Empirical aspects of capital flight in Kenya, 1970-2009

Capital flight remains a fundamental academic and policy issue for developing countries. During the early 1990s the debt crisis appeared to have been contained and attention to the capital flight phenomenon waned. However, capital flight still remains a serious problem for many developing countries. The outbreak of several major financial crises in the international financial system from the mid-1990s, notably in Latin America and Asia, brought renewed attention to the phenomenon of capital flight. These crises led to large outflows of capital from developing countries and the issue of capital flight regained its importance. In many developing countries capital flight constitutes an important proportion of the very resources that are critical for financing economic growth and reversing adverse economic trends (Hermes, Lensink and Murinde 2002: 1). The magnitude of capital flight from Africa has increased considerably in recent years accompanied by widespread fluctuations and volatility (Salisu 2005: 1). Despite the progress being made by some African economies towards economic and political reforms much more reform deepening is necessary to create a conducive environment for private sector participation generally and capital flight reversal. Kenya is a typical small developing economy and has experienced challenges of trying to contain capital flight.