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Money laundering undermines middle income dream - report
Government must curb illicit financial flaws and tax evasion if it is to achieve the middle income dream. FILE PHOTO
Kampala- Uganda’s attempt to attain middle income status continues to be undermined by corruption, widespread tax evasion and money laundering, according to a new report.
The report, titled: Scooping Study in Illicit Financial Flows in Uganda, was authored by Global Financial Integrity with contributions from Economic Policy Research Centre (EPRC) and Uganda Association of Women Lawyers (FIDA).
The report also cautions against heavy reliance on foreign debts, which currently stands at $10.7b, as a development driver.
For a country to attain and sustain middle income status, the report says, it must finance its own budget with funds mobilised domestically.
“Three policy areas should be the central focus for government: eliminate use of anonymous companies in the economy, reduce the ease and volumes of trade misinvoicing, and enforce anti-money laundering laws, particularly within the banking sector,” the report commissioned in August last year, reads in part.
Trade misinvoicing is the most significant area of illicit financial flows in Uganda, according the experts.
“From 2006-2015… trade misinvoicing amounted to roughly 18 per cent of total trade over the same 10-year period. The figure for possible outflows is some 10 per cent of total trade and for possible inflows it is around 8 per cent of total trade (2006-2015),” the report notes.
Potential over- and under-invoicing of imports from 2006-2015 was estimated at $4.9b (Shs18.5 trillion), and over- and under-invoicing of exports may have reached $1.7b (Shs6.4 trillion).
Uganda’s laws on financial transparency and anti-money laundering have the strongest influence on illicit financial flows, and there are notable gaps in the framework that Government of Uganda has in place to address the sources, transfer methods, and motivations of IFFs in the country.
Policy and economic analyst such as Dr Fred Muhumuza have time and again said that stopping illicit financial flows and curbing money laundering will have a positive bearing on the national budget.
Fears of growing debt
Uganda’s stock of public debt has almost tripled in the last 10 years, from $2.9b (Shs11 trillion) in 2006 to $8.7b (Shs32.8 trillion) in 2016.
Although government says public debt stock in terms of GDP is still within sustainable levels, civil society organisations such as the Uganda Debt Network, CSBAG, Oxfam and Action Aid warn that further increases in debt stock, could soon prove untenable.
