VZCZCXRO0918
PP RUEHDBU RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #0323/01 0431349
ZNR UUUUU ZZH
P 121349Z FEB 09 ZDK
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7349
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0730
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 000323 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS FOR AID/ANE 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS OPIC 
DEPT PASS FOR TDA FOR STEIN AND GREENIP 
USOECD FOR ENERGY ATTACHE 
CENTCOM FOR CSTC-A 
NSC FOR JWOOD 
TREASURY FOR MHIRSON, ABAUKOL, BDAHL, AND MNUGET 
OSD FOR SHIVERS 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
 
SENSITIVE 
 
SIPDIS 
 
E.O.  12958 N/A 
TAGS: EFIN PGOV PREL EAID ECON EAIR AF
SUBJECT: CHANGE AT THE TOP OF AFGHANISTAN'S FINANCE MINISTRY 
 
REF: A) Kabul 317  B) Kabul 259  C) 08 Kabul 3334 
 
KABUL 00000323  001.4 OF 002 
 
 
¶1. (SBU) Summary.  Finance Minister Ahadi has resigned to run for 
president and been replaced by acting Transport Minister Zakhilwal, 
a technocrat whose political star has been rising since he rescued 
the Haj-flights operation late last year.  Zakhilwal, a strong 
proponent of private sector development, is a good choice but 
inherits the top job at Finance at a tough time.  Among other 
things, he must ensure Afghanistan does not fall off its IMF program 
and guide the FY 2009-10 budget into law.  End Summary 
 
¶2. (U) As anticipated Ref B, Afghan Finance Minister Anwarulhaq 
Ahadi February 5 submitted his resignation, and President Karzai 
accepted it.  This followed endorsement of Ahadi by some members of 
his Afghan Millat party last week as candidate for president in this 
year's election.  Karzai has named Dr. Omar Zakhilwal as the new 
Finance Minister. 
 
¶3. (SBU) Zakhilwal has been wearing three hats in the government. 
Since November he has been acting Minister of Transport and Civil 
Aviation, a job Karzai named him to after dismissing the last 
minister for alleged corruption and mishandling the Haj flights to 
Saudi Arabia.  Having spent most of his first month as Transport 
Minister focused on Haj operations, Zakhilwal was just settling into 
other aspects of the job, for which he had little background, and 
had made plain that his tenure would be temporary.  Throughout this 
time, Zakhilwal retained his other two positions, Chief Economic 
Advisor to the President and President of the Afghanistan Investment 
Support Agency (AISA).  As Finance Minister, Zakhilwal is expected 
to retain only the former position. 
 
¶4. (SBU) Zakhilwal (see bio note below) is a staunch proponent of 
private sector development and is widely considered - including, 
importantly, by Karzai - to be very competent.  That said, Ahadi's 
will be large shoes to fill at the Finance Ministry, and with a 
number of economic policy issues on the front burner, this is 
arguably not the best time for turnover at the top of this key 
department. 
 
¶5. (SBU) IMF program.  Ref A describes the state of play in 
Afghanistan's relations with the IMF.  In brief, Afghan performance 
under the PRGF program has slipped, and the government must fulfill 
several prior actions by June at the latest to put the program back 
on track.  Failure to do so could have significant financial 
consequences for a government already unable to pay its own bills. 
Zakhilwal will be keenly aware of the importance of good relations 
with the IMF.  But he is mainly a technocrat; his political skills 
will be required with Parliament and other ministries to ensure the 
GIRoA meets Fund conditions, and these remain largely untested. 
Once through this immediate challenge, Zakhilwal will need to 
improve on Ahadi's efforts to generate more revenue and work toward 
medium-term fiscal sustainability. 
 
¶6. (SBU) Afghan budget.  The government's proposed budget for FY 
2009-10 has just been presented to Parliament.  Ahadi did the hard 
work of preparing the budget, imposing necessary spending restraint 
on fellow ministers.  Zakhilwal must now guide it into law, working 
with MPs, many of whom are famously unschooled in market economics 
but likely to be certain the government is not doing enough for 
their districts.  He must also manage the government's finances 
under circumstances of very low cash balances. 
 
¶7. (SBU) ARTF benchmarks.  MOF has been donors' main interlocutor in 
efforts to establish an "economic reform window" in the Afghan 
Reconstruction Trust Fund (Ref C), with Ahadi making key decisions. 
Specific benchmarks still need to be agreed, against which Afghan 
performance would be assessed for eligibility to tap funds from this 
window. 
 
¶8. (SBU) Regional economic cooperation.  MOF often chairs the Afghan 
delegation to international economic meetings, even when the agenda 
includes topics where other ministries have the lead.  This was the 
case with the Pak-Afghan Joint Economic Commission in November, 
despite the Commerce Ministry's supposed lead on trade policy, and 
could be for negotiations, not yet firmly set, on a new Pak-Afghan 
 
KABUL 00000323  002.6 OF 002 
 
 
Transit Trade Agreement.  Coordination with Commerce will be 
required to finalize a new Tariff and Trade Policy and launch the 
WTO accession process, both priorities of Commerce Minister 
Shahrani. 
 
¶9. (SBU) Karzai has named Noorullah Delawari, Advisor to the 
President on Banking and Private Sector, to head AISA.  A USAID 
consultant, Delawari is well and favorably known to the U.S. Mission 
and was the first President of AISA.  He has told EconCouns that one 
of his early priorities will be to re-energize the moribund, 
cabinet-level High Commission on Investment, to lend high-level 
support for promotion of foreign investment. 
 
¶10. (SBU) Zakhilwal's departure leaves veteran civil servant 
Engineer Raz Mohammad Alami as acting Minister of Transport and 
Civil Aviation until a permanent replacement is named.  Alami knows 
the aviation business and is considered competent but as an acting 
minister is unlikely to launch new reform initiatives despite the 
serious need for such at this ministry. 
 
¶11. (SBU) Bio Note.  Prior to becoming President of AISA, Omar 
Zakhilwal served as the Chief Policy Advisor at the Ministry of 
Rural Rehabilitation and Development.  He has been a member of the 
Supreme Council of Afghanistan's central bank and teaches economics 
at Kabul University.  Zakhilwal is a Canadian citizen, has family in 
Canada, worked previously as a Senior Research Economist for 
Statistics Canada, and holds a Ph.D. in economics from Carleton 
University in Ottawa, where he also lectured in economics. 
 
WOOD