1 trillion taken from Africa illegally since 1970

A new study says that 1 trillion British pounds has flown out of Africa illegally since 1970. This is the claim made by a new study from the Global Financial Integrity. This is 1 trillion pounds that could have been used instead for debt reduction or poverty fighting. Instead the money was taken in corruption and graft, tax evasion, and the illegal drug trade.

From the Guardian, writer David Smith tells us more about the study, and how it huts the poor in Africa.

Illicit outflows from Africa grew at an average 11.9% a year over the four decades. Some of this is attributed to oil price rises and increased opportunities to mis-price trade.

"It is not unreasonable to estimate total illicit outflows from the continent across the 39 years at some $1.8tn," writes Raymond Baker, director of the GFI.

"This massive flow of illicit money out of Africa is facilitated by a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mis-pricing and money laundering techniques."

This capital loss has a devastating effect on development and attempts to alleviate poverty, the report says. Even by a more conservative estimate, using accepted economic models from the World Bank and the IMF, Africa has lost $854bn in cumulative capital flight between 1970 and 2008, the report notes. This would be enough to not only wipe out its 2008 external debt of $250bn but potentially leave $600bn for poverty alleviation and economic growth.

"Instead, cumulative illicit flows from the continent increased from about $57bn in the decade of the 1970s to $437bn over the nine years 2000-2008."

Africa lost around $29bn a year between 1970 and 2008, of which the Sub-Saharan region accounted for $22bn. On average, fuel exporters including Nigeria lost capital at the rate of nearly $10bn a year. "The impact of this structure and the funds it shifts out of Africa is staggering. It drains hard currency reserves, heightens inflation, reduces tax collection, cancels investment, and undermines free trade. It has its greatest impact on those at the bottom of income scales in their countries, removing resources that could otherwise be used for poverty alleviation and economic growth."