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Volume 450: debated on Monday 23 October 2006

To ask the Secretary of State for International Development what steps the Government have taken to improve the functioning of the banking system in (a) Iraq and (b) Afghanistan; and if he will make a statement. (95330)

Much of the banking sector in Iraq is state owned and in a very poor financial condition. The range of financial services available is very limited. Restructuring of the banking system is widely identified as a high priority in creating the conditions for non-oil economic growth. The United States (US) has led on banking sector reform in partnership with the Iraqi authorities. This will remain a priority for the Government of Iraq in the coming years. DFID works with the Ministry of Finance in Iraq to take forward other essential reforms including reform of state subsidies, promoting public investment and reforming the oil sector.

In Afghanistan the situation is similar. Despite some progress in recent years the banking sector remains extremely weak. As with Iraq, the sector is dominated by the state owned banks but in Afghanistan financial services, such as money transfers, are often carried out under the informal Hawala system. The US has also led on banking sector reform in Afghanistan. At the request of the Government of Afghanistan, DFID has focused on assisting budget planning and execution and on support to tax reform, where we are the lead donor.