A new study shows that Kenya’s political elites who served under Moi and Kibaki administrations looted over Sh327.89 billion within a 20-year period and stashed it in off-shore accounts.
The elites plundered the cash directly from foreign aid or through kickbacks from State agencies that received donor funding, according to the report titled “Elite Capture of Foreign Aid: Evidence from Offshore Bank Accounts.”
The study was carried out 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,” the report states.
Kenya ranked second in the amount of stolen donor funds hidden overseas behind Jordan which had Sh350 billion stashed abroad. Ivory Coast came third with Sh128 billion stashed abroad, followed by the Democratic Republic of Congo (Sh110 billion).
Neighboring Uganda and Tanzania were among the 22 aid-dependent countries that were targeted in the study.
The report indicates that most of the looted funds were hoarded in countries that have laws that guarantee secrecy and encourage tax evasion. They include Switzerland, Luxembourg, the Cayman Islands, and Singapore.
Other funds were hidden non-havens including Germany, France, and Sweden, the report noted. Out of the Sh327 billion looted in Kenya, Sh136.2 billion was hidden in tax havens while Sh190.35 billion was deposited in regulated bank accounts.
“We document that aid disbursements to the most aid-dependent countries coincide with significant increases in deposits held in offshore financial centers 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 report adds.