Karzai urges Afghans not to panic as bank withdrawals accelerate

[Don]

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/02/AR2010090202266_pf.html

[SIZE=-1]By Andrew Higgins, David Nakamura and Ernesto Londoño
Washington Post Staff Writers
Thursday, September 2, 2010; 10:20 PM
[/SIZE]
DUBAI, UNITED ARAB EMIRATES - As depositors thronged branches of Afghanistan's biggest bank, President Hamid Karzai told Afghans on Thursday not to panic shortly after his brother, a major shareholder in the beleaguered Kabul Bank, called for intervention by the United States to head off a financial meltdown.

Why should this mean anything to you?

Because Kabul Bank is the primary funds-holder for Afghan soldiers. While I was there, the big push was to get every Afghan soldier an electronic funds capability to get their monthly pay. Therefore, Karzai is asking the U.S. Treasury to guarantee the pay of Afghan soldiers, more than just Afghan citizens.

If Kabul Bank goes under, the next question will be: How will the soldiers get paid? If the soldiers stop getting paid, they will go AWOL. Currently, there is no real punishment for Afghan soldiers who go AWOL, so there is nothing to keep them from running off for not being paid -- except, perhaps, the rifles of their superiors.

So that means, if the Afghans are going AWOL because they're not being paid, guess who gets to continue the fighting against insurgents and the Taliban? And guess who may become an insurgent or otherwise ally of the Taliban, because they've lost all trust in their own government?

 

[FR7 Baptist]

Don, the article makes it seem like the Afghan government can back up the deposits. If not, we have a Catch-22. We don't have the money to back up the deposits, and we don't have the money to handle the fallout if it further destabilizes.

 

[Don]

I think if you re-read it, you'll find that it's the Afghan government officials who are making the claims that they can back up the deposits.

If they have that much money available to back up the deposits, then why are we spending so much to support their economy?

And you're absolutely right about the Catch-22, which leads to my initial point: Without being paid, Afghan soldiers and police will go AWOL.

Did you guess who that leaves to fight the insurgents and the Taliban?

 

[billwald]

Important because the US govt will probably bail them out.