UK-funded audit to clean up Kabul Bank

A UK-FUNDED audit of Afghanistan's Kabul Bank has been ordered in a bid to bolster confidence after the institution was crippled by a loans scandal and a run on the bank.

Depositors rushed to withdraw money after evidence emerged of unofficial loans to shareholders and their friends, accusations that are strongly denied by all, including Hamid Karzai's brother Mahmoud.

The UK government's Department for International Development will pay £7m for an in-depth audit after donors refused to grant aid until an agreement between Kabul and the IMF is reached.

Britain has withheld £85m of aid and other donors have signalled their unwillingness to financially back the regime since the scandal broke last year, forcing the Afghan government to bail out the bank.

A number of major firms have offices in Afghanistan, including Grant Thornton, Deloitte, KPMG and PwC. However, the US government recently suspended Deloitte's contract advising Kabul Bank amid accusations that the firm failed to flag up corruption, The Wall Street Journal reported.

DfID has not yet chosen a firm to undertake the audit, but a spokeswoman said it was likley to be Afghan based due to language and local knowledge requirements.

Development secretary Andrew Mitchell said: "The audit will mean an improved, more stable banking system, which is vital for the Afghan economy. The UK remains committed to tackling corruption in Afghanistan and ensuring that UK taxpayers' funds achieve maximum value for money."