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World Bank: Aid to poor countries diverted to tax havens

The average “leakage rate” of aid sent to poor countries is estimated at around 7,5 percent. A study into large-scale corruption has finally been revealed after rumours that its suppression led to the resignation of the World Bank's chief economist.

Published: February 22, 2020, 10:52 am


    The paper, commissioned by the Bank and written by one of its own economists along with two academics, found that as much as one-sixth of all international aid ends up in tax havens, indicating the potential scale of corrupt officials stealing the funds meant for the poor.

    The document was revealed by the British magazine The Economist. The aid released by the World Bank for the poorest countries actually trigger transfers of funds to offshore accounts in tax havens.

    The World Bank estimates that 7,5 percent of the aid paid is eventually diverted. A study looked at 22 of the poorest countries, located mainly in Africa, which received annual payments between 1990 and 2010 from the World Bank, equivalent to at least 2 percent of their GDP.

    “The aid diverted by the politicians in power, the bureaucrats and their acolytes is consistent with all of the patterns observed,” explained the study, adding that the effects “are greater for the most corrupt countries”.

    The publication of this study has provoked debates within the financial institution. According to this publication, this is one of the reasons for the resignation of the chief economist of the World Bank, Pinelopi Koujianou Goldberg.

    Some corrupt officials may be skimming as much as fifteen percent after the study found that flows of capital from the 22 of the world’s poorest countries to countries known for banking secrecy like Switzerland and the Cayman Islands increased within a financial quarter of payments of World Bank aid being made.

    No individual acts of wrongdoing were identified however, but its authors noted that the absence of a sudden spike in transfers in more transparent jurisdictions strongly suggested aid money was being stolen.

    “This is consistent with some kind of capture: That the people who control aid flow have found a way to divert some of that money to their personal accounts,” Professor Niels Johannesen of Copenhagen University told British daily The Telegraph.

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