Pubdate: Fri, 04 Jan 2002
Source: Wall Street Journal (US)
Copyright: 2002 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Author: Guy Chazan

Special Report: Aftermath Of Terror

AFGHAN GOVERNMENT'S EMPTY BALANCE SHEETS POSE A PROBLEM FOR THE NEW FINANCE 
MINISTER

KABUL, Afghanistan -- Hedayat Amin-Arsala has one of the toughest jobs in 
finance: trying to balance the books in a country with no taxes, no exports 
and no budget.

As finance minister of Afghanistan's new interim administration, he serves 
a government so badly stretched it can't pay its own staff, let alone 
rebuild an economy shattered by 22 years of war. "We basically don't have 
any resources to speak of," says Mr. Amin-Arsala, a 59-year-old former 
World Bank economist. "We have very little reserves, and our revenue 
streams have all dried up. We're in really bad shape."

There are few gold reserves to speak of and no functioning banks. Taxes 
aren't being paid, and customs duties are pocketed by local warlords. The 
government owes $66 million to civil servants, some of whom haven't been 
paid for six months.

"We're going to be dependent on international support for even our current 
budget," says Mr. Amin-Arsala. Even setting up his office would have been 
impossible without outside help: The United Nations supplied Mr. 
Amin-Arsala's desk, computer and satellite phone.

The national currency, the Afghani, is also in crisis. No exports mean no 
hard-currency revenues to back up the Afghani. Yet the presses have been 
churning out notes, fueling inflation. One official says the previous 
administration of Northern Alliance leader Burhanuddin Rabbani printed 300 
billion Afghanis a month.

Even the strengthening of the Afghani since the new government came to 
power on Dec. 22 -- from 70,000 to $1 to 25,000 now -- is causing trouble, 
by swelling dollar-denominated debts.

Many of Mr. Amin-Arsala's woes are the result of Taliban mismanagement. The 
Islamic militia cared little for fiscal policy: Its war budget was a tin 
trunk stuffed with money and stashed under the bed of leader Mullah 
Mohammed Omar. Most revenue came from illegal opium exports and smuggling. 
At the Taliban-run finance ministry, mullahs educated at madrassas, or 
traditional Islamic schools, replaced qualified economists and bankers.

Mr. Amin-Arsala hopes the new regime will provide enough stability to 
revive long-dormant plans to build roads and export pipelines across 
Afghanistan, binding it more tightly into the regional economy.

Much speculation has centered on California-based Unocal Corp., which 
shelved plans for a gas pipeline linking Turkmenistan and Pakistan across 
Afghan territory after the U.S. launched a 1998 cruise-missile attack 
against Osama bin Laden's terrorist training camps in Afghanistan. Mr. 
Amin-Arsala says he's heard nothing so far from Unocal. But, he adds: "I'm 
sure they'll turn up."
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