Capital flight from sub-Saharan Africa: linkages with external borrowing and policy options
Even as African countries became increasingly indebted, they experienced large-scale capital flight. Some of this was legitimately acquired capital fleeing economic and political uncertainties; some was illegitimately acquired wealth spirited to safer havens abroad. This paper presents new estimates of the magnitude and timing of capital flight from 33 sub-Saharan African countries from 1970 to 2004. We then analyze its determinants, including linkages to external borrowing. Our results confirm that sub-Saharan Africa is a net creditor to the rest of the world, in that the subcontinent's private external assets exceed its public external liabilities: total capital flight amounted to $443 billion (in 2004 dollars), compared to the external debt of $195 billion. Econometric analysis indicates that for every dollar in external loans to Africa in this period, roughly 60 cents flowed back out as capital flight in the same year, a finding that suggests the existence of widespread debt-fueled capital flight. The results also show a debt-overhang effect, as increases in the debt stock spur additional capital flight in later years. In addition to policies for recovery of looted wealth and repatriation of externally held assets, we discuss the need for policies to differentiate between legitimate and odious debts, both to ease current burdens on African countries and to improve international financial governance in the future.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 25 (2011)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIRA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIRA20|
When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:25:y:2011:i:2:p:149-170. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.