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1African Development Bank Group
DEVELOPMENY RESEARCH DEPARTMENT
PRESENTATION AT AERC SENIOR SEMINAR ADDIS ABABA9-10 April 2014
ILLICIT FINANCIAL FLOWS AND THE PROBLEM OF NET RESOURCE TRANSFERS FROM AFRICA (1980 – 2009)
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Outline of the Presentation
Context Setting
Data and key definitions
Key Results
Policy Recommendations
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Context Setting
• Africa could finance bulk of its development needs from own resources.
• Decline of external financing expected to continue.
• Significant financial outflows, both recorded and unrecorded, continue to make domestic financing seriously inadequate.
• Growing demand for more transparent processes for resource rents.
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Data and key definitions
• Use IMF and World Bank Data as inputs in models
• Data availability dictates choice of time period
• Illicit financial flows estimated using World Bank Residual measure adjusted for trade misinvoicing
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Data and key definitions
• NRT = Net Resource Transfers• NRecT = Net Recorded Transfers (Broad and narrow)• IFF = Illicit Financial Flows
– Normalized = Conservative or lower estimates– Nonnormalized = Robust or higher estimates
NRT = NRecT – IFF
4 resulting measures of NRT
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Key Result – regardless of measure, Africa was net creditor to the world
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Key Results – Illicit financial flows main driver behind net drain on Africa
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Key Results – Illicit financial flows varied by region
Cumulative Normalized IFFs (in millions of 2005 U.S dollars)
Region 1980s 1990s 2000s 1980-2009
Africa 361,621 298,155 555,279 1,215,055
North Africa 113, 397 105,567 149,908 368,873
Sub-Saharan 248,224 192,587 405,371 846,183
Horn of Africa 8,745 3,308 11,987 24,040
Great Lakes 14,244 5,702 13,091 33,037
Southern 106,805 86,501 136,713 330,019
West and Central 118,430 97,076 243,580 459,086
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Key Results – Fuel exporters highest Illicit Financial flows (as single category)
Region 1980s 1990s 2000s 1980-2009 Fuel 92,889 117,484 284,811 495,184Non-fuel 34,275 27,970 28,499 90,744Others 234,457 152,701 241,970 629,127Total 361,621 298,155 555,279 1,215,055
HPIC 112,179 69,453 119,897 301,529
Cumulative Normalized IFFs
(in millions of 2005 U.S dollars)
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Summary of Main results - IFFs
• Illicit financial flows (IFFs) were the main driving force behind the net drain of resources from Africa.
• Africa lost about USD 1.2 -1.3 trillion in real terms over the 30 year period, 1980-2009.
• Outflows dominated by outflows from SSA led by West and Central Africa.
• Fuel exporters dominated outflows.
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Policy Recommendations 1
1. Restricting absorption of illicit financial
– Promotion of transparency in the financial system
– Automatic exchange of information
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Policy Recommendations - 2
2. Curtailing the illicit financial outflows from Africa
– Resource-rich countries
– Resource-poor countries
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Policy Recommendations -3
3. Policies to boost net recorded transfers by improving the business climate
– Strengthen rule of law and other aspects of governance to improve the business climate.
– Business-friendly measures to improve infrastructure and corporate taxation and governance.
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For further information please contact Jennifer Mbabazi Moyo ([email protected])
Dev Kar ([email protected]) or Sarah Freitas([email protected])
THANK YOU
