This archive report was first published on 20 May 2020.
Kenya Siphoned $3.1 Billion Of Foreign Aid Into Offshore Bank Accounts ¶
According to a recent World Bank research, Kenya has siphoned $3.1 billion in foreign aid into offshore bank accounts. The research, conducted by Penny Goldberg, a former World Bank chief economist, and her colleagues from BI Norwegian Business School and the University of Copenhagen, reveals that aid granted by the World Bank is falling into the wrong hands.
The research, titled 'Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts,' was initially done for the World Bank but was not published due to its embarrassing findings. The researchers were reportedly not allowed to share the contents, leading Penny Goldberg to resign from her job. The document is now published on her website.
The research analyzed data from 22 countries, including Kenya, Rwanda, Uganda, and Tanzania, and found that aid granted by the World Bank is being diverted to offshore havens. For Kenya, the researchers found that $1.277 billion exited the country and was deposited in offshore havens, while $1.784 billion left Kenya for non-offshore havens.
The researchers used quarterly information on aid disbursements from the World Bank and Bank for International Settlements banking statistics to track the flows between the recipient country and offshore havens. The study excluded scenarios that would lead to higher inflows and outflows, such as wars or financial crises.
The research highlights the issue of 'elite capture' of foreign aid, where aid intended for the poor is diverted to the wealthy and powerful. The study suggests that Kenyan elites prefer hiding their money in offshore havens, while Ugandans and Tanzanians are fine with stealing World Bank cash and sending it to places that do not tolerate spoils of theft from poor countries.
While the researchers admit that they cannot identify the individuals responsible for moving the funds, the statistics used only count the total flows per quarter between countries.
Kenya Insights reviewed the 46-page document and found the grim reading. The research is a significant blow to the World Bank's reputation and highlights the need for greater transparency and accountability in the use of foreign aid.
