The African Development Bank (AfDB) has stated that Africa loses approximately $1.6 billion every day due to illicit financial flows and profit shifting by multinational corporations operating on the continent.
This information was shared by AfDB’s Chief Economist, Kevin Urama, in a special interview with The PUNCH.
Illicit financial flows, as explained by the International Monetary Fund (IMF), refer to the illegal transfer of money across countries. This can happen through corruption, smuggling, tax evasion, or funding terrorism. The IMF has been working for a long time to stop these harmful activities, even when some of these flows take advantage of legal gaps instead of directly breaking the law.
Urama pointed out the huge financial losses Africa is dealing with, noting that the money leaving the continent is much more than what it receives from foreign investments and other external funds.
“There are many deep-rooted problems that make corruption a major issue in Africa,” Urama explained. “The continent loses around $248 billion each year due to corruption. Adding illicit financial flows of over $90 billion and profit shifting by multinationals, the total annual loss climbs to $275 billion. When we factor in other traceable losses, Africa loses about $587 billion annually—that’s $1.61 billion every day.”
Urama criticized the current approach of focusing too much on attracting foreign investments and other incoming funds while ignoring the need to stop the huge financial losses. “In 2022, the total money coming in from foreign investments, aid, financial markets, and remittances was $174.5 billion. This is less than one-third of the $600 billion lost every year. Instead of just focusing on bringing in money, we should prioritize stopping these losses,” he said.
To tackle this problem, Urama stressed the need for stronger institutions and better systems to hold people accountable. He mentioned the importance of giving public officials the right tools, rules, policies, and technologies to track and stop financial leaks.
He also talked about the role of the African Development Bank (AfDB) in promoting transparency and accountability. “We’ve created a Public Service Delivery Index for Africa to measure the quantity and quality of public services delivered in key sectors,” he explained.
