Rampant Capital Flight Saw $4.6 Billion Leave Afghanistan In 2011

March 19, 2012Afghanistanby EW News Desk Team

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Government officials in Afghanistan are growing increasingly concerned over the massive amounts of money being flown out of its capital city of Kabul each year, said a report by the Financial Times on Sunday, as money laundering and corruption activities continue to undermine the fledgling government.

According to the FT report, over  $4.6 billion of declared dollar exports left Afghanistan via the Kabul airport last year, with some officials suspecting that larger quantities of cash could be leaving the country completely unchecked.

Nevertheless, $4.6 billion remains a staggering figure for the country, particularly as the sum is almost equivalent to the entire state budget of Afghanistan for 2010-2011 ($4.8 billion).

Related: Afghanistan (Islamic Republic of Afghanistan) Economic Statistics and Indicators

Related: Afghanistan is Broke, US Drowning in Debt – So What About a War Ceiling?

Related: Black Money: The Business of Money Laundering

As such, the governor of Afghanistan’s central bank, Noorullah Delawari, has introduced a new rule this month that will hopefully close a previous loophole in Afghan law, which allowed passengers to carry as much money as they liked out of the country.

According to Delawari, the new rule would restrict passengers from leaving the country with more than $20,000. Consequently, anyone who wishes to move more cash abroad can only do so via a bank wire transfer.

“It will have a major impact on financing terrorism as well as on money laundering,” said Delawari boldly, during an interview with FT.

Brick-sized stacks of $100 bills were apparently being stuffed into boxes, bags and suitcases by Dubai-bound passengers, added some Afghan officials, who believed that a larger percentage of the cash had belonged to drug lords or criminal cartels.

According to a cable from the US Embassy in Kabul that was later published on the website WikiLeaks, even the former Afghan vice-president Zia Masood was prone to leaving the country with large sums of money – with Masood once stopped while entering Dubai with $52 million in cash, though he was soon released without question.

Influential Afghans think nothing of carrying large quantities of cash out of the country, says FT. Many Afghans have also become accustomed to stashing their cash in foreign accounts and real estate in Dubai, added the paper.

But Delawari has since moved to halt the flow of money out of the country, despite protestations from many Afghan currency traders.  Delawari claimed that he had received a phone call from a foreign exchange dealer who told him that Afghan currency merchants would lose $250 million a year as a result of the rule. The governor responded by hanging up his phone.

Kabul authorities have also since placed additional monitors throughout the Kabul airport, in order to enforce the new measures. Questions however remain over whether criminal networks can find new ways to circumvent the law.

According to the World Bank, gross revenues from Afghanistan’s illegal opium trade were estimated to be equivalent to up to a third of the country’s GDP. Rampant bribery and corruption in the country also ensures that perpetrators of financial crimes are seldom punished.

 

Related: Drug Capitals of the World

Related: Antidote To Afghanistan's Opium Addiction: Red Gold

Related: World Corruption Special Report