economy is getting worse day by day, businesses facing many problems, shopkeepers complain less sales, poor people hardly find one time meal, hunger is increasing, at DAB [the central bank], the payment system has been stopped, APS, FID and many other depts are paralyzed, they haven’t managed to print new banknotes, girls’ high school still closed, bomb blasts occurred in many mosques recently during Holy Month of Ramadan and only poor civilians killed, and many more problems.
God help people of Afghanistan.“
Indeed. Over the last twenty years Afghanistan gradually developed and strengthened its institutions of government. After toppling the elected government of Afghanistan, my hope, and the hope of the West, was that the Taliban would form an inclusive government that would build on that progress. It hasn’t happened. The new Taliban “government” has not even been able to solidify itself. If it fails, Afghanistan will suffer another (or continuing) civil war. “Nation building in Afghanistan”
The former Canadian ambassador to Afghanistan, William Crosbie, commented that: “Hope is certainly receding that the TB will work towards a political settlement to make its military takeover a lasting peace. Our argument to those neighbouring countries and non-Western partners (e.g. China) has been that the TB regime is not sustainable as a Pashtun, TB clique relying on fear. Quite apart from the economic devastation of a non-functioning government and private sector, the ethnic and tribal rivalries and other extremist groups will resort to the tactics that the TB used so effectively. And they will prove just as destructive.”
The world is rightly looking for ways to help Afghans without helping the Taliban (until or unless the Taliban forms a government the world is willing to recognize). Washington Post: “How to help Afghans without aiding Taliban” In this Post article Anthony Faiola states that “The biggest problem isn’t a lack of food. Rather, it’s the disappearance of what had been the lifeblood of the Afghan economy — Western cash.” This mischaracterizes the problems of Afghans thus confusing our understanding. In this note I attempt to clarify the “cash” aspect of Afghanistan’s problems.
But first there is no escaping the fact that the cut back of foreign aid is reducing the income (and the goods that income buys) available to Afghans. Mention is often made of the approximately 10 billion US dollars of the Afghan government’s funds frozen in deposits abroad. These funds cannot be used until a new Afghan government is recognized with the authority to claim them. But these funds are not part of the lost revenue to the Afghan government. They are the wealth–the previous income saved–of the government (whoever that will turn out to be). The savings that we accumulate from our incomes for retirement or whatever is our wealth not our current income (though it can be drawn on to augment current income).
In recent years (prior to the Taliban take over) the Afghan government’s operating expenditures were 16 to 18% of Afghanistan’s GDP while its domestic revenue was 12 to 14% of GDP. The balance of its financing plus all development expenditures were from donors. The hope is that squeezing the Taliban “government” financially will add to the incentives for them to quickly form an inclusive government meeting international norms of human rights. Unfortunately, it is not possible to shut off the flow of funds to the government without also starving the Afghan people.
While the Ghani government has been replaced (temporarily) by Taliban leaders, the institutions (ministries and agencies) of government remain, but with new management. Of the government’s operating expenditures roughly 80% was for wages and salaries. Thus, the government could more or less finance its wage and salary expenses from its own domestic revenue without donor support. Indeed, all salaries have been and continue to be paid in the central bank (Da Afghanistan Bank — DAB) and presumably in the other government ministries as well, albeit with delays. However, the real value of these incomes is being reduced because of increased inflation (an indirect form of taxation). DAB and other government agencies have largely stopped providing economic and financial data since the Taliban take over. IMF First-Review-Under-the-Under-the-Extended-Credit-Facility
None the less, freezing Afghanistan’s deposits abroad (DAB’s foreign exchange reserves held abroad) has created monetary problems within Afghanistan because of the inability to import the cash (dollar banknotes) on which the economy depends. Afghanistan remains a largely cash economy. Most payments are made in cash. Though inflation has been low in recent years (generally 2-4%), inflation in earlier decades was relatively high and thus Afghans held and transacted in US dollars quite extensively. Around 70% of bank deposits are in dollars. The availability of USD banknotes for local payments is thus very important. These were mostly supplied by the New York Federal Reserve Bank from the dollar deposits that DAB maintains there (and now frozen).
Prior to the Taliban takeover, the normal operation of DAB’s monetary policy consisted of receiving US dollars from the government (largely from donor grants) and depositing the equivalent value of Afghani in the government’s accounts. The government disbursed these Afghani to its employees in wage and salary payments (generally by electronic deposits to employee bank accounts). Without offset, the resulting creation and injection of these Afghani would be inflationary. DAB drains (buys back) this excess base money by auctioning some of the dollars it received from the government (sufficient to stabilize the dollar exchange rate) and capital notes of DAB. The government’s deposits of dollars with DAB took the form of credits to DAB’s dollar account with the New York Fed. From these deposits DAB pays the Federal Reserve to fly USD banknotes to Kabul as needed for DAB’s dollar auctions.
In mid-April 2021, when the U.S. announced its intention to withdraw the rest of its military personnel by September, an increased outflow of dollars by Afghans wanting to protect their wealth put the Afghani exchange rate under pressure. Acting DAB Governor Ajmal Ahmady (his appointment was never approved by Parliament) increased dollar auctions to stabilize the exchange rate. “Afghan central bank drained dollar stockpile before Kabul fell” As the amount of dollars in its vaults ran down, it used USD banknotes that it held on behalf of banks (approximately $700 million USD). The delivery of additional cash from New York expected in July never arrived and DAB’s balances at the New York Fed are now frozen until a new government is recognized so that no more dollar cash can be purchased from the Federal Reserve by DAB.
As an aside, I was surprised during a 2009 visit to Zimbabwe—as part of an IMF team following Zimbabwe’s dramatic hyperinflation during which it dollarized—to learn that there was an active private market in dollar banknotes supplying Zimbabwe from South Africa: “Hyperinflation in Zimbabwe”
In the days just before and after the American evacuation in August 2021 public demands to withdraw dollar cash intensified but DAB had largely used up the dollars in its vaults (both its own and those held for banks). In response, on August 14 DAB imposed limits on the amounts that could be withdrawn each day. This fed public concern that their banks were running out of dollar banknotes and triggered runs on the banks. DAB was even running low on Afghani banknotes, which might have replaced dollars. Without access to its deposits abroad DAB is unable to purchase additional dollar cash nor pay for printing additional Afghani. For a largely cash and heavily dollarized economy this drying up of cash liquidity is very disruptive and the basis of the statement that people can’t buy the food that might be available.
In addition to the cash shortage, Afghans are also lining up to withdraw their deposits out of concern for a possible bank failure. Aid cut offs and civil strife have damaged many firms resulting in arrears on their bank loan payments. This threatens to push bank illiquidity into insolvency. Even if DAB had USD and AFN cash to lend or sell to banks with fully performing loans, DAB is currently unable to buy or lend against these illiquid bank assets. Moreover, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury has sanctioned payments to many Afghan entities and activities blocking many payments to and from abroad by Afghan banks and uncertainly about the application of the sanctions regime has made banks overly cautious about executing payments for their customers.
UN and other aid organizations have experience in other countries with delivering wages and other payments to targeted recipiences (teachers, healthcare workers and potentially even government employees) without the funds passing through the government’s hands. This approach is needed and is being developed for use in Afghanistan. OFAC sanctions are being modestly relaxed and UN and other aid agencies have begun funding the importation of dollar cash for humanitarian assistance projects. The use of digital mobile phone payments, such as M-Paisa and HesabPay, should be promoted and exploitation to the extent possible. “Use of mobile phone payments” The United States needs to and has been gradually relaxing its payment restrictions to make this possible.
The Taliban leadership needs to take urgent steps to establish a new inclusive government that can and will be recognized internationally thus unfreezing Afghanistan’s (and DAB’s) deposits abroad and eliminating its cash shortage and restoring development assistance. In the meantime, in addition to the urgent need for humanitarian assistance that bypasses the Taliban, the New York Federal Reserve, or any other doners, should consider a loan to DAB to finance immediate shipments of dollar banknotes to Kabul. Da Afghanistan Bank Law adequately protects the central bank from government interference in its conduct of monetary policy and bank supervision. As a condition for restoring USD currency shipments to DAB, the Federal Reserve (and the UN) should obtain an agreement from the Taliban government to fully respect that law and appoint qualified people to its Supreme Council and Executive Board.
Until Afghanistan has a proper government, and its economic development can resume, Afghans, many of whom are very poor to begin with, will suffer unnecessarily depressed incomes. The lack of cash is adding a further, tragic, and quite unnecessary disruption to the lives of a long-suffering people. This can be and should be fixed urgently. Any such assistance will somewhat reduce the financial pressure on the Taliban, but a total financial squeeze on the government will fall on the people of Afghanistan as well.
I worked in Afghanistan as a member of the IMF program and technical assistant teams from January 2002 until mid 2015. I am grateful to Syed Ishaq Alavi for his insights and comments on this article. Mr. Alavi was Advisor to the governor of DAB from 2010 to early 2013, Director General Monetary Policy Department of DAB from early 2013 to mid 2018, and advisor to the Executive Director of the International Monetary Fund for Afghanistan, Algeria, Ghana, Iran, Libya, Morocco, Pakistan, and Tunisia from June 2018 to August 2020. For the sake of their security, I am not naming those who helped me with this article who remain in Afghanistan.
The lesson of Afghanistan is not that the US is washed up as a great power. The lesson is that the US is such a great power, militarily and economically, that it is continually tempted to try hopeless things that nobody else on earth – including China – would ever attempt.David Frum
On July 8, 2021, President Biden said that: “the United States did what we went to do in Afghanistan: to get the terrorists who attacked us on 9/11 and to deliver justice to Osama Bin Laden, and to degrade the terrorist threat to keep Afghanistan from becoming a base from which attacks could be continued against the United States. We achieved those objectives. That’s why we went. We did not go to Afghanistan to nation-build.” “Remarks by President Biden on the drawdown of U.S. forces in Afghanistan”
In fact, except for killing Osama Bin Laden, we had achieved those objectives before I arrived with an IMF team in January 2002 to contribute to building a more effective government. Finding and killing Bin Laden was delayed until May 2, 2011, because of the redirection of American efforts to the ill-advised and illegal war in Iraq. So why were American troops still occupying Afghanistan until August 30, 2021?
In an August 18, 2021, interview with George Stephanopoulos, President Biden explained what happened asking: “Then what happened? Began to morph into the notion that, instead of having a counterterrorism capability to have small forces there in — or in the region to be able to take on al-Qaeda if it tried to reconstitute, we decided to engage in nation-building. In nation-building. That never made any sense to me.”“Biden’s claim that nation building Afghanistan never made any sense”
George W Bush opposed nation building in his 2000 presidential campaign. In his memoir, Decision Points, he states that “After 9/11, I changed my mind.” Already by April 2002, he stated that “We know that true peace will only be achieved when we give the Afghan people the means to achieve their own aspirations. Peace will be achieved by helping Afghanistan develop its own stable government.” He was right. However, as he noted: “Our government was not prepared for nation building.” He was right about that as well. “Bush on nation building and Afghanistan”
The U.S. officials responsible for “nation building” in Afghanistan knew little about its history and culture. They foolishly imposed an alien Western style government dropped on a diverse people as if from a drone. The US military is an excellent machinery of war. The best in the world. However, it does not have the skills required for “nation building.” Our military couldn’t even recruit the right solders or provide the training they needed to fight on their own, much less build a proper military organization. “Afghanistan combat interpreter Baktash Ahadi: U.S. cultural illiteracy” And attempting nation building at the point of a gun is bound to fail.
And why did the Afghan soldiers that Americans trained for decades not fight to defend the existing government? “Afghan forces were demoralized by neglect, corruption and ethnic bias among their superiors. Often they went without pay and ammunition, and sometimes without rations…. ‘The why is corruption, the why is poor leadership,’ John Sopko, told The Washington Post in 2017, ‘If leadership is poor, the people below don’t care, and they wonder why they have to die.’” “Afghanistan U.S. troop withdrawal”
On Sunday August 15, 2021, Taliban forces walked into Kabul and took over the government without a shot. “The Band of Brothers and Afghanistan” But what did they take over or replace? And did 20 years of so-called nation building make any difference. “Nation building” is often given a bad name because it has too often been associated with the imposition of a “government” by an occupying military force as with imperialism. Afghanistan is a very different place than it was 20 years ago. Both the nation and its government and its institutions have changed considerably. We can hope that the Taliban has changed as well.
Governments consist of ruler/decision makers, and the institutions that administer whatever it is that the government does. A nation extends beyond its government to include civil society, and social and cultural norms. The Taliban have displaced Afghanistan’s President Ashraf Ghani, who fled to Uzbekistan then to the UAE rather than step aside for a transition period as had been agreed. Afghanistan’s Chief Executive Officer, Abdullah Abdullah, remained and with former President Karzai is discussing the composition of a new government with Taliban leaders.
“Taliban co-founder Mullah Abdul Ghani Baradar will lead a new Afghan government…. Haibatullah Akhundzada, the Taliban’s supreme religious leader, will focus on religious matters and governance within the framework of Islam.
“While the Taliban have spoken of their desire to form a consensus government, a source close to the Islamist militant movement said the interim government now being formed would consist solely of Taliban members. It would comprise 25 ministries, with a consultative council, or shura, of 12 Muslim scholars, the source added.
“Also being planned within six to eight months is a loya jirga, or grand assembly, bringing together elders and representatives across Afghan society to discuss a constitution and the structure of the future government, the source said.” “Taliban co-founder Baradar will lead new Afghanistan govt”
Prior to the fall of Kabul, the government of Afghanistan consisted of the cabinet of ministers, provincial governors and the national assembly, with a democratically elected president serving as the head of state, head of government and commander-in-chief of the Afghan Armed Forces. It appears that the new government will retain the same administrative units. In addition to the central bank (DAB), which I advised, these would include functions such as Foreign Affairs, Internal Affairs, Finance, Economy, Agriculture, Energy and Water, Justice, Information and Culture, Education, Industry and Commerce, Transportation, Women’s Affairs, Public Health, Mines, and of course, National Defense. Though the U.S. did a poor job developing Afghanistan’s National Defense institutions, more experienced international agencies made considerable progress in developing more efficient and effective agencies in many other areas. Of at least equal importance, a generation of Afghan men and women have grown up expecting their place in the world to reflect their skills and accomplishments (merit) rather than who they knew.
I have written earlier about the dramatic progress in modernizing the central bank’s operations. It was achieved in the proper, traditional way of “nation” and institution building. We explained best practice for central banks derived from the experiences of established central bank and the approaches we thought would fit best with Afghanistan’s existing central bank and economy. But DAB’s management and staff made the decisions of what to embrace and how to move forward and we offered guidance on designing and implementing those decisions. “BearingPoint Afghans”
But one institution can’t develop independently of what is happening in the rest of the country. In particular, developing the rule of law is critical and difficult. An example was provided by DAB’s (the banking supervisor) confrontation with a corrupt President and Attorney General over the resolution of the insolvent and criminal Kabulbank in 2010-12. The founders and owners of Kabulbank (President Karzai’s brother Mahmood was the third largest shareholder) had rapidly grown this newly licensed local bank into the country’s largest depository and had lent almost all of its deposits to themselves. During the global financial crisis of 2008, many of Kabulbank’s owners’ investments failed and they were unable to repay their depositors. DAB’s banking supervisors were blamed for weak supervision and even arrested and jailed in disregard of the provisions of the central bank law. The scandal revealed considerable corruption, but the supervisory resolution of the bank somewhat strengthened (modestly) the rule of law in the process. “Afghan President Ghani’s attack on corruption”“The Kabul Bank Scandal”
Another huge set back to the impressive development of DAB resulted from President Ghani appointing an unqualified friend, Ajmal Ahmady, as Acting Governor of the central bank. He fired many of the best of the BearingPoint Afghans and brought in his own small group of cronies. Mr. Ahmady’s appointment was rejected by the Parliament, but he illegally remained in his post. The Taliban (???) have now appointed Haji Mohammad Idris as the Acting Governor of the central bank. “Mr. Idris was head of the Tabliban‘s finance section, but he has no formal financial training or higher education.” “Haji Mohammad Idris”
These examples are meant to illustrate the distinction between a government’s leaders and its administrators. Time will tell whether our “nation building” efforts with DAB survive the attacks on it from Afghanistan’s leaders (current and past). But as a result of the nation building efforts of many international bodies, Afghanistan is a very different and better place, and its young population has very different expectations, than twenty years ago. I hope that the Taliban leaders that have taken over the government are also very different than their repressive and brutal forebearers of twenty years ago.
While the new government will no doubt leave many of the institutional structures in place that have been developed over the last two decades, from which they and the country have benefitted, the big question is what policies and rules they will establish under the name of Sharia law, especially with regard to the rights of women. The Taliban have their own internal factions that need to be sorted out and their earlier version of Sharia was an extremely harsh interpretation not shared by most Muslims. The Taliban has pledged to treat women and others fairly, within the dictates of Sharia Law. Other Muslims will need to convince the Taliban to moderate their earlier interpretations of what that means. The United States, the EU “EU sets five conditions for future operational engagement with Taliban”, China, Russia, and the international organizations, have enormous financial and diplomatic leverage with which to encourage the Taliban government’s better behavior. They should be used vigorously to help build a better Afghanistan. Early signs are not encouraging, but these are early days. One Afghan friend changes locations every night in the hopes of not being found. Other friends are afraid to leave their homes at all.
The idea that we should refuse to cooperate with the new government and should oppose it at every turn from the outset is bone headed. Just ponder the alternatives for a second. Do not think that it is easy for me to sit here in my comfortable Bethesda home and urge us to give the Taliban a try. My days begin with heart wrenching pleas for help from Afghan friends and strangers. I challenge you to read the following account of dashed hopes without weeping: “After a university falls in Afghanistan a DC organization scrambles to keep students safe and still learning”
Efforts to achieve a better Taliban government this time around may be a long shot, but the alternatives of a return to civil war and worse yet the return of American and NATO troops are not pretty either. The U.S. intention to cooperate with the new government in countering ISIS-K is encouraging, but, like anything else in life, not without risks. “US may coordinate with Taliban to take on ISIS-K” Nation building by everyone but the U.S. government over the last 20 years has not been a waste of time. Now is not the time to give it up.
Nation building is unlikely to be successful when coerced, i.e., when it is part of a military intervention. It does not follow that nation building–sharing best practice in the design and operation of institutions public and private–is an unworthy objective and undertaking.
The second is the final installment of my series on the Kabul Bank scandal. The failure of Kabul Bank in Afghanistan was probably the biggest bank failure and fraud in history on a per capital basis. As this final article looks at some of the legal issues and developments in recovering stolen assets held abroad and Afghanistan’s uneven struggle to strengthen its criminal justice system, Gary Gegenheimer, a lawyer who also worked in Afghanistan, joined me to write this third installment: http://www.compasscayman.com/cfr/2015/08/19/The-Kabulbank-scandal–Part-III/
The Comptroller General of Da Afghanistan Bank, Afghanistan’s central bank, has been sitting in jail since October 8 along with 3 DAB colleagues as part of President Ghani’s attack on corruption. What has he done, asked the two young children of this young 32-year-old rising Afghan star? Muhammad Qaseem Rahimi was one of 21 Afghans convicted on March 6, 2013 by a Special Tribunal appointed by President Karzai for crimes associated with the Kabul Bank fraud, by which Afghanistan’s largest bank channeled virtually all of its almost one billion U.S dollars worth of depositor money to a handful of its owners and their friends.
Kabul Bank’s founder Sher Khan Farnod and his former bodyguard and later Kabul Bank CEO Khalil Ferozi received light sentences of five years in prison and were asked to repay 279 million, 531 million respectively. Mahmood Karzai, one of the President’s brothers and the third largest shareholder got off scot free having repaid part of what he had “borrowed” and claiming that he did not need to repay the loan he received to buy his shares (illegal in itself) because the shares were now worthless!!! These two primary perpetrators of this crime, as well as the other 19 appealed their convictions. Farnod and Ferozi have repaid nothing and have been seen dinning around Kabul ever since. In one of his first acts as President, Ashraf Ghani, a former World Bank employee, ordered: the Supreme Court to get on with the case, the confiscation of stolen assets, the prosecution of accomplices, and the immediate incarceration of those convicted pending the resolution of their appeals. Justice finally on the move? Perhaps.
At the time of Kabul bank’s collapse four years ago, young Qaseem had just recently been appointed Deputy Director General of the central bank’s Supervision Department. As one of a group of young Afghan university graduates recruited to the central bank for special mentoring under a highly successful USAID capacity building program, Qaseem, a natural leader, rose rapidly within DAB. I frequently saw him standing in the middle of an admiring circle of his peers. As a Tajik of about 5’10’’ he towered over his much shorter Pashtun colleagues making him seem taller than he really is. After his two year mentoring appointment he left DAB and Kabul for graduate studies in Kuala Lumpur. Upon his return he pondered his options for a clearly bright future and with some hesitation (and some urging from me) returned to the central bank. He had hoped for a directorship but instead was offered the position of Deputy Director General of the Supervision Department. So what crime had he committed for which he now sits in jail?
The Special Tribunal found Qaseem as well as the Governor of the central bank, Abdul Fitrat, and its First Deputy Governor, Mohibullah Safi, both of whom have now fled the country, and five other DAB employees guilty of dereliction of duty. They had failed to detect and report the cleaver fraud perpetrated by Farnod and Ferozi. Though hard working and intelligent, at 28 years old Qaseem naturally lacked the experience of seasoned banking supervisors, who would have had great difficulty detecting this fraud as well. The central bank law like those in most every other country protects its employees from prosecution for acts committed in the good faith exercise of their duties.
At least two questions leap out immediately. How could the central bank staff have been charged and convicted in the first place and why haven’t their appeals been heard until now?
It is widely believed in the international community that the charges and convictions against the central bank governor and his staff were President Karzai’s retaliation for the embarrassment caused when Governor Fitrat disclosed the names of Kabulbank shareholders and borrowers in public testimony in Parliament on April 21, 2011. The names included one of Karzai’s brothers and one of Vice President Fahim’s brothers. Governor Fitrat resigned and fled the country for the United States soon thereafter for his safety. In a normal country these vengeful convictions would have been thrown out promptly but sadly Afghanistan and especially its judiciary is one of the most corrupt in the world.
But why Qaseem and his colleagues are still sitting in jail is harder to answer. If President Ghani wishes to move away from rule by Presidential fiat, as seems the case, he is right to adhere to established procedures as painful as they are. But jailing those convicted pending the consideration of their appeal is almost unheard of in other countries, though it is satisfying to see Farnod and Ferozi finally behind bars. An honest judiciary would have thrown out the convictions of the central bank employees long ago. Let’s hope they finally do so quickly now.
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.
Current developments in Iraq are depressing but follow the pattern of America’s well meaning but misguided attempts to remake the world in our own image. “Chaos in Iraq prompts soul searching among military veterans” WP /2014/06/18/ For my friends in Iraq the advances of the Islamic State of Iraq and Syria (ISIS) fighters is alarming and dangerous. I am truly sorry for them that they have not yet sorted out their internal sectarian (Shia and Sunni Muslims) and ethnic (Kurds and Arabs) issues. However, these developments do not constitute a serious risk to the United States, though reengaging militarily in Iraq to support the terrible al-Maliki government would. I hope that President Obama sticks to his current resolve not to. Our attack of far away Iraq ten years ago was a disastrous mistake foisted upon us by misguided neocon warmongers. See my account of my work and life in Baghdad in 2004: “My Travels to Baghdad”. And Senator McCain would you please shut up before I loose all respect.
For over twenty years I have worked in transition economies (Bulgaria, Kazakhstan, Kyrgyzstan, Moldova) and post conflict economies (Bosnia, Kosovo, Serbia, Afghanistan, Iraq, South Sudan and West Bank and Gaza) to help them develop central banks capable of supplying a stable currency and overseeing a sound banking system. I have made many wonderful friends along the way and am thankful for the opportunity given me by the International Monetary Fund to have these experiences. My primary motivation, which I think I share with most people, has been the desire to help make the world a better place by sharing the knowledge and expertise I have developed in my field (monetary policy). Often working alongside or with the U.S. military, which is I am sure the finest that ever existed, has convinced me that the neocon dream of forced democracy at the point of a gun is a dangerous delusion. Our post cold war military adventures have weakened our national security, weakened our liberties at home as part of a mad war on terror, and failed to establish better governments in the countries we attacked. We need to engage the rest of the world cooperatively to help build a peaceful, productive, and just world based on the rule of law. Our Army should stay at home to defend our territory.
My longest engagement has been in Afghanistan, starting with a visit in January 2002 and lasting through this last December. I have watched bright and dedicated young Afghans (some still in their twenties) grow up into outstanding leaders in Afghanistan’s central bank (Da Afghanistan Bank). I admire and respect them and have been privileged to enjoy their company. If Afghanistan succeeds in becoming a viable country, it will be because of them and other young Afghans like them. I pray for it to happen. It cannot be made to happen by the U.S. military and President Obama is right to finally bring them home. The rest of the world and its international organizations such as the IMF and World Bank should remain engaged with Afghanistan, sharing its advice and resources. But only Afghans can sort out the country’s ethnic, corruption and governance problems.
A full transition to a truly democratic country based on the rule of law, something badly wanted by the younger generation I have been working with, will take decades of hard work by Afghans. Significant progress has been made. Both candidates for President in Afghanistan’s run off election this past week are capable people who should be able to put together and run a successful government. Success of the election and Afghanistan’s continued progress toward becoming a modern, effectively governed country depends, in my view, more on the Afghan peoples’ broad acceptance of the outcome of the election rather than on who wins. Thus I am saddened (appalled actually) by the behavior of Abdullah Abdullah, one of the two candidates. Today’s Washington Post reports that he “is calling the government’s vote-counting process illegitimate, laying the groundwork for a protracted dispute that could destabilize the country.” This risks sabotaging Afghanistan’s future. “Afghan-presidential-election-thrown-into-question-as-abdullah-disputes-vote-counting”