Political elites who served during the last 10 years of late retired President Daniel Moi and Mwai Kibaki’s reigns stole at least Ksh327 billion and hid it in off-shore accounts, a new study has shown.
The amounts were either paid directly to them or received as kickbacks from state corporations, according to the report titled “Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts”.
The study was conducted by Bob Rijkers of the World Bank, Jorgen Juel Andersen of BI Norwegian Business School, and Niels Johannesen of the University of Copenhagen and covered the period between 1990 and 2010.
“We observe a sharp and immediate increase in deposits in the disbursement quarter with no increase in subsequent quarters to the extent political elites divert aid to foreign accounts, either directly or through kickbacks from private sector cronies,” noted the report.
Kenya was ranked second in countries whose money was stolen and hidden abroad, after Jordan which had Ksh350 billion stashed abroad. Ivory Coast was ranked a distant third with Ksh128 billion stashed abroad, while Democratic Republic of Congo was fourth with Ksh110 billion in off-shore accounts.
Other countries that were targeted in the study include Uganda and Tanzania.
Most of the money was hidden in countries that have laws that guarantee secrecy and encourage tax evasion such as Switzerland, Luxembourg, Cayman Islands and Singapore. At least Ksh136.2 billion was in these countries.
“We document that aid disbursements to the most aid-dependent countries coincide with significant increases in deposits held in offshore financial centres known for bank secrecy and private wealth management. Our estimates suggest a leakage rate of around 7.5 percent for the average highly aid-dependent country,” the study adds.
The World Bank Country Director for Kenya, Felipe Jaramillo, has however faulted the methodology of the study.
“I had raised some issues with the methodology of the report,”he said.