Illicit Financial Flows from Africa: Hidden Resource for Development
This paper presents an analysis of the volume and pattern of illicit financial flows from African countries over a 39-year period from 1970 to 2008. The paper makes a contribution given that existing research on long-term trends in the pattern of illicit flows from African countries is rather scanty. The classification of African countries used in this paper differs from that in the IMF’s World Economic Outlook; here, Egypt and Libya (members of the African Union) are included under North Africa while the group of CFA Franc countries is distributed along a geographical basis. The paper presents estimates of illicit financial flows from Africa and its various regions and economic groupings during the 1970s, 1980s, 1990s, and the most recent nine-year period 2000-2008 for which data are available. We find that illicit flows have not only grown on a decennial basis, cumulatively they have come to far exceed the continent’s outstanding external debt at the end of 2008. The statistical analysis of long-term trends brings out some interesting regional disparities in the pattern and growth of such flows. Utilizing the World Bank Residual model and the IMF Direction of Trade Statistics, illicit outflows from Africa across the 39-year period are estimated at US$854 billion. The authors point out that data limitation significantly understates the problem. Making various adjustments to the estimate suggests that the volume of illicit flows over the period 1970 to 2008 may be closer to US$1.8 trillion. We argue that this staggering loss of capital seriously hampers Africa’s efforts at poverty alleviation and economic development.