Malawi loses five percent of its total wealth as measured by gross domestic product (GDP) annually due to illicit financial flows, United Nations Conference of Trade and Development (Unactd) has said.
This, based on the findings, means that for every K100 generated in the country, K5 is lost to movements of money and assets across borders, which are illegal in source, transfer or use, leaving the country with K95 of its hard-earned money.
The Unctad report titled Tackling Illicit Financial Flows for Sustainable Development in Africa, says stopping illicit financial flows could almost cut in half the annual financing gap of $200 billion that African countries, including Malawi, faces to achieve the Sustainable Development Goals.
The report says in Africa, an estimated $88.6 billion, equivalent to 3.7 percent of its GDP, leaves the continent as illicit capital flight every year.
In an interveiw, Betchani Tchereni, associate professor of economics at The Polytechnic—a constituent college of the University of Malawi—explained that such behaviour is robbing the country resources, leading to suppressed taxes, wages and denying workers a fair share of their labour.
“Illict financial flows [IFFs] is basically theft by capital owners from workers that in turn is perpetuating poverty and poor quality of life through distorted low wages,” he said.
Tchereni said the country needs specific regulations that can be enforced through punitive active actions.
The country’s revenue loss through illicit financial flows if contained could also bail out the country in terms of revenue given that it is currently faced with fiscal pressures due to its constrained resource envelope.
For instance, the current 2020/21 National Budget is already strained largely due to revenue under collections. The budget has a projected fiscal deficit of K754.8 billion, which will be financed by foreign borrowing amounting to K224 billion and K530.1 billion in domestic borrowing.
In an earlier interview, anti-money laundering expert Jai Banda admitted that Malawi has room for new approaches in the fight against financial crimes.
“It is important that we take different and new approaches to fight IFFs to see how they stand to benefit us in the fight against crimze,” he said.
Financial Intelligence Authority has signed a number of memoranda of understanding with local and international fraud and crime busting bodies to facilitate information sharing.