Analysis of Capital Flight from Burundi

Burundi has reportedly lost resources amounting to 10.2% of gross domestic product to capital flight, on average, over the period 1985a-2013. Given the episodes of political instability and poor governance that have characterized Burundi's landscape in the past decades, an institutional analysis of capital flight is undertaken and some instances of embezzlement of public funds reviewed in this study. Data analysis of the main trends of capital flight is also undertaken. In addition, this study examines the drivers of capital flight from Burundi. The estimation results seem to be sensitive to the capital flight measurement used, but in general they suggest that external debt, political instability and wars, as well as exports, are the main drivers of capital flight from Burundi. To discourage capital flight, the findings of this study suggest that Burundi should promote peace and political stability. In addition, more responsibility, transparency and accountability are required from the Government of Burundi in managing external debt. Moreover, some actions are needed to reduce trade misinvoicing, which is a major channel of capital flight from Burundi.