As African leaders are meeting in Addis Ababa to discuss growing threats from extremist groups, instability, and poverty, Heads of State are urged to give priority to a growing threat to their economies: illicit financial flows.
Tomorrow, AU Heads of State will review a report produced by the AU High Level Panel on Illicit Financial Flows, which has been chaired by Thabo Mbeki. The new report looks at the dire consequences of illicit financial outflows from Africa, estimated at US$50 billion per year, according to Global Financial Integrity (GFI) and the African Development Bank (AfDB).
“The fact that our leaders are devoting a portion of their very full session to illicit financial flows underlines just how serious this issue is,” said Savior Mwambwa, Policy and Advocacy Manager for the Tax Justice Network Africa. “Illicit financial flows are not only an extreme hindrance to Africa’s development; they are growing rapidly every year.”
A new study from GFI notes that illicit financial flows are growing at an average rate of 9.4% per year. In sub-Saharan Africa alone, illicit financial flows amounted to 5.5% of the region’s total gross domestic product.
“The AU High Level Panel report will add African regional details to the global problem of illicit financial flows, and how best to fix it,” said Tigere Chagutah of Oxfam. “We urge AU Heads of State to move quickly to adopt the recommendations contained in the report, in order to reap the benefits of new-found tax revenue that can address poverty and economic stagnation.”
“It’s important to note that this isn’t just an African problem; much of the money that leaves Africa illicitly by way of corporate tax evasion or corruption ends up in banks within Europe and the United States,” said Henry Malumo of Action Aid International. “It’s vital that global accounting and tax enforcement policies being established by the G20 and other international bodies fully encompass the needs and context of Africa.”
The report comes at a timely moment, as policy makers are meeting in New York this week to discuss the United Nations Financing for Development (FfD) agenda. Curbing illicit financial flows could jumpstart the ability of African nations to recoup tax revenue, and enable governments to better fund programs of sustainable development.
The report from the High Level Panel on Illicit Financial Flows will be presented to African leaders on 31st January and will be publicly released at an event on 1st February in Addis Abeba.
A consortium of CSOs are asking AU Heads of States to extend the High Level Panel’s mandate and fully resource the Panel as a standing committee or an AU agency that will oversee and monitor the implementation of the recommendations of the High Level Panel’s report .
Cover illustration: A graph showing illicit flows that more than doubled from 2002 to 2006. The two lines correspond with least and most conservative estimates.
Source: Oxfam International
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