Jomo Kwame Sundaram, Jan 17 2024 (IPS) – World Bank aid encourages governments to enable illicit financial outflows to offshore tax havens by reducing capital controls, thus draining precious foreign exchange and government resources.
Aiding elite wealth
Aid disbursements to highly aid-dependent countries coincide with sharp increases in bank deposits in offshore financial centres known for banking secrecy and private wealth management.
Using Bank for International Settlements (BIS) data, Jørgen Juel Andersen, Niels Johannesen and Bob Rijkers found trends suggesting wealth accumulation abroad by national elites coinciding with World Bank aid disbursements.
Capital outflows follow aid inflows apparently captured by ruling politicians, bureaucrats and their cronies. In the 22 most World Bank aid-dependent countries, aid disbursements coincide “with increased deposits in foreign bank accounts in tax havens”.
National elites capture World Bank aid to poor developing countries. Such ‘leakages’ came to 7.5% of inflows, rising with aid-reliance. Earlier, ‘petroleum rent’ leakages to secretive offshore tax havens were estimated at 15%.
A modest share of all aid, World Bank disbursements averaged over 2% of low-income countries’ GDPs yearly. For Bank disbursements of at least 1% of GDP, leakages from 46 countries increased deposits in havens by 3.4%. But at a 3% of GDP threshold, leakages from seven countries rose to 15%!
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