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African Development Bank Group

ILLICIT FINANCIAL FLOWS AND THE PROBLEM OF NET RESOURCE TRANSFERS FROM AFRICA ( 1980 – 2009). DEVELOPMENY RESEARCH DEPARTMENT PRESENTATION AT AERC SENIOR SEMINAR ADDIS ABABA 9-10 April 2014. African Development Bank Group. Outline of the Presentation. Context S etting

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African Development Bank Group

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  1. ILLICIT FINANCIAL FLOWS AND THE PROBLEM OF NET RESOURCE TRANSFERS FROM AFRICA (1980 – 2009) • DEVELOPMENY RESEARCH DEPARTMENT • PRESENTATION AT AERC SENIOR SEMINAR • ADDIS ABABA • 9-10 April 2014 African Development Bank Group

  2. Outline of the Presentation • Context Setting • Data and key definitions • Key Results • Policy Recommendations

  3. 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.

  4. 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

  5. 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

  6. Key Result – regardless of measure, Africa was net creditor to the world

  7. Key Results – Illicit financial flows main driver behind net drain on Africa

  8. Key Results – Illicit financial flows varied by region

  9. Key Results – Fuel exporters highest Illicit Financial flows (as single category)

  10. 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.

  11. Policy Recommendations 1 • Restricting absorption of illicit financial • Promotion of transparency in the financial system • Automatic exchange of information

  12. Policy Recommendations - 2 2. Curtailing the illicit financial outflows from Africa • Resource-rich countries • Resource-poor countries

  13. 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.

  14. For further information please contact Jennifer Mbabazi Moyo (j.moyo@afdb.org) Dev Kar (dkar@gfip.org) or Sarah Freitas(sfreitas@gfip.org) THANK YOU

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