In August, Karzai ordered all security firms to disband before the end of the year. This week, however, the US-backed Karzai said some of the firms could operate to provide security for reconstruction projects.
"Deals under the name of private security companies are cut in the hallways of American government buildings. It involves 1.5 billion dollars," he said.
"The money, 1.5 billion dollars, is being distributed there (in the United States) on Blackwater and this and that," he said, referring to the giant US-based security firm now known as Xe.
It gained notoriety in Iraq after guards protecting a convoy opened fire in a busy Baghdad square in September 2007, killing as many as 17 civilians.
Last month two former Blackwater security guards went on trial in the United States, accused of the murder of two Afghan citizens in a 2009 shooting.
Speaking at a press conference in Kabul with visiting Tajikistan President Emomali Rahmon, Karzai said private security firms "cause the deaths of Afghan children, and they cause blasts and terrorism".
"In fact we don't yet know how many of these blasts are by Taliban and how many are carried out by them (security companies)," he said.
Remnants of the Taliban are leading an insurgency of guerrilla and bomb attacks aimed at toppling Karzai's administration.
He said disbanding security firms was in Afghanistan's interest but admitted being under pressure from "the international community" to step back from dissolving all firms operating in the country. He did not give details.
Karzai reiterated that firms providing protection for reconstruction would be allowed to operate.
Private security firms in Afghanistan are employed by US and NATO forces, the Pentagon, the United Nations, aid and non-governmental organisations, embassies and foreign media.
They employ about 26,000 registered personnel, though experts say the number could be as high as 40,000. Most Afghan firms are operating as sub-contractors under mostly US companies.
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