Journal of Business and Administrative Studies

Abstract

There exists no generally accepted definition of the term “capital flight”. For the
purpose of this article capital flight refers to Illegal capital flight, also known as
illicit financial flows, which disappear from any record in the country of origin.
Moreover earnings on the stock of illegal capital flight outside of a country
generally do not return to the country of origin. In this regard, capital flight is
creating a serious development challenges for most African economies. Ethiopia is
not exceptional for this impact. The analysis of this article led to two major
findings. First, African countries have become increasingly indebted; they
experienced large scale capital flight. According to studies a group of 33 SSA
(Sub- Saharan Africa) countries has lost a total of $814 billion dollars from 1970
to 2010. This exceeds the amount of official development aid ($659 billion) and
foreign direct investment ($306 billion) received by these countries. Oil-rich
countries account for 72 percent of the total capital flight from the sub region
($591 billion). Secondly, an upcoming report by Global Financial Integrity 2009,
finds that
Ethiopia, which has a per-capita GDP of just US$365, lost US$11.7 billion to
illicit financial outflows between 2000 and 2009. In 2009, illicit money leaving the
economy totaled US$3.26 billion, which is double the amount in each of the two
previous years. In conclusion, currently the impact of capital flight for Ethiopia
economy is becoming very severe. So, Ethiopian government effort to promoting
economic development must be go hand in hand with fighting capital flight