By William Kumwembe:
Malawi, like most African economies, remains susceptible to shocks of illicit financial flows (IFFs) due to lack of political will and enabling policies to help curb the vice.
This is the message from the African Forum and Network on Debt and Development (Afrodad), a regional civil society organisation lobbying for and advocating debt cancellation and addressing other debt-related issues.
Illicit financial flows are illegal movements of money or capital from one country to another.
The Global Financial Integrity estimated that Malawi lost about $278 million (an equivalent of K204.3 billion) due to forex externalisation, one of the forms of IFF.
Afrodad Executive Director, Fanwell Bokosi, said illicit financial flows continue draining resources, including tax revenues, and hinder the level of savings required to address key development issues.
He said, while illicit financial flows are difficult to estimate, impact of the resource lost is far-searching.
“The effect is that they [the IFFs] take away money that could have otherwise been used for deferent reasons; they also encourage criminal activities.
“We need to look at illicit financial flows as a lost opportunity because, when a government cannot raise enough money, it would either increase taxes and the people that are taxed are not the multinational corporations or big companies but ordinary people,” Bokosi said.
He said, eventual l y, the government would be forced to borrow locally and internationally, and “those loans come with high interests.”
Finance Professor The Malawi Polytechnic, James Kamwachale Khomba, recently did a study on innovative financing of education in Malawi which highlighted illicit financial flows among major licking points for resources that would help develop the economy.
In a telephone interview Tuesday, Khomba said the economy has been losing billions of kwacha through IFFs.
“The main impact is that it reduces the [amount of] money that the government can collect and as a result various sectors would suffer,” Khomba said.
He said the onus was on authorities to create deliberate policies to curb the vice.