World Bank Headquarters in Washington, London. Money loaned to Kenya by the global financial institution was channeled to offshore accounts by politicians in the Moi & Kibaki eras.

Just one day after the World Bank approved a Ksh107 billion (USD1 billion) concessional loan to help Kenya battle the COVID-19 Pandemic, The Nation on Thursday reported that Kenya’s elite siphoned Ksh328 billion borrowed from the Washington headquartered financial institution to their offshore accounts.

A report authored by World Bank researchers Jørgen Juel Andersen, Niels Johannesen and Bob Rijkers dubbed Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts published in February 2020 shows that the Ksh328 billion was funneled to the offshore accounts between 1990 and 2010 during the tenures of Presidents Daniel Arap Moi and Mwai Kibaki.

The report sought to find out the effectiveness of foreign aid with the study delving deep into how money borrowed from concessional lenders is absorbed into domestic economies, how much it stimulates growth and reduces poverty.

The report’s findings hinge on data on foreign bank deposits from the Locational Banking Statistics of the Bank for International Settlements (BIS) which has information on the value of bank deposits in 43 financial centers owned by residents of around 200 countries including Kenya, Uganda, and Tanzania.

Theft

Jordan topped the list globally with over Sh350 billion of stolen aid money followed by Kenya.

Ivory Coast was third at Sh128 billion, while the Democratic Republic of Congo was fourth with Sh110 billion of aid money looted.

By the same token, some Ksh61.8 billion was siphoned from Tanzania while another Ksh28,5 billion money earmarked to help Tanzanians never saw the light of the day.

Some Ksh20 billion was siphoned from Rwanda, while Burundi’s ruling elite looted Ksh12.9 billion.

According to the authors of the report, the money was stashed in tax havens such as the Cayman Islands, Switzerland, Belgium and Singapore whose legal systems place a premium on client secrecy and protection of assets .

For instance, some USD872.8 million (Cayman Islands), USD455.5 million (Switzerland), USD295.7 million (Belgium) and USD224.8 million (Singapore) were deposited in non- bank accounts in the four quarters of 2010.

“We document that aid disbursements to the most aid-dependent countries coincide with significant increases in deposits held in offshore financial centers known for bank secrecy and private wealth management. Aid capture by ruling politicians, bureaucrats, and their cronies is consistent with the totality of observed patterns: it can explain why aid does not trigger flows to non-havens, why the capital outflows occur precisely in the same quarter as the aid inflows and why the estimated effects are larger for more corrupt countries,”

World Bank researchers

“A concern often voiced by skeptics is that aid may be captured by economic and political elites. The fact that many of the countries that receive foreign aid have high levels of corruption invokes fears that aid flows end up in the pockets of the ruling politicians and their cronies,” reads the report.

“This would be consistent with economic theories of rent-seeking in the presence of aid and resonate with colorful anecdotal evidence about failed development projects and self-interested elites,” the report adds.

In an interview with The Nation, outgoing World Bank Country Director for Kenya Felipe Jaramillo said the report was an independent study conducted by researchers from the lender and other institutions.

According to Jaramillo, the report “was not sanctioned by World Bank” adding that he had raised some concerns regarding the methodology of the report.

This comes even as the European Union lines up sanctions against Mauritius, a tax haven over money laundering and terror financing.

Questionably wealthy Kenyans are known to like Mauritius as a tax haven to hide illegally gotten cash or to escape the radar of the Kenya Revenue Authority (KRA).

In a State visit to Kenya in 2018, then Swiss President Alain Berset announced that his government had struck a deal with the Kenyan government to help recover looted money stashed in Swiss banks.

Another Loan

On Wednesday, the World Bank approved a Ksh107 billion concessional loan tailored for budgetary support and to help the government combat the COVID-19 Pandemic.

Following tax relief measures announced by President Uhuru Kenyatta, KRA is expected to forego tax revenue to the tune of Ksh172 billion making the loan a neccesity with Treasury forecasting that the country’s economic growth will fall to an eleven-year low this year.

According to Jaramillo, 75% has been sourced from the International Development Association (IDA) and the remaining 25% drawn from the bank.

The World Bank has indicated that it is not worried about Kenya’s debt position despite the country’s debt standing at Ksh6 trillion by December 2019 as per Central Bank of Kenya (CBK) statistics.

“Kenya actually does quite well in comparison to other Sub Saharan countries but it still has a long way to go to measure its practices against the majority of middle-income countries that manage a significant amount of debt.

This also comes two weeks after the International Monetary Fund (IMF) approved a Ksh78 billion loan to help Kenya navigate the economic effects of COVID-19.

See Also>>> Politics for Politic’s Sake: Eyeing Leadership While Overlooking Public Health

LEAVE A REPLY

Please enter your comment!
Please enter your name here