The European Union is losing patience with the Afghan interim government of Hamid Karzai, fearing that hundreds of millions of pounds in aid are being frittered away by stubborn officials with no understanding of economics.
In a clear sign that Mr Karzai's honeymoon is over, EU foreign ministers issued a terse statement yesterday "insisting" that his government takes urgent action to create a viable currency system and a "competent macro-economic framework".
This follows growing alarm at the European Commission over the way Mr Karzai is managing the £330 million state budget, most of which is paid for this year by donor countries. Until reforms are introduced, the next tranche of almost £8 million of EU aid is likely to be withheld.
An internal EC document said it was impossible to rebuild the country as long as "competing warlords are able to engage in economic warfare. - ie, printing rival currencies, raising rival taxes, etc".
The commission is demanding that Mr Karzai restore discipline by adopting an International Monetary Fund proposal involving the "dollarisation" of the state sector. But the Karzai government is resisting the plan, preferring the symbolism of a sovereign Afghan currency.
There are two sorts of "afghanis" in circulation, one printed in Kabul by the Taliban and earlier governments and the other by the Uzbek warlords in the north. Each has a different value.
A total of 12 trillion have been printed, more or less ensuring an inflationary explosion in the near future.
There are fears that aid is vanishing into a bureaucratic maze where few records are kept. "There has to be some sort of transparency, otherwise our dollars will end up in somebody's Swiss bank account," said one official.
Afghanistan is counting on £3.5 billion in aid over two and a half years to restore a minimum of normal life after two decades of warfare. The country was down to its last £7 million in reserves when the Taliban was overthrown.
Afghanistan began the tricky process yesterday of electing delegates to a grand assembly which the UN hopes will prove decisive in restoring peace. It will decide whether Mr Karzai's interim government continues until elections in two years or is replaced.
The former king, Zahir Shah, 87, is due to return this week from 30 years of exile to preside over the opening session on June 10. As a Pathan - like most Taliban - he is not in favour with Tajiks in the interim government.
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