Bangladesh ranks 26th in terms of illicit financial outflows, which mainly stem from tax evasion, crime and corruption, with a whopping $5.6bn siphoned out of every year during 2004-2013, said US-based think-tank’s report said yesterday.
This is around 15% of the country’s national budget and almost 3% of the gross domestic product.
According to the report titled “Illicit Financial Flows from Developing Countries: 2004-2013,” a record $1.1tn flowed illicitly out of developing and emerging economies in 2013.
“Political uncertainty, corruption and weak internal investment climate are the main reasons behind the high illicit outflow,” World Bank lead economist Zahid Hussain told the Dhaka Tribune.
“The bottom reason is corruption. Unless corruption is curbed, illicit financial flow will continue,” he said.
In the previous year’s report, Bangladesh ranked 47th among 150 developing countries.
“I think this year Bangladesh’s rank went 21 notches up because of some changes brought in estimating illicit financial flow. However, the new method has better reflection in ill-gotten money than in the past,” said Hussain.
“If you look at 2010 and 2013, siphoning increased by around 80% when there was political instability in the country.”
In all, during the 2004-2014 decade, more than $56bn went out of Bangladesh, estimates Global Financial Integrity (GFI), the US think tank.
In South Asia, Bangladesh ranks 2nd, after 4th India ($51bn), 53rd Sri Lanka ($2bn), 86th Nepal ($567m), 109th Pakistan ($192m) and 132nd Bhutan ($40m). China tops the list with $139bn, followed by Russia ($104bn) and Mexico ($52.8bn).
Illicit financial outflows are measured using two sources – deliberate trade mis-invoicing and leakage balance of payment or hot money.
During the period, Bangladesh’s annual average money transfer through mis-invoicing hit about $50bn; through hot money, average annual transfer was $6.8bn, says the report.
The study shows that illicit financial flows first surpassed $1tn in 2011 and have grown to $1.1tn in 2013, marking a dramatic increase from 2004, when illicit outflows totalled just $465.3bn.
Asia has the fastest growth rate in illicit financial flows from 2004 to 2003, registering an average annual increase of 8.6% over the period.
“This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world’s developing and emerging economies,” said GFI President Raymond Baker, a longtime authority on financial crime.
“This year at the UN, the mantra of ‘trillions not billions’ was continuously used to indicate the amount of funds needed to reach the Sustainable Development Goals. Significantly curtailing illicit flows is central to that effort,” he said.
Noting that Sustainable Development Goals (SDGs) call on countries to significantly reduce illicit financial flows by 2030, the report said the international community has not yet agreed on goal indicators, the technical measurements to provide baselines and track progress made on underlying targets and subsequently the overall SDGs.
In its report, GFI recommends that world leaders should focus on curbing opacity in the global financial system, which facilitates these outflows.