Illicit Financial Flows (IFFs) are increasingly being recognised as a key driver of Africa’s mounting debt crisis, with the continent losing an estimated US$80 to US$90 billion annually through such practices.
Zambia, specifically, the United States Ambassador Michael Gonzales, this month said the country’s economic stability is under threat, with up to US$3 billion lost each year due to IFFs.
This alarming figure represents 20 percent of Zambia’s Gross Domestic Product (GDP), posing a significant challenge to the country’s development and economic growth.
Last week, Executive Director of the African Forum and Network on Debt and Development (AFRODAD) Jason Rosario Braganza, underscored the devastating impact of IFFs and unlawful business practices on Africa’s economies.
Mr Braganza was speaking at a press briefing on the side-lines of the 11th Session of the Africa Regional Forum on Sustainable Development in Kampala, Uganda.
The press briefing focused on financing sustainable development, centred around the theme: “Unlocking Africa’s Sustainable Development through Innovative Financing and Debt Reform.”
“These losses significantly contribute to budget deficits across the continent, which in turn compel governments to resort to borrowing,” Mr Braganza said.
Mr Braganza stressed that addressing IFFs is crucial to halting the progression of the debt crisis.
“Every year, Africa is losing close to US$80 billion. That’s money governments must recover through taxation, often through regressive measures that disproportionately affect the poor,” he noted.
“Addressing this issue requires both targeted national strategies and a coordinated continental response, some of which are already proposed in the High-Level Panel report on IFFs.”
He pointed to the extractive and natural resources sectors as particularly vulnerable, noting that the true value of these resources is frequently underestimated.
“The undervaluation begins at the point of discovery and extraction and shifts to overvaluation when resources are exported, facilitating capital flight,” he explained.
Mr Braganza also highlighted the role of multinational corporations in perpetuating IFFs through aggressive tax planning and profit shifting.
By establishing subsidiaries in low-tax jurisdictions – commonly known as tax havens – many firms avoid paying corporate taxes in Africa, where rates typically range from 25 to 30 percent.
“These companies transfer profits to jurisdictions with near-zero tax rates, effectively stripping African nations of crucial revenue,” he said. “This is a core mechanism of illicit financial flows that urgently needs to be addressed.”
As African countries continue to grapple with debt burdens, the call to confront IFFs grows louder.
Experts argue that reclaiming even a fraction of the billions lost annually could significantly ease fiscal pressure and pave the way for more sustainable development.
Discover more from PressNewsAgency
Subscribe to get the latest posts sent to your email.