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Building Afghanistan's Financial System

U.S. Treasury officials are working with their Afghan partners to lay the groundwork for more effective, corruption-free management of public funds.

The U.S. strategy for Afghanistan hinges on a two-pronged approach: improving security through building the capacity of the Afghan National Security Forces, and building governance capacity within the Afghan government so it can better provide much needed goods and services to the Afghan people. While battles, such as the ongoing one in Marjah, will still be fought, the focus is more and more turning to the transition of security responsibility to the Afghan security forces. At the same time, an increasing number of civilian experts and professionals are working with Afghan partners to build up Afghanistan's capacity to become self-sufficient through good governance, and economic development initiatives.

The U.S. Department of the Treasury is one of the agencies involved in this effort. Speaking at the American University in Kabul on February 10, Deputy Secretary of the Treasury Neal Wolin spoke of Treasury’s crucial role in preparing Afghanistan for the future.

The Treasury Department has a dual mission in Afghanistan. First, to strengthen Afghanistan’s systems of financial management so that Afghan authorities can collect, manage and spend Afghan resources on Afghan priorities transparently and effectively. And second, to combat illicit financial activity and deny funds to terrorists.

Because donor governments worry about corruption, most international financial aid is administered by outside agencies, bypassing the Afghan authorities, said Deputy Secretary Wolin. Thus, "Afghanis miss out on the opportunity to shape the projects such funds support. The government of Afghanistan misses the opportunity to develop the capacity to administer such large-scale expenditures effectively."

U.S. Treasury officials are working with their Afghan partners to lay the groundwork for more effective, corruption-free management of public funds, said Deputy Secretary Wolin.

Second, the Treasury seeks to minimize illicit financial activity and prevent funds from reaching terrorists; and to build Afghanistan's capacity to gain control over the flow of funds within the country. So they are building a strong central bank, which can help facilitate and promote economic growth and help disrupt the financial networks on which terrorists depend. Establishing mobile banking and payment card services for the Afghan people, thus eliminating a large percentage of cash transactions, is another step in that direction.

The work of promoting Afghanistan's fiscal independence will not be finished anytime soon, but it is necessary if Afghanistan is to become a strong, independent nation. "Just as the U.S. military looks forward to the day when we can begin to effect a responsible transition to Afghan forces," said Deputy Secretary Wolin, "we at Treasury look forward to the day when our technical expertise is no longer needed."