Savers panic in Afghan bank run

NERVOUS Afghans are continuing to pull funds out of the nation's largest bank despite assurances from government that their money is safe.

Crowds gathered at Kabul Bank branches around the capital yesterday to withdraw dollar and Afghan currency savings, with customers saying they had lost faith in the bank's solvency.

This followed a change in leadership at the bank and reports that tens of millions of dollars had been lent for risky real estate investments. "Kabul Bank has lost the trust of the people. Even the chairman resigned, so all the people are concerned," said Mohammad Nawaz, head of an Afghan aid group who had been trying for three hours to withdraw the $15,000 (10,000) in his account.

The bank run that began early last week undermines efforts by the government to build an efficient political and financial system to drag Afghanistan out of poverty.

Problems at the bank could have wide-ranging political repercussions since it handles the pay for Afghan public servants, soldiers and police in the unstable nation beset by a Taleban insurgency, widespread drug-trafficking and the plundering of aid money.

Kabul Bank's woes also underscore entrenched problems with cronyism and corruption, with millions of dollars in deposits allegedly loaned to relatives and friends of the ruling elite to buy property in Dubai. The New York Times and The Wall Street Journal reported last week that Kabul Bank's losses could exceed $300 million (200m) - more than the bank's assets. Afghanistan's central bank has also ordered Kabul Bank's newly resigned chairman to hand over $160m (105m) in Dubai real estate holdings.