The problem of debt being influenced by political corruption is not limited to the African continent. What we have seen recently with the leaking of the “panama papers” is that many world leaders are choosing to hide their money in banks situated in countries like Panama that are considered tax havens. These papers connected many world leaders, including some in Africa, but also Iceland and China, to participation in suspect practices regarding their finances. These individuals and corporations that choose to put their money into bank accounts in these elusive tax havens are treading a fine line between tax avoidance and tax evasion.
Regardless of the reason for their money being in the offshore account, you cannot argue that many wealthy individuals are simply taking advantage of a global financial loophole that caters toward wealth and corruption. It is important to notice that the majority of the money that can be found in these offshore accounts is either legally or illegally earned.
In the case of the bank accounts belonging to some of Africa’s leaders their money can be better described as “stolen.’ In Africa, the corruption lies in the issuance of loans to countries that are intended to finance projects that can speed up the development of capital deprived African economies. Unfortunately, with the help of the very financiers that are helping facilitate the loans, government officials are allowed to get their hands in the cookie jar. This has resulted in funds being diverted from the projects they were intended for.
As a citizen, it has to be disappointing to see that the leaders of your country are hiding away their assets to avoid paying their fair share of taxes. However, what is happening in Africa has to be even more disheartening because it is not only tax evasion that government officials are participating in. Corrupt government officials are actively stealing money from their countries that could have been used to improve the living standards for their citizens. Instead they are funneling money into their own bank accounts for personal luxuries. The worst part perhaps, is that the citizens are the ones that get stuck with the bill. It is unfortunate that these debts have been, in some cases, immorally accumulated by corrupt leaders, but it is most unfortunate that Africa’s countries will not be able to experience that economic benefits that could have materialized from the development projects the loans were intended to fund. As Africa struggles with paying back these debts, it is loosing in credibility with wealthy lenders around the world. This makes it increasingly difficult for Africa to obtain new sources of funding.
Africa needs stricter regulation around the money loaned for economic development purposes. The core source of the problem is that the politicians are rarely held accountable for their actions as they are sometime seen as being above the letter of the law. Another is the questionable incentive that lenders and banks have to continue lending money and participate in this financial hemorrhage of an entire continent. New rules and regulations will have to be implemented in order for Africa to harness the full economic potential that it possesses. This will not be possible without receiving the full benefit of having access to wealthy creditors like the IMF and the World Bank.