JEROME STARKEY: $ 4.2 BILLION IN MYSTERIOUS CASH FLOWN OUT OF KABUL

US and British fraud investigators fear that most of the money leaving Kabul has been siphoned-off from international aid contracts, or made from the country’s rapidly expanding opium trade.

Documents seen by The Scotsman show that the Afghan Ministry of Finance puts the real figure at $4.2bn – at least $1.2 billion higher than previously feared.

“Our records show that $4.2bn has been transferred in cash through Kabul International Airport alone during the last three-and-a-half years,” Afghanistan’s finance minister, Dr Omar Zakhilwal, wrote in a letter to US Congresswoman Nita Lowey.

Ms Lowey, chairwoman of the aid appropriations sub-committee in Congress, has vowed not to send another dime to Afghanistan until she was confident “that US taxpayer money is not being abused to line the pockets of corrupt Afghan government officials, drug lords and terrorists”.

Dr Zakhilwal’s letter acknowledges allegations that Afghan president Hamid Karzai’s government is “assisting or partaking in this fraud” but the minister hits back by pointing out that most of the money America spends in Afghanistan circumvents the Afghan government.

“Only 20 per cent of aid in Afghanistan (5 per cent of the whole US government’s assistance) is spent through the government budget.

The rest is going to development and security projects outside our systems and outside our control,” he wrote.

“In particular, while during the last three years $19.6bn of aid has been delivered to Afghanistan, (the Afghan] government has had full discretion and control only over $1bn.”

Britain’s Department for International Development has pioneered efforts to put money into the Afghan government’s budget, but many donors, especially America, are reluctant because of corruption and lack of government capacity.

Dr Zakhilwal’s letter implies that the private business is mostly to blame for the disappearing billions and he warns it is, “critical that full transparency and effectiveness principles are also applied to the aid directly spent by donors or their contractors”.

The sheer volume of cash couriered out of the country’s main airport is huge relative to Afghanistan’s gross domestic product which was just $13.5bn last year, and it easily dwarfs the amount of tax revenue collected by the government.

The figure doesn’t include cash exported from any of Afghanistan’s other international airports, which include Kandahar International, Mazar-e Sharif, in northern Afghanistan, and the main US base at Bagram, north of Kabul.

In the letter, dated 30 June, Dr Zakhilwal reiterated calls for an investigation and he formally asked for American cooperation to determine the money’s origins.

“Whilst cash transfers are in principle legal, we are concerned about the Source of this estimated transfer,” he wrote.

‘Black hole’ in US military’s financial oversight

DR Omar Zakhilwal’s letter comes just days after a separate Congressional report highlighted a gaping black hole the US military’s financial oversight.

An investigation titled “Warlords Inc” warned the military was inadvertently funding the insurgency through private security companies who pay-off local power brokers to drive supplies through their territory. It said a $2.16 billion logistics contract was fuelling “warlordism, extortion, and corruption.”

Afghanistan relies on a cash economy and there is no limit to how much money can be exported, as long as it is declared to customs. Official records show most of the money that was declared leaving Kabul since 2007 formed part of the traditional Islamic hawala system, in transfers to Dubai. The often informal nature of the hawala contracts, based on trust, honour and lender’s reputation, make the transactions almost impossible for financial investigators to track.