Ethiopia – Alarming illicit financial outflows: $26 billion stolen in 10 years

Ethiopia feeling pinch of illicit financial outflows

By Harun Varlı – Feb 17, 2016

-State creates new intelligence unit after reports that $26 billion left country in 10 years

ADDIS ABABA, Ethiopia – Alarmed by increasing illicit financial outflows, Ethiopia says it is taking new counter measures including installing advanced CCTV cameras at airports and establishing a special intelligence unit.

A report released by Global Financial Intelligence last January revealed that $26 billion left the country unlawfully in many forms over between 2004 and 2013 with Ethiopia continuing to bleed an average of $2 billion every year.

However, according to the report, a staggering $19.7 billion of the total money loss left through misinvoicing, mainly by importers who reported undervalued sums while exporters overvalue their transactions.

“The problem [illicit outflow] is there, and it is a huge challenge,” Ethiopian Customs and Revenue Authority Deputy Director General Alebachew Niguisse told Anadolu Agency.

But Niguisse refuses to accept the report and is skeptical about its accuracy.

He admitted that there would be a sum of money leaving out of sight but said there is a “limitation of information, a lack of experience and skill in parts of custom employees to understand the magnitude of the problem and the exact amount of money being taken out of the country”.

He said a major cause of capital flight — trade misinvoicing by importers and exporters dealing with their foreign partners — has been investigated by a newly developed Ethiopian Custom Valuation System (ECVS), a system which calculates the local price for goods based on international market price.

“When we know the international price tag of certain goods, we go down to the market and check the price against the actual price set by the importer or wholesaler and take corrective measures,” he said.

“Intelligence officers investigate transactions to track down on culprits of misinvoicing,” he added. “Thanks to improvised use of detecting technologies, close to $4 million outbound illicit money was intercepted at airport and customs checkpoints over the past six months.”

He also said the government is further reinforcing a 2009 national bank proclamation that stipulates that an individual cannot leave or enter the country with more than $3,000 or equivalent value of other currency in his or her possession.

-‘Black market’

Abebe Shiferraw, a lecturer in commerce at Addis Ababa University said that illegal currency exchange corners in the capital are contributing to increasing illicit financial outflows and business people are always on the demand side.

If they got the currency so easily, ways for them to take it out would not be that difficult, he opined.

Nearly four decades ago the value of foreign currency against Ethiopian birr was fixed and set by national bank, he said, adding that these days the black market exchange rate is considerably higher than the rate of banks.

One of the reasons why businesspeople are opting for the black market may be restricted access to foreign currency at the National Bank of Ethiopia, according to Shiferraw.

To avert this problem, he said that the government should take tightened measures on culprits be they importers, exporters or individuals. He added that the intent of importers to evade tax by under-invoicing caused greater capital flight.

Currently revenue from tax contributes 13 percent to the country’s GDP.

-Africa bleeding $50 billion annually

CEO of the United Nations Economic Commission for Africa (UNECA) Dr. Carlos Lopes told Anadolu Agency last July that illicit outflow was the major detrimental factor that brought a funding gap to Africa’s 15-year Sustainable Development Goals (SDGs).

According to him, the funding gap forces the continent to look for $52 billion in aid.

A report launched in Ethiopia in Jan. 2015 by an African Union Commission’s High-Level Panel on Illicit Financial Flows from Africa — chaired by former South African president Thabo Mbeki — shows Africa lost $50 billion annually between the years 2000 and 2008.

This was in the form of illicit flow which exceeded African development assistance of $46.1 billion earned in the year 2012.

It was announced on Friday by the UNECA that Mbeki is set to visit the United States after African leaders requested the panel make the problem an international concern.

Mbeki will meet U.S. officials, members of the International Monetary Fund and the World Bank, plus diplomats.

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Posted by on February 17, 2016. Filed under FEATURED. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

2 Responses to Ethiopia – Alarming illicit financial outflows: $26 billion stolen in 10 years

  1. Gebressilasie Abem

    February 17, 2016 at 12:58 PM

    Hi Harun after reading your well researched and timly article I am unable to keep silent.
    See the paradox of this poorest nation with in 10 years the country lost around 26 Billion USD right now More than 10 Milion Ethiopians are starved this famine is not merely a result of the lack of rainfall rather it occurs three times is the last 25 years due to the systematic failure of ethnic apartide regim of ethiopia (TPLF).
    This is not Just only related with under invoicing in import and export the lion share was taken by top military officials of the ruling party.
    Several milions dollars simply taken by individuals let me show you one incident
    There is no Bank in Ethiopia? Yesterday the British Judge ask the Ethiopian Ruling party (TPLF) member after he replay to the court that his money captured by police while arrivimg Gatwick Airport on Aug.17/2015 accused for having morethan 5 million USD and Golds in his suit case to the judge the money belongs to the Ethiopian government and he is there for govermental purchase. It is not funny that is why currently morethan 20 milion peoples are in need of emergency food.
    Illicit Financial Outflows from Ethiopia Nearly Doubled .
    Corruption, kickbacks and bribery are on the rise in Ethiopia, Global Financial Integrity 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. More worrying is that the study shows Ethiopia’s losses due to illicit capital flows are on the rise. In 2009, illicit money leaving the economy totaled US$3.26 billion, which is double the amount in each of the two previous years.
    The report, titled Illicit Financial Flows from Developing Countries over the Decade Ending 2009, shows that the vast majority of the rise in illicit financial flows is a result of increased corruption, kickbacks, and bribery while the remainder stems from trade mispricing.
    Ethiopia is one of the poorest countries on planet. Plagued by famine, war, and political oppression, 38.9% of Ethiopians live in poverty, and life expectancy in 2009 was just 58 years. In 2008, Ethiopia received US$829 million in official development assistance, but this was swamped by the massive illicit outflows. The scope of Ethiopia’s capital flight is so severe that our conservative US$3.26 billion estimate greatly exceeds the US$2 billion value of Ethiopia’s total exports in 2009.

    The people of Ethiopia are being bled dry. No matter how hard they try to fight their way out of absolute destitution and poverty, they will be swimming upstream against the current of illicit capital leakage. The global shadow financial system happily absorbs money that corrupt public officials, tax evaders, and abusive multi-national corporations siphon away from the Ethiopian people.

    Gebressilasie Abem

  2. Neba

    July 31, 2016 at 9:27 AM

    The international concerned body , like IMF , WORLD BANK , … Should take economical , and political stratejek measure to the country , specialy the ruling government, bs most of the flight operators and those who are doing this are ministers , Their relatives , wife’s , children’s , business partneres , of the Regime officials , the people of Ethiopia know , understand , who is doing this but any body can’t rise any costion , if u do so u will find yourself in jail without reason , in addition you will aligned with the tererist group the country( in Ethiopia being opposition party is a terrorists )