Papergate: Do Burundi elites really capture foreign aid?
The Briefing Issue #42, Wednesday, February 19, 2020
Dear Readers,
Since Monday already, there were rumors about Burundi appearing in a paper that studies corruption related to the 22 most aid-dependent countries. Today, I got finally a copy. (You can download it here)
The paper states that aid disbursement to highly aid-dependent countries like Burundi coincides with sharp increases in bank deposits in offshore financial centers.
According to the researchers, local officials steal a significant part of development aid funds and hide that money in their personal offshore accounts.
The researchers compared the World Bank’s quarterly payments with foreign deposits from the Bank for International Settlements (BIS). They found that "aid disbursements coincided in the same quarter with significant increases in the value of bank deposits in tax havens.
Specifically, for a quarter during which a country has received aid equivalent to 1% of GDP, its deposits in tax havens increase by 3.4% compared to a country that does not receive aid and there is no increase in bank deposits in countries which are not tax havens.
Source: Policy Research Working Paper 9150
The implied average leakage is around 7.5 percent: This means that for every $100 of development aid, $7.50 apparently becomes corruption profits, hidden in offshore financial centers.
The data the three authors use for their study all come from the Bank of International Settlements and from the World Bank.
The development aid that fuels corruption is actually money disbursed by two major World Bank institutions: the International Development Association and the Bank of Reconstruction and Development.
According to The Economist, the World Bank refused to release the study. Afterward, its chief economist resigned.
Reading the Paper, I was curious to know the Burundians who own offshore accounts. But unfortunately— the authors didn’t get the means to know who benefits from these deposits. But other studies, they point out, show that it is the economic elites of a country who send money to tax havens.
This raises serious concern linked to bank secrecy and private wealth management confidentiality. From a radically perspective, as the University of Lexumburg’s Expert Arnaud Bourgain notes, the scale of international tax evasion breaks the principle of equality before tax, reduces state tax revenue and, ultimately, promotes bad governance by allowing capital from corruption.
The World Bank Group considers corruption a major challenge to its twin goals of ending extreme poverty by 2030 and boosting shared prosperity for the poorest 40 percent of people in developing countries.” On its website, the World Bank acknowledges that corruption is one of the main obstacles to development.
Burundi is the 165 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International.
Source: tradingeconomics.com
According to UNDP, establishing good governance and overcoming corrupt practices remain among the major challenges facing Burundi today.
Despite the government’s commitment to a zero-tolerance policy on corruption, cases of embezzlement, mismanagement of public property and funds, and corruption continue to abound.
Supported by its development partners, Burundi is committed to the fight against corruption, starting with building the capacities of the supreme institutions of control and fight against corruption, as well as actors of civil society.
Fabrice Iranzi
Founding Editor, RegionWeek.com
Notes & Ressources
https://www.nielsjohannesen.net/
https://tradingeconomics.com/burundi/corruption-rank
IN THE REGION
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