Fighting capital flight in Ethiopia

Abstract

There exists no generally accepted definition of the term “capital flight”. For the purpose of this article capital flight refers to Illegal capital flight, also known as illicit financial flows, which disappear from any record in the country of origin. Moreover earnings on the stock of illegal capital flight outside of a country generally do not return to the country of origin. In this regard, capital flight is creating a serious development challenges for most African economies. Ethiopia is not exceptional for this impact. The analysis of this article led to two major findings. First, African countries have become increasingly indebted; they experienced large scale capital flight. According to studies a group of 33 SSA (Sub- Saharan Africa) countries has lost a total of $814 billion dollars from 1970 to 2010. This exceeds the amount of official development aid ($659 billion) and foreign direct investment ($306 billion) received by these countries. Oil-rich countries account for 72 percent of the total capital flight from the sub region ($591 billion). Secondly, an upcoming report by Global Financial Integrity 2009, finds that Ethiopia, which has a per-capita GDP of just US$365, lost US$11.7 billion to illicit financial outflows between 2000 and 2009. In 2009, illicit money leaving the economy totaled US$3.26 billion, which is double the amount in each of the two previous years. In conclusion, currently the impact of capital flight for Ethiopia economy is becoming very severe. So, Ethiopian government effort to promoting economic development must be go hand in hand with fighting capital flight

Keywords: Capital Flight, Illicit Financial Flows, Global Financial Integrity, Africa, Ethiopia