Wednesday, 31 August 2011

Minister's gaffe reveals IMF audit of second Afghan bank

International Development Secretary Andrew Mitchell's gaffe yesterday, when he was photographed carrying a document on Afghanistan as he left a National Security Council meeting in Downing Street, revealed that the British government was not unduly concerned about President Karzai leaving office in 2014.
However, less coverage was given to another point in the document's final paragraph, which reveals that there is substance to rumours that a  second Afghan bank - after Kabul Bank - may be facing financial problems. This probably refers to Azizi Bank, the country's second largest financial institution, which is thought to face a shortfall of funds and for which the IMF has demanded an audit.
Below, so far as is possible, are the actual words that can be read on the document. Where Mr Mitchell's hand obscures the words, I have suggested likely candidates (in brackets).
The document itself is headed 'Protect.Policy', presumably a reference to the government's CONTEST programme for countering international terrorism, which contains four strands: Pursue, Prevent, Protect, Prepare.

"Protect Policy

Agenda item 1: Northern Ireland update
No DFID points to make

Agenda Item 2: Afghanistan Update
Points to make: We have been encouraged by the progress made by the Government of Afghanistan in recent weeks to meet IMF requirements. An IMF (team) is planning to visit Afghanistan in September to resume negotiations. We are hopeful that the Government will have demonstrated sufficient progress towards credible reforms of the financial sector, and actions to address the Kabul Bank fraud, so that a new programme can be agreed over the Autumn.

* The World Bank have told us that the suspension of UK and other donor funds to the Afghan Government will soon begin to destabilise actions essential to successful transition. To guard against this I have (agreed) fund critical interventions in the ARTF  (Afghanistan Reconstruction Trust Fund) investment Window (for x months) while negotiations on the new programme are (continuing. This)..... does not change our suspension of support to the Government .....costs to ensure .... leverage during IMF negotiations.

* Note that Karzai has publicly stated his intention to step down at the end of his second term as per the constitution. This is very important. It improves Afghanistan's political prospects very significantly. We should welcome Karzai's announcement in private and in public.

*(on Vice-CDS (Chief of Defence Staff) presentation). Afghan perceptions of violence are very important for their confidence in their future and for their readiness to work for the Afghan government. Have we got the strategic communications on levels of violence right?

IMF programme: Although the critical reforms to the banking sector are not yet complete, we have been encouraged by the actions of the Afghanistan Government in recent weeks - for example in commencing the forensic audit on the second bank at risk. The IMF is planning to visit Afghanistan in September to take negotiations forward and we are hopeful that there will be evidence of sufficient progress from the Afghan Government to submit a new programme to the IMF board in the autumn. We are continuing to work closely with both sides for resolution.

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