OSLO: Norway has frozen 280 million kroner (52 million euros, $36 million) in aid to Afghanistan until Kabul clears up a corruption scandal surrounding Kabul Bank, the Norwegian deputy foreign minister said Tuesday.

Oslo will block payment of the funds until the International Monetary Fund (IMF) and Afghan authorities reach an agreement resolving the crisis plaguing Kabul Bank, the biggest private bank in Afghanistan now on the verge of bankruptcy after its management embezzled funds.

“A large part of our work in Afghanistan is contributing to good governance,” deputy foreign minister Espen Barth Eide told business daily Dagens Naeringsliv (DN).

“What has happened at Kabul Bank is not an example of good governance,” he added.

Several bank officials, including Mahmood Karzai, the brother of Afghanistan's President Hamid Karzai, have been accused of taking out large loans that were never repaid, totalling some $900 million, sources close to the case have said.

The IMF has insisted any financial aid package for Afghanistan would be conditional on the bank crisis being resolved.

“If the Afghan authorities and the IMF do not reach a solution, we will not return to 'business as usual'. Other solutions will have to be found,” Barth Eide said.

In such an event, he said, Norwegian aid could be channelled through the United Nations. Until now, Oslo has been paying 40 per cent of its aid to Kabul through the Afghanistan Reconstruction Trust Fund.