Government asked to tackle illicit financial flows to drive economic growth

Curbing illicit financial flows should be top of the policy agenda as the government seeks to reboot the economy in the post-pandemic era, the immediate past Dean of the University of Ghana Business School, Prof. Joshua Yindenaba Abor, has suggested.

“You have huge tax revenue that would have come into the economy, but it is transferred elsewhere illegally through illicit flows, misinvoicing, overstating management fees, among others,” said Prof. Abor in an interview.

The interview followed a lecture given by Prof. Abor at the SD Dombo University of Business and Integrated Development Studies in Wa on the topic, “COVID-19 pandemic and Africa’s financial systems: How do we reform the post-COVID-19 financial systems?”

According to the Thabo Mbeki High Level Panel report on illicit financial flows from Africa, the continent loses in excess of US$50bn a year to illicit flows. The report further stated that over the past 50 years, Africa has lost more than US$1tn to illicit flows, equivalent to all the official development assistance received during the same period.

Prof. Abor underscored the need for foreign capital to complement domestic resources, adding that government should broaden the tax net, minimise tax exemptions, and focus on more strategic sectors.

He also recommended encouraging financial market development by ensuring the existence of effective market infrastructure, encouraging institutional investors, attracting private capital flows as well as encouraging international remittance flows.

He further called for an improvement in institutional quality and the integration of stock markets. He added that encouraging natural resource revenue retention in the domestic economy to improve financial market activity would also help to boost the economy.