Monday, February 28, 2011

Africa's lost billions and Mubarak's share

The international community made some moves today to seize the assets of former Egyptian President Hosni Mubarak. The Mubarak family fortune almost equals the amount of development aid Egypt received since 1981. This has many questioning how much aid money goes right into the pockets of politicians and how it can be avoided in the future.

From the Guardian, writer Jonathan Glennie asks some more questions on why so little development aid goes into development.

The current spotlight on north African despots points to one of these alternatives. Hosni Mubarak, Egypt's former president, has apparently managed to accumulate $70bn over the years. Libya's Muammar Gaddafi has something of that order as well, which makes Tunisia's Zine el-Abidine Ben Ali the region's presidential pauper with a feeble $3.5bn to his name.

Since Mubarak assumed the presidency in 1981, Egypt has received $53.6bn in official development aid (about $80bn in today's money), according to figures from the World Bank's world development indicators. In other words, for every dollar Egypt has received in aid, Mubarak has managed to acrue roughly a dollar for himself, give or take a luxury yacht or two.

There are various ways to interpret this. You could say that, given the fungibility of money (ie the ease with which it can be moved within budget lines and bank accounts), donor countries have contributed indirectly to the Mubarak family's multi-billion dollar fortune. Alternatively, you might argue that the money would have been stifled anyway and that Egypt would therefore have been even worse off without foreign aid.

Of course, the primary purpose of aid to Egypt wasn't really for development, but to bolster a president playing what was seen as an important stabilising role in the region – so in that sense, aid worked and Mubarak's personal fortune was not a primary concern.

Whatever your take, the futility of seeing so much money siphoned out to offshore accounts (or onshore in the case of London and Switzerland) must give the development finance community pause for thought. We have so far only looked at one family's wealth; what about all the other officials in Egypt taking their piece of the pie?

Clearly, countries like Mali have vastly fewer resources than Egypt but on some estimates, African political elites hold between $700-800bn outside Africa (pdf). The fact that it is outside Africa is key. If they stole it and reinvested it in their own countries, while the impact on accountability and governance would still be severe, the economic consequences would be less so – it would still contribute to growth and capital formation.

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