1 Ethiopia and 2011 Global Financial Integrity Report

The Washington, D.C.-based organization, Global Financial Integrity (GFI), released on 15 December 2011 its report on Illicit Financial Flows from Developing Countries over the Decade Ending 2009. The co-authors of this carefully designed study were Dev Kar and Sarah Freitas. You can access the report on the GFI website at www.gfintegrity.org. In a separate statement dated 5 December, which you can access at www.financialtaskforce.org/2011/12/05/illegal-ethiopian-capital-flight-skyrocketed-in-2009-tous3-26-billion/, co-author Sarah Freitas singled out Ethiopia for criticism. The piece by Freitas states: “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 commentary by Freitas concludes that “the people of Ethiopia are being bled dry” and notes that Ethiopia is a country “plagued by famine.” I agree with Freitas that the increase in 2009 in Ethiopian illicit financial outflows is a serious problem that the government of Ethiopia must confront. There is no excuse for this. At the same time, singling out Ethiopia is curious. The report itself does not single out Ethiopia. More important, this problem, and it is a problem, needs to be put in perspective. For an African country, Ethiopia has a relatively high GDP, although the per capita figure is low in part because of its large population. Of Africa’s 54 countries, Ethiopia is the second most populous after Nigeria. According to the World Bank, its real GDP in 2009 was $16.6 billion. This exceeded the GDP of all but the following eleven African countries in 2009: Angola, Kenya, Nigeria, South Africa, Sudan, Tanzania, Algeria, Egypt, Libya, Morocco and Tunisia. According to the GFI report, Ethiopia’s cumulative (2000-2009) illicit financial flows (IFF) based on conservative estimates were $7.9 billion. Ethiopia’s cumulative (2000-2009) IFF based on high-end estimates was $11.7 billion. Now what about the situation for other African states? Using the conservative GFI estimates, Ethiopia AVERAGED for the years 2000-2009 $794 million annually in IFF. Eight countries (Nigeria, Egypt, South Africa, Libya, Angola, Republic of the Congo, Côte d’Ivoire and Tunisia) had higher average IFF amounts. The only countries that in 2009 had higher GDPs than Ethiopia but did better on the average IFF ranking were Kenya, Sudan, Tanzania, Algeria and Morocco.

2 Now let’s look at GFI’s high-end estimate. Ethiopia AVERAGED for the years 20002009 $1,169 million annually in IFF. Nine countries (Nigeria, South Africa, Egypt, Libya, Angola, Algeria, Morocco, Republic of the Congo and Côte d’Ivoire) had higher average IFF amounts. The only countries that in 2009 had higher GDPs than Ethiopia but did better on the average IFF ranking were Kenya, Sudan and Tanzania. This is not to excuse the problems facing Ethiopia and the point of the statement by Sarah Freitas is to highlight the deterioration of Ethiopia’s situation in 2009. If this trend has continued into 2010 and 2011, then Ethiopia has a real problem. But the singling out of Ethiopia in what is a bad news story affecting many countries without putting it into perspective is strange, especially when a professional economist uses language such as “the people of Ethiopia are being bled dry” and Ethiopia is “plagued by famine.” Ethiopia has experienced chronic food shortages since the early 1970s; it has not experienced “famine” in recent years, including 2011 when famine only impacted parts of Somalia in the Horn of Africa.

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