Afghan cash crunch looms, millions withheld over bank

The International Monetary Fund has rejected Afghanistan's plan to deal with a failed bank at the center of a corruption crisis, a step that has blocked tens of millions of dollars in aid and may put development projects worth billions more at risk.

Three diplomats involved in negotiations between the aid-reliant Afghan government, donor nations and the IMF said Kabul had failed to address the fund's concerns over the scandal-hit Kabulbank by a deadline last Saturday.

That meant a scheduled payment of $70 million from the World Bank-administered Afghan Reconstruction Trust Fund (ARTF) was automatically withheld.

"It seems the IMF has rejected the Afghan government's latest proposal to solve the bank crisis," said one of the diplomats, who asked not to be identified.

Corruption, bad loans and mismanagement cost the politically well-connected Kabulbank, Afghanistan's biggest private lender, hundreds of millions of dollars in what Western officials in Afghanistan now openly call a classic Ponzi scheme.

An IMF spokesman in Washington, Raphael Anspach, said donor countries, and not the IMF, decide when to make payments from the trust fund. "The IMF does not make those decisions nor does it prompt donor countries to disburse" funds, Anspach said.

Donors, however, look to the IMF and the World Bank as a seal of approval in their funding decisions. The IMF has failed to sign off on a new financing program for Afghanistan since the last one expired in September until the government begins to address fund concerns over Kabulbank.

One Western diplomat in Kabul, speaking on condition of anonymity, described the bank stalemate as "the IMF's second biggest problem after the Greek bailout."

U.S. President Barack Obama voiced concern over the crisis during a video conference with Afghan leader Hamid Karzai last week, directly linking it to negotiations for the long-term relationship between the two countries, the Kabul-based diplomats told Reuters.

Ties between Washington and Kabul have been strained for years, with the Kabulbank crisis adding extra pressure just as the United States prepares to begin a gradual drawdown of its forces from next month in a transition process that will end with the withdrawal of all foreign troops by the end of 2014.

"There is a bigger political process at stake here. The political pressure here is that we've got to get this solved so we can go ahead with transition," one diplomat said.

The IMF told Reuters in Washington Tuesday that it was ready to move quickly to disburse loans to Afghanistan once Karzai's government begins to fix financial and corruption issues that led to the collapse of Kabulbank last year.

Karzai's cabinet met to discuss the Kabulbank crisis last Thursday, and Finance Minister Omar Zakhilwal then sent a letter to the IMF at the weekend containing compromise proposals, one regarding the future auditing of banks, the diplomats said.

The IMF rejected the finance ministry's proposal as insufficient to guard against future abuses, they added.

Finance Ministry spokesman Aziz Shams, however, said he was not aware of any letter sent to the IMF. He said the ministry was cooperating with the fund and "there hasn't been any problem."

"WE WILL HOLD BACK MONEY"

Kabulbank, which has close ties to the Afghan leadership and their families, has about $926 million in outstanding loans, of which around $900 million is considered to be at risk. Afghan officials say about $347 million will be recovered, but donors want more aggressive work done on asset recovery.

The bank doled out nearly half a billion dollars in unsecured, undocumented loans to a roster of Kabul's elite, including cabinet ministers and a powerful former warlord, anti-corruption officials have said.

No payments have been made by the ARTF for the past three months, diplomats said, because of the IMF's failure to renew its support program over the stalemate. An IMF support package is a seal of approval most donors need before pledging aid.

The fund has been reviewing its support for Afghanistan since last September, when news of the Kabulbank scandal broke.

"On our side we are just waiting for resolution of the IMF issue. In the meantime, we will hold back money to the ARTF," another European diplomat said.

Western officials now fear a "cash crunch" will hit the Afghan government by late summer, risking even further political instability if wages for hundreds of thousands of civil servants funded by the ARTF go unpaid.

Representatives of donor nations voiced concern in a letter sent to the IMF earlier this month. The letter, a copy of which was seen by Reuters, said the government's operating budget was likely to be hit by the continued absence of IMF support.

The Afghan government has also expressed frustration with the senior IMF official leading negotiations.

An IMF team visited Afghanistan in February but the fund is represented in Afghanistan by only one official. "With a crisis this significant, one would expect the IMF to deploy a team of people to Afghanistan," one diplomat said.

Karzai has accused foreign donors of contributing to the corruption scandal, saying they failed to act quickly enough to stem losses at Kabulbank and that they had given bad advice.

The Finance Ministry has also said the crisis was exacerbated by a flawed audit of the bank done by a Pakistan-based member of accounting firm PricewaterhouseCoopers.

FINANCE MINISTER TURNS TO RUSSIA

The withholding of aid began with a warning shot when the British government refused to pay 85 million pounds ($137.6 million) in promised aid in March.

On top of the delayed payment of $70 million, the ARTF was also expected to funnel about $200 million to support the Afghan government's recurrent costs this year. That represents about 25 percent of Afghanistan's non-security wages bill, most of it in teachers' salaries.

In the longer term, development projects worth billions of dollars are now at risk unless the IMF and the Afghan government are able to agree on a plan to liquidate Kabulbank and rehabilitate Afghanistan's fractured financial sector.

Those projects are needed to help rebuild infrastructure shattered by three decades of conflict, including everything from roads and schools to power, water and other basic services.

Finance Minister Zakhilwal is in Russia on a 12-day visit, holding talks with officials including Russian Economy Minister Elvira Nabiullina and President Dmitry Medvedev. In July 2010, Russia scrapped almost all of Afghanistan's $12 billion debt.

A Russian official in Kabul told Reuters that around $470 million in debt remained. He said Zakhilwal was "in Russia for one goal only: debt relief." Russia has been tentatively flexing its muscles again in the region recently after the Soviet Union's disastrous occupation of Afghanistan in the 1980s.

U.S. Hospitals Performed Needless Double CT Scans, Records Show

Long after questions were first raised about the overuse of powerful CT scans, hundreds of hospitals across the country needlessly exposed patients to radiation by scanning their chests twice on the same day, according to federal records and interviews with researchers.

Performing two scans in succession is rarely necessary, radiologists say, yet some hospitals were doing that more than 80 percent of the time for their Medicare chest patients, according to Medicare outpatient claims from 2008, the most recent year available. The rate is typically less than 1 percent, or in some cases zero, at major university teaching hospitals.

Next month, the Center for Medicare and Medicaid Services is expected to release figures for 2009, but according to people who have seen the numbers, the practice of double scanning chest patients has continued.

“When I saw the 2009 numbers, they were the same essentially, and I was disquieted by that,” said Dr. Michael J. Pentecost, a radiologist and Medicare consultant who also reviews claims for commercial clients.

The overuse of scans has been the subject of growing concern in recent years, but a review of the federal data, focusing on a common procedure performed millions of times a year, offers a rare and detailed snapshot of the problem state by state, hospital by hospital.

In 2008, about 75,000 patients received double scans, one using iodine contrast to check blood flow, and one that did not. “If you do both, you bill for both,” Dr. Pentecost said.

Radiologists say one scan or the other is needed depending on the patient’s condition, but rarely both. Double scanning is also common among privately insured patients who tend to be younger.

Double scans expose patients to extra radiation while heaping millions of dollars in extra costs on an already overburdened Medicare program. A single CT scan of the chest is equal to about 350 standard chest X-rays, so two scans are twice that amount.

“The primary concern relates to radiation exposure,” said Dr. James A. Brink, chief of diagnostic radiology at Yale-New Haven Hospital, where double scans accounted for only a fraction of 1 percent of cases. He added: “It is incumbent upon all of us to limit it to the amount needed to make a diagnosis.”

Officials at hospitals with high scan rates said radiologists ordered the extra chest scan figuring that more information is better. In rare instances, the two scans might help a doctor distinguish between tangled blood vessels and a tumor, Dr. Pentecost said.

The Medicare agency distributed the data to hospitals last year to show how they performed relative to each other and to encourage more efficient, safer practices. The review of that data found more than 200 hospitals that administered double scans on more than 30 percent of their Medicare outpatients — a percentage that the federal agency and radiology experts considers far too high. The national average is 5.4 percent.

The figures show wide variation among states as well, from 1 percent in Massachusetts to 13 percent in Oklahoma. Overall, Medicare paid hospitals roughly $25 million for double scans in 2008.

Double scanning is more likely to occur at smaller, community hospitals such as Memorial Medical Center of West Michigan in Ludington. It gave two scans to 89 percent of its Medicare chest patients..

“We aren’t radiologists, but as we understand the practice, it was strictly a matter of physicians, independent practitioners who were doing their best to get to the bottom of what was ailing their patients,” said Bill Kerans, a spokesman for that hospital.

Since 2008, Memorial Medical Center lowered its rate to 42.4 percent in 2010 and to 3 percent in the first part of 2011. “We have made some dramatic changes in protocols and practices,” Mr. Kerans said.

A few large hospitals have had problems as well. St. John Health System in Tulsa double-scanned 80 percent — or 800 of its Medicare outpatients in 2008. “We recognized in late 2008 and early 2009 those numbers were higher than we needed to be,” said Charles Anderson, the hospital’s president and chief executive.

By changing protocols, the percentage of double scans is now “hovering around 5 percent,” Mr. Anderson said. “What that means for us is when a physician orders a scan from a radiology department, the radiologist begins to engage in a conversation with those physicians, talking about what might be a more reasonable and acceptable approach.”

Medicare paid St. John roughly a quarter of a million dollars for the double scans in 2008, but Mr. Anderson said money was not a factor in why they were done. “We are an organization that last year did $75 million in costs of uncompensated care, so we are hardly in it for the money,” he said.

UNC Healthcare in Chapel Hill, N.C., performed nearly 2,000 scans in 2008 and none were doubles. “I would be very surprised as to why that would occur,” said Dr. Paul L. Molina, the hospital’s executive vice chairman of radiology. “Someone’s got to educate me as to why they see the need to do both.”

Carroll Rogé, a spokesman for ETMC hospitals in Texas, three of which had dual scan rates over 60 percent, said independent doctors at those hospitals “hold varying opinions” on the value of the federal data.

“Combining these tests expedites the diagnosis and the care to the patient,” said Dr. Harold Smitson, who helps to oversee radiology at ETMC hospitals in Athens and Fairfield. “These are small and rural hospitals, without a complete range of medical services, which are mandated to evaluate patients quickly and efficiently to determine the need for transfer to a higher level of care.”

The Medicare agency believes hospitals can and should do more to change physician behavior. “Hospitals will say, ‘Wait, we don’t order tests, why are you measuring us?’ ” said Dr. Michael Rapp, who directs the Quality Measurement and Health Assessment Group for the federal agency. But, he added, “Hospitals certainly have the ability to put in policies and to monitor what’s happening.”

Added revenue may not be the reason dual scans are ordered.

“It is because no one has looked at it before,” said Dr. Rebecca Smith-Bindman, professor of radiology, epidemiology and biostatistics at University of California, San Francisco. “This is a brand new quality measure. There are very few of them out there.”

The federal agency plans to use other, similar measurements to rein in what it considers to be unjustified — and potentially dangerous — medical procedures.

“Modifying physician behavior is a hard thing to do,” said Dr. Pentecost, the claims consultant. “And we are doing it. This is a very powerful tool.”

Russia eyes bigger role in Afghanistan, wants to rebuild

Russia

wants to enlarge its presence in Afghanistan and rebuild the country where Soviet troops fought a disastrous decade-long war, Russia’s envoy to Kabul said, describing ties between the two former foes as the best in 20 years.

Although Russia has refused to send troops to join the NATO-led war in Afghanistan, Moscow has been flexing its muscles in the region bordering much of ex-Soviet Central Asia, which Russia views as its traditional sphere of influence.

“Relations, I think, are at their highest in the past 20 years, and they are moving and expanding ... But I would like them even wider,” Russian ambassador Andrey Avetisyan told Reuters in an interview in Russia’s vast, opulent Kabul embassy on Thursday night.

Russia has embarked on a series of infrastructure and hydroelectric projects in Afghanistan, where the Soviet Union lost 15,000 troops fighting insurgents before trudging away from the country in 1989. Strengthening this relationship, Afghan Finance Minister Omar Zakhilwal is currently in Russia on a 12-day trip, where he is holding meetings with President Dmitry Medvedev and other high-ranking officials. His trip follows Russia’s scrapping a year ago of almost $12 billion of debt owed by Afghanistan to Russia.

Afghan President Hamid Karzai, in the Kazakh capital Astana this week, praised a June 14 agreement between Moscow and Kabul to boost trade and economic ties. Karzai spoke to Medvedev at the Shanghai Cooperation Organisation (SCO) summit this week. “A country with a functioning economy, with people having jobs, is less dangerous,” said Avetisyan, who worked in the Soviet embassy in Kabul in the 1980s, becoming fluent in Afghanistan’s two main languages Dari and Pashto. Avetisyan said Russia’s quest for stability in Afghanistan stems from its fear of what he described as Afghanistan’s two main threats: terrorism and drugs.

Escalating violence across Afghanistan in the 10th year of an increasingly unpopular war has sent tremors of worry across Russia, which borders mainly Muslim former Soviet republics in Central Asia, and which is battling a growing insurgency in its own North Caucasus. Avetisyan said Russia hopes this year to embark on constructing affordable housing, reminiscent of the Soviet occupation when Moscow built infrastructure across the country.

Each year, Russia hopes to build about 1 million square metres of housing, starting with Kabul and with an eye to expanding to other cities. Russia also wants to be involved in hydroelectric dam projects and a proposed gas pipeline stretching from ex-Soviet Turkmenistan to India via Afghanistan and Pakistan.

Though Afghanistan was devastated by the Soviet Union’s war here, which by some estimates killed millions and destroyed its once-thriving agriculture, both sides are looking through ‘rose-tinted glasses’, Avetisyan said. “The recollection (of the Soviet era) is better than I expected when I came here. The feeling among the Afghans from people on the street to the ministers is very friendly. And it is mutual,” he said. He said Russia is “not to ever be involved in any military activities here... We are ready to come and help” on the development side.

Under a gradual transition process beginning next month, US and NATO troops plan to hand security for all of Afghanistan by the end of 2014. Avetisyan however criticised that date as premature. “In the three years that are left before 2014, I have doubt that it is indeed possible to build a strong army and police,” he said, adding such training requires at least five years.

NATO is racing against the clock to train Afghanistan’s ill-equipped and illiterate army and police. Critics have warned progress is slow and that security gains cannot be upheld. “We support the transition as we want everything in Afghanistan to be Afghan-led ... But the situation in the country today makes us worried about the reparedness,” he said. reuters

Saudi Women Take the Wheel

Several dozen women drove in defiance of the law in major cities of Saudi Arabia on Friday, according to reports on social media and by an informal network of activists in the country. There appeared to be few confrontations reported with either the traffic or morals police, and at least half a dozen women who were stopped were escorted home and admonished not to drive again, said activists reached by telephone.

From its inception in April, the protest against the longstanding ban was far smaller than initially anticipated, but it was not meant to be a mass driving effort. Rather, women with legal driver’s licenses from other countries were urged to run mundane errands — going to the grocery store, perhaps — in order to underscore the fact that it should be normal for women to drive.

Maha al-Qahtani, an information technology specialist for the government, drove around the capital, Riyadh, for 45 minutes with her husband, Mohamed, a human rights activist, in the car. She braced for a siren after passing each of about five police cars, she said, but they ignored her.

“I woke up today believing with every part of me that this is my right, I woke up believing this is my duty, and I was no longer afraid,” said Mrs. Qahtani, adding that she had brought a change of clothes and a prayer rug with her in case she was detained.

Manal al-Sharif, a 32-year-old single mother, started the call for the June 17 protest in April with a Facebook page. But after posting videos of herself driving around Al Khobar in the Eastern Province, she was arrested in late May and jailed for nine days — a punishment that was stricter than expected. Many supporters were disappointed, feeling that she had jumped the gun and jeopardized them all by taking a confrontational approach.

Women driving remains a sensitive issue in Saudi Arabia. For religious conservatives, it is a kind of Alamo, with the ban a sign that the kingdom still holds to its traditions and has not caved to Western pressure.

The ruling family has been especially dependent on this base of supporters in recent months as protests erupted across the region and has been mute as the mufti, the highest religious figure in the kingdom, rolled out a fatwa banning protests.

Many Saudi activists considered the treatment meted out to Ms. Sharif a warning from the monarchy against trying to organize any kind of movement via social media. The initiative for women to drive was the strongest effort so far in the kingdom inspired by the regional climate.

“Women in Saudi Arabia see other women in the Middle East making revolutions, women in Yemen and Egypt at the forefront of revolutions, being so bold, toppling entire governments,” said Waleed Abu Alkhair, whose wife drove around Jidda. “The women of Saudi Arabia looked at themselves and they realized, ‘Wow! We can’t even drive!’ ”

Mr. Abu Alkhair said he knew about many women who drove, and aside from one being questioned by the police for two hours, none were bothered. Once the campaign had been announced there were frequent threats by opponents to punish female drivers either by beating them or by smashing their cars.

“We want women to keep fighting this fight and to be free,” he said. “It will help to liberate the entire society.”

In the weeks after Ms. Sharif’s arrest, a debate erupted between conservative clerics and their followers and the kingdom’s increasingly outspoken women. Opponents largely argued that Saudi society was not ready, that a woman should not be thrown into the wilds of Saudi driving habits or be held responsible for any accidents.

Worse, opponents argued, it would lead to the public mingling of the sexes. Supporters mocked the clerics for putting everything in a sexual context and asked why it was O.K. for Saudi women to be driven around by an army of some 800,000 male drivers imported from Southeast Asia.

Although the arrest of Ms. Sharif discouraged women from driving, the fact that it enlivened the debate was in contrast to the first (and last) such protest in November 1990. Clerics branded the 47 women amoral and the royal family confiscated their passports, firing those working for the government. Many went into isolation for their own safety.

In addition to religious opposition there is widespread suspicion in the country that those who control the visa process — and in Saudi Arabia that means the princes of the ruling family — have made a business out of controlling the black market in visas for drivers, which can cost more than $3,000 apiece.

Many young married women decry the fact that they cannot afford that, not to mention the driver’s salary, about $600 a month.

The more liberal princes support allowing women to drive.

Prince Talal bin Abdul-Aziz al-Saud, 79 years old and long among the most outspoken members of the royal family, argues that such reforms lag because the leading members of the family have failed to yield any power or influence to younger generations.

“Bravo to the women!” the prince said in an interview. “Why should women drive in the countryside and not in the cities?” (Women have long driven in rural areas.)

King Abdullah and other royals have said in interviews with foreign reporters that they expected Saudi women to drive one day soon but have done little lately.

“Saudi Arabian women are going to have to fight for our rights, men are not going to just hand them over to us,” said Amira Kashgary, a professor who drove through Jidda on Friday for 45 minutes with her 21-year-old daughter. Women are tired of being stranded or missing appointments because their drivers disappear for the day, Professor Kashgary said. “We want to drive today, tomorrow, and every day — it’s not a one-day show. We want to make it a norm.”