Ethiopia lost $3.3 billion to corrupiton

By William Davison

(Bloomberg) — Ethiopia, Africa’s second-most populous nation, lost $3.3 billion to illicit outflows such as bribery and corruption in 2009, Global Financial Integrity said.

Mispricing of trade transactions to facilitate money laundering accounted for $1.9 billion of the funds in the Horn of Africa nation in 2009. The total lost was more than double the amount in 2007, the Washington-based advocacy group said in an e-mailed report.

Ethiopia earns 6.4 percent of gross domestic product from donor grants, compared with an average of 0.9 percent for all sub-Saharan African nations, according to the International
Monetary Fund. Illicit outflows exceeded the $2.8 billion in aid and export revenue earned in 2009, GFI said.

“There is no excuse for this,” former U.S. Ambassador to Ethiopia, David Shinn, said in an e-mailed response to questions on Dec. 12. “If this trend has continued into 2010 and 2011, then Ethiopia has a real problem.”

The government hasn’t had a full explanation of the figures yet, Communications Minister Bereket Simon said.

“Overall Ethiopia is a country where you can find financial discipline,” Bereket said in a phone interview from the capital, Addis Ababa, yesterday.

Ethiopia scored 2.7 out of 10 on Transparency International’s Corruption Perceptions Index 2010, with zero being highly corrupt. The country ranked 66th out of 157 nations for losing the most in illicit flows in the past decade, averaging $1.2 billion a year, GFI said. China was the highest ranked with $273.7 billion. After adjusting for economy size, only Kenya, Tanzania and Sudan had a better average from over 50 African nations, Shinn said.

“The calculations are largely picking up measurement errors and differences in weak data collection methodologies between countries, even though they will also include smuggling, underreporting to avoid customs duties and capital flight,” Stefan Dercon, chief economist at the U.K.’s Department for International Development, a major Ethiopian donor, said in an e-mailed response to questions yesterday. “But it’s extremely naive to assume that this is just capital flight.”