US aid may fund Afghan insurgents

2011-07-20 22:46

Washington - US aid money could be fuelling corruption and inadvertently bankrolling insurgents in Afghanistan because the United States is unable to closely track the funds, a government audit said on Wednesday.

The report by the Special Inspector General for Afghanistan Reconstruction said the effect of massive US funding was jeopardised by a lack of financial controls as well as a deep reluctance by Afghan authorities to prosecute corruption cases.

"US agencies have taken steps to strengthen their oversight of US funds, but the United States still has limited visibility over how these funds flow through the Afghan economy, leaving these funds vulnerable to fraud or diversion to insurgents," said the audit.

The findings come amid growing frustration in Washington over the corruption-plagued Afghan government and steadily declining public support for the nearly 10-year-old war.

The audit reviewed oversight of US aid converted to cash, including electronic payments to contractors, and assessed American efforts to bolster the Kabul government's regulation of commercial banks and informal hawala financial networks.

The report said that "given the amount of US cash that flows through the Afghan economy, it is imperative that the US government have robust measures in place to ensure that these funds are not used for fraud or diverted to insurgent networks.

"However, we found that agencies have not instituted sufficient controls over US funds," it said.

Hawala networks

US agencies and Afghan banks do not record the serial numbers of cash handed out in Afghanistan to contractors, and US lead contractors are not prohibited from using unlicensed hawala networks to make payments, it said.

"As a result, the US risks inadvertently funding activities that directly oppose its reconstruction goals for Afghanistan."

The audit found the Afghan government had stalled or refused to take action to stem corruption despite US assistance and advice, with the attorney general's office only following up on four of 21 leads in corruption cases.

In May, Afghan President Hamid Karzai barred advisers from the US Treasury Department to work at the country's central bank while negotiations with the International Monetary Fund were under way, the report said, citing Treasury officials.

"Subsequently, he [Karzai] decided that US government advisers were no longer welcome at DAB [central bank]", it said.

The US embassy had no plans to try to resume work with the central bank and Treasury officials described the central bank as "hostile" to American advisers, it said.

- SAPA
Read more on:    us  |  afghanistan  |  aid
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