[UAH] US$680 m taken out of Uganda By Powerful Politicians In Last 10 years
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EAC debt grows as $1.3bn silently siphoned out
Anti-graft activists said huge unreported flows of money are leaving the EAC countries every year, ending up in rich countries or tax havens, denying nations desperately needed tax revenues.
Posted Saturday, December 22 2012 at 18:02
In Summary
- Global Financial Integrity's estimates are based on parameters such as smuggling, cross-border movements of cash and trade mis-pricing in invoices exchanged between importers and exporters.
- Uganda leads the pack in the EAC, ranking 66th out of 143 economies surveyed, losing $680 million; Tanzania, which was ranked 86, lost $333 million; Rwanda was ranked at 106, having lost $158 million; Kenya lost an estimated $112 million; while Burundi, the region's smallest economy, lost $49 million.
- Most of the billions stashed away in foreign bank accounts by influential businessmen and powerful politicians are suspected to be proceeds from defence and security-related contracts and payment of fake debts.
Countries in the East African Community saw a combined $1.33 billion moved out of the region through illicit financial transactions over the past decade, a new report shows, raising questions over the efficiency of regulations meant to curb illegal capital outflows.
Uganda leads the pack in the EAC, ranking 66th out of 143 economies surveyed, with illicit financial transactions costing it at least $680 million over the 10-year period.
According to the Global Financial Integrity report, Tanzania, which was ranked 86, lost $333 million over the same period. Rwanda was ranked at 106, having lost $158 million. Kenya lost an estimated $112 million while Burundi, the region's smallest economy, lost $49 million.
EAC countries have been grappling with capital flight, with individuals setting up companies and accounts in tax havens.
The estimates by GFI are based on parameters such as smuggling, cross-border movements of cash and trade mis-pricing in invoices exchanged between importers and exporters.
Tax havens
The researchers said they lacked reliable figures, meaning the illicit flows from emerging markets and developing countries could be much higher.
Most of the billions stashed away in foreign bank accounts by influential businessmen and powerful politicians are suspected to be proceeds from defence and security-related contracts and payment of fake debts.
"Astronomical sums of dirty money flow out of the developing world into offshore tax havens and developed country banks," GFI director Raymond Baker said.
"Whatever strengthened financial regulations may be in place or may be contemplated, cannot yet be seen to have an effect on the continued passage of funds out of poorer countries, through the global shadow financial system, and ultimately into richer Western economies," said Mr Baker in the report titled "Illicit Financial Flows from Developing Countries."
In June, the Swiss National Bank (SNB), the central bank of Switzerland, said EAC countries had at least $1.3 billion stashed in the country. Kenya topped the list with $857 million followed by Tanzania ($178 million), Uganda ($159 million), Rwanda ($29.7 million) and Burundi ($16.7 million).
Global pressure has been rising on Switzerland to compel its banks to share information about their clients with foreign governments. It is suspected that foreigners holding illicit wealth in Swiss banks may be moving their funds out for fear of being exposed due to growing scrutiny.
The news about growing illicit outflows comes as the EAC countries battle budget deficits that have seen them go on a borrowing spree.
Kenya's public debt currently stands at 48.6 per cent of GDP, having marginally declined from the 48.8 per cent recorded in 2011.
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