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."