A new report by Global Financial Integrity (GFI) has revealed that Ethiopia lost an estimated $24.6 billion to trade-related illicit financial flows between 2013 and 2022.
The Washington-based organization in its report issued Friday placed Ethiopia as one of the ten most affected countries in sub-Saharan African region.
The organization’s regional study, Trade-Related Illicit Financial Flows in Africa, 2013–2022, uses UN Com. trade data and a “mirror trade” methodology to identify trade value gaps — discrepancies between what countries report as exports and what their trading partners record as imports, and vice versa.
These gaps are widely used as a proxy for trade misinvoicing, a practice involving the deliberate under- or over-statement of trade values to enable capital flight, tax evasion or other illicit activities.
Ethiopia ranked tenth in cumulative trade value gaps with global trading partners over the decade. It trailed South Africa, which recorded 478.0 billion US dollar in gaps, followed by Nigeria (77.7 billion US dollar), Ghana (54.1 billion US dollar), Côte d’Ivoire (47.7 billion US dollar), Kenya (47.5 billion US dollar), Tanzania (35.5 billion US dollar), Zambia (35.8 billion US dollar), Angola (35.4 billion US dollar) and Senegal (25.5 billion US dollar).
According to the report, countries with large extractive sectors dominate the list. “Resource-rich countries account for the highest trade value gaps,” the study notes, consistent with earlier findings that Africa’s largest economies and commodities exporters contribute disproportionately to illicit capital outflows.
Across sub-Saharan Africa, total trade value gaps reached 152.9 billion US dollar in 2022, the highest level recorded in the past decade, up from 139.8 billion US dollar in 2021. The regional average over the ten-year period stood at $113.0 billion, with no sustained decline observed.
“Following a modest decline in 2020, trade value gaps rose sharply in subsequent years,” the report states, pointing to the interaction of structural weaknesses with pandemic-related disruptions, commodity price volatility and shifting global trade patterns.
While South Africa accounted for forty-two percent of the region’s cumulative trade-related gaps, smaller economies were more severely affected relative to their overall trade volumes. Gambia recorded the highest ratio, with gaps equivalent to forty-four percent of total trade, followed by Gabon (twenty-nine percent), Tanzania (twenty-eight percent) and Ghana (twenty-eight percent). On average, the ten most affected countries lost twenty-eight percent of their total trade value, compared with a regional average of twenty-four percent.
The report links illicit financial flows directly to development constraints. Citing UNCTAD estimates, it notes that Africa loses about 88.6 billion US dollar annually to illicit outflows — almost equal to the continent’s combined annual inflows of official development assistance and foreign direct investment. As a result, Africa has effectively become a net creditor to the rest of the world, with cumulative illicit outflows exceeding its external debt stock in recent years.
Public spending is particularly affected. Countries with high illicit financial flows spend, on average, twenty-five percent less on health and fifty-eight percent less on education than comparable countries with lower levels of illicit outflows, the report says. Lost revenues also increase reliance on borrowing, reinforcing fiscal stress and weakening service delivery.
“No country appears to have made significant progress in reducing trade value gaps during the period,” it concludes.
MG/abj/APA