The African Development Bank is to work with the continent’s central banks to help reduce the capital pouring out of Africa. Plans to curb illicit funding flows, bolster tax collection and exchange information to improve the monitoring of domestic financial markets are all part of the initiative. As well as higher revenues for government coffers, the partnerships are expected to extend access to global markets to more African nations, enabling them to issue long-term sovereign bonds.
“There are clearly big challenges which contribute to illicit financial flows,” noted AfDB vice president Charles Boamah.
“To boost domestic financial resources, we need major tax reforms and reforms in the global capital markets.”
He added that while every opportunity to help African nations raise finances locally is important, success is underscored by measures to improve tax collection and boost savings.
The bank also pledged it would coordinate with central banks on joint interventions to support the effective management of foreign currency sent home by African expatriates and migrant workers.
Projects to help governments deal with currency risks and stability, associated with huge losses suffered by major producers and exporters, are already underway.
The slump in global oil prices has led to severe shortages of foreign currency in countries like Nigeria, prompting the naira to tank and making acquiring the imports the country relies upon much more difficult, in turn pushing up prices. Boamah said the bank was prepared to work with central banks on collective instruments to cover currency risk, measures to enhance financial technology and using the AfDB’s lending to the agricultural sector to further enhance the raising of local funds for development.
Speaking alongside Boamah, Jules Bondombe, vice governor of the Bank of the Democratic Republic of Congo, welcomed the initiative, stating that central banks are currently failing to stop large sums of money leaving the continent through illicit transactions.
It is estimated that between at least $30bn and $60bn flows out of Africa illegally every year.
Bondombe highlighted that the DRC is even “creating avenues for the flight of capital”, granting tax incentives to the mining companies its economy is largely dependent on. – PFI