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KARACHI, Dec 21: Top bankers believe that reconstruction of Afghanistan may allow some interaction between Pakistani and Afghan banks. But they say this may take some time. They say, however, that the proposed reconstruction would generate some indirect business for Pakistani banks. That is when Pakistani businessmen would get involved in the reconstruction process and need financing from the banks.
“Right now no bank here seems interested in Afghanistan,” says president of state-run National Bank S. Ali Raza. “So far I know the Afghan central bank is nonfunctional. Banks in Pakistan or elsewhere can establish direct contacts in Afghanistan only when the central bank becomes functional.” Raza is not far removed from the truth.
Press reports suggest that Bank Mille — the Afghan central bank — has been in ruins for past five years: It has not framed and conducted any monetary policy nor has it supervised the banking system.
In fact the banking system as such had collapsed in the war-raged country years ago — and no state-run bank was left to be supervised. Some private banks kept working under Taliban regime but they served more as fund collection booths than commercial banks for the ruling militia until the UN slapped sanctions on them last year.
Bank Mille has not even kept record of money supply what to talk about regulating it. It could not have. Various factions of Afghan warlords used to get Afghani printed through different sources. Besides the US dollar and Pakistan rupee remained much in use along with the local currency.
Bank Mille is broke: It now has only $140,000 left in its coffers. Before the fall of Taliban the Afghan central bank had foreign exchange reserves well over $6 million. But when Kabul fell to Northern Alliance last month unidentified people took away 5.3 million US dollars and $570,000 worth of Pakistan rupee.
So here they are. Unless Afghanistan makes its central bank functional the economic activity to be generated by the UN-backed reconstruction programme would remain incoherent. Central bankers in Pakistan say Bank Mille and the State Bank of Pakistan are yet to interact. “There is no interaction right now. We are waiting for the Bank Mille to become fully operational,” said a central banker who declined to be identified.
The United Nations Development Programme wants to help Kabul have a truly operational central bank.
But there is no word on how it will do it. Something concrete may emerge next month when donor states will meet in Tokyo to chalk out the details of the multi-billion dollar reconstruction plan.
INDIRECT GAIN: Bankers here say Pakistani banks may get some indirect gains once reconstruction work starts in Afghanistan.
When Pakistani businessmen will actually be taking part in the reconstruction work they would need working capital to finance their operations in Afghanistan. “That is where Pakistani banks will come into picture,” says Ali Raza. “We hope to get some business this way.” So reconstruction of Afghanistan is also going to help banks in Pakistan enhance private sector lending. It is going to be very well-timed as private sector lending has remained far off the mark so far during this fiscal year.
Pakistan is trying to secure a quota out of the multi-billion dollar reconstruction package for Afghanistan. Chances are it might get the quota but even if the relief work is awarded to world businesses on open bidding Pakistan might not lag behind.
Cement and iron & steel industries in Pakistan are almost sure to get big orders from Afghanistan once reconstruction starts there; food, pharmaceuticals and engineering industries are also sure to secure some solid business. obviously 25 million plus Afghan not only need bread and butter; antibiotics and pain-killers but also tools and machinery to build roads, houses and bridges. Businessmen say ample opportunities are also awaiting in telecommunication and oil and gas sector.
“Those who get involved in reconstruction work will obviously need money from banks. That is how banks play and immediate role and get some new business,” says Ali Raza.
There is also a possibility that the UN might use some banks outside Afghanistan to channelize funds for reconstruction in that country. If that happens foreign banks operating in Pakistan can get some business. “But that will depend on how quickly the Afghan central bank is made functional,” says a foreign banker.
He and other bankers say chances are bleak for Pakistani or foreign banks operating here to set up branches in Afghanistan. “Licencing rules are yet to be laid down. Besides it is not clear whether the interim Afghan government would follow a western banking system or an Islamic one,” says head of a private bank.
