Egypt Lost $57.2 Billion from 2000-2008
January 26th, 2011
January 26th, 2011
WASHINGTON, DC – Egypt is losing more than US$6 billion per year—US$57.2 billion in total from 2000 to 2008— to illicit financial activities and official government corruption, writes Global Financial Integrity (GFI) economist, Karly Curcio, in a new weblog published today at www.financial taskforce.org. The piece “Egypt too? There Goes the Neighborhood” uses numbers from GFI’s recently released report, “Illicit Financial Flows from Developing Countries: 2000-2009.” The report, authored by GFI Lead Economist Dev Kar and Ms. Curcio, lists illicit capital flight numbers for all developing countries from 2000-2008, including Egypt.
Ms. Curcio also notes that the Middle East and North Africa (MENA) region had the highest rate of growth in illicit outflows measuring an increase of 30 percent from 2000-2008.
Writes Ms. Curcio:
Comparing Egypt’s illicit flows to those of Tunsia, Tunisia experienced nominal illicit capital flight through trade mispricing, whereas Egypt sees strong and persistent illicit flows both through the commercial (trade mispricing) component at US$2.54 billion per year in addition to loss from corruption and crime. Both countries had about the same average volume of merchandise exports between 2000-2008, however Egypt experienced much larger GDP figures. Consequently, unrecorded flows picked up through the balance of payments (due to corruption and crime) account for over 60 percent on average between 2000 and 2008 of the total illicit flows out of the country at about US$3.8 billion per year. This brings the country’s average illicit outflows up to a staggering US$6.36 billion per annum. No wonder Egyptians are upset.
In 2006, 2007, and 2008 Egypt’s GDP jumped into the hundred billion range annually. As this growth occurred illicit flows peaked at US$13.0 bil, US$13.6 bil, and US$ 7.4 bil; respectively. Those engaging in corrupt and criminal activity were certainly getting their cut of the country’s growth.
The dip down to US$7.4 in 2008 was due in part to a sharp out flow of licit capital late in the year, when according to the IMF foreign investors pulled out of equity and government debt markets reflecting diminished confidence in Egypt and a lowered appetite for risk. “The rapid capital outflow in late 2008 was met mostly with a drawdown in official reserves and the Central Bank of Egypt’s (CBE’s) foreign currency deposits with commercial banks.” As the economy and financial markets contracted, so did the volume of money corrupt officials and criminals could break off for themselves.
Monique Perry Danziger
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