Illicit financial flows (IFFs) are a significant and persistent drag on developing country economies according to Global Financial Integrity (GFI).

The Washington based IFF-focused lobbying and research group also says trade misinvoicing undermines the impact of international trade in developing nations

Obstacle to growth

New analysis by GFI of trade misinvoicing in 148 developing countries demonstrates that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies.

Trade misinvoicing therefore remains an obstacle to achieving sustainable and equitable growth in the developing world GFI concludes in its new report, Illicit Financial Flows to and from 148 Developing Countries: 2006-2015.

Growth trends

The report is the latest in a series published by GFI that provide country-level estimates of the illicit flows of money into and out of 148 developing and emerging market nations as a result of their trade in goods with advanced economies.

Increasing trade among developing and emerging market countries is seen by many economists as a primary path to greater development.

Misinvoicing peril

But high levels of misinvoicing, as a percentage of total trade, indicate that most developing country governments do not benefit from a significant portion of their international trade transactions with advanced economies.

Highlights of GFI’s research for 2015 (the most recent year for which there is usable data) show that on average, trade misinvoicing is equivalent to 18 per cent of total trade with advanced economies among all developing countries.

Several nations have trade misinvoicing levels significantly higher than the global average, including Sierra Leone (39.8 per cent), Georgia (34 per cent), Botswana (31.8 per cent), Maldives (29.6 per cent), Ethiopia (29.3 per cent), The Bahamas (29 per cent) and Cameroon (26 per cent).

More details on GFI’s report, Illicit Financial Flows to and from 148 Developing Countries: 2006-2015, can be found here.