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‘Curb financial flows to expand fiscal space’


CURBING illicit financial flows will expand fiscal space through institutional co-ordination, information exchange and reducing loopholes that are exploited by cross-border crime syndicates, a local financial expert has said.


Zimbabwe Economic Policy Analysis Research Unit (Zeparu) executive director Gibson Chigumira said there is need to put in place measures to curtail tax avoidance and aversion schemes by multinational corporates including transfer pricing.

Illicit financial flows, in economics, refers to a form of illegal capital flight and occurs when money is illegally earned, transferred, or spent.

“Countering illicit financial flows would require strengthening of the legal and institutional frameworks that are fit for purpose, credible, enforceable and adaptable to the dynamic and complex illicit activities that include illicit financial flows,” he said.

Chigumira said according to a study that the think-tank undertook between 2009-2013 $2,8 billion has been lost through illicit financial inflows from the mining, wildlife, fisheries and other sectors.

In his monetary policy statement, Reserve Bank governor John Mangudya said the bank was seriously concerned by the abuse of individual or personal accounts to externalise business earnings under the pretext of “free funds” for family upkeep, medical, etc, thereby circumventing or evading taxes.

“This practice of promoting illicit financial flows is counterproductive and should be stopped. The Reserve Bank has no appetite to put impediments on the conduct of free funds accounts, but we cannot also remain naïve at the wanton abuse of the liberalised facility by a few nationalities,” he said.

The African Development Bank and the Global Financing Integrity 2012 study shows that Africa is the net creditor to the world, with net resources transfers to close to $1,4 trillion over the years.

Chigumira said the recovering of the money lost through illicit financial flows will go a long way in enhancing fiscal space.
The country has been witnessing growth from 2009-2011 when growth reached a peak of 11,9% after the hyper inflationary era.

The growth has weakened to 3,1% and 3,2% in 2014 and 2015 respectively.

The sluggish growth according to Treasury is due to limited resources to support growth as well as low credit ratings that had made access to external lines of credit to remain subdued.

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