Ghana loses over $3b to illicit financial flows through trade misinvoicing in 2015 – GFI

Ghana is losing several billion dollars to illicit financial flows in its trade with developed countries, according to a new report released by the Global Financial Integrity (GFI) last week.

Estimates of losses through trade misinvoicing for both imports and exports amount to $3.2 billion in 2015.

The report says in 2015 Ghana’s trade with advanced economies amounted to $9 billion.

According to the GFI, the latest in a series of reports that it issued on a roughly annual basis provides country-level estimates of the illicit financial flows of money into and out of 148 developing countries and emerging market nations as result of their trade in goods with advanced economies, as classified by the International Monetary Fund (IMF).

The GFI indicates that such flows – referred to as illicit financial flows (IFFs) are estimated over the years from 2006 to 2015, the most recent ten year period for which comprehensive data are available.

It further notes that this underscores the point that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies.

“As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world,” it said.

Ghana lost $758 million in import over-invoicing, $722 million to import under-invoicing, $117 million to export over-invoicing, $1.6 billion to export under-invoicing.

In a response to questions from, Tom Cardamone, Managing Director at the GFI said these estimates are based on official Ghana government data provided to the IMF and there are likely inaccuracies in the data.

“However, even if the actual figures were all what we are reporting here, there is massive misinvoicing in Ghana which requires immediate attention by government,” Cardamone said.

Asked how the government can deal with this, he said: “One way to address the most serious problem ($1.6 billion under-invoicing exports) would be for the Central Bank to implement GFI’s trade risk-assessment database called GFTrade – which can help the Bank identify when exports have been under-invoiced which results in a loss of hard currency into an economy.”

GFI defines IFFs as “money that is illegally earned, used or moved and which crosses an international border.” Currently, the World Bank, IMF, UN, and the OECD use a similar definition, it notes.

The report states that the top quintile (30) of countries, ranked by dollar value of illicit outflows, includes resource rich countries such as South Africa ($10.2 billion) and Nigeria ($8.3) but also European countries including Turkey ($8.4 billion), Hungary ($6.5 billion) and Poland ($3.1 billion) as well as Latin American nations Mexico ($42.9 billion), Brazil ($12.2 billion), Colombia ($7.4 billion) and Chile ($4.1 billion). Asian states in the top 30 countries of this category include Malaysia ($33.7 billion), India ($9.8 billion), Bangladesh ($5.9 billion) and the Philippines ($5.1 billion).

It indicates also that the top quintile (30) of countries, ranked by illicit outflows as a percentage of total trade with advanced economies, produces an entirely different group of countries including Mozambique (48.1%), Malawi (44.1 per cent), Zambia (43 per cent), Honduras (39.7 per cent), Namibia (38.7 per cent) and Myanmar (30.8 per cent).

The list of top 30 countries ranked by dollar value of illicit inflows (Note: illicit inflows are a type of resource curse in that a) their origin is unknown, b) inflows are invisible to governments, c) they are not taxed, and d) they often times fuel illegal activities such as drug trafficking) include a regionally diverse group including Vietnam ($22.5 billion), Thailand ($20.9 billion), and Indonesia ($15.4 billion) as well as Latin American nations Panama ($18.3 billion) and Argentina ($4.8 billion). Additional countries include Kazakhstan ($16.5 billion), Belarus ($6.1 billion) and Morocco ($3.9 billion), the report says.

By Emmanuel K. Dogbevi
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