Mentoria Economics on how to tackle illicit financial flows in Kenya

A recent report by the United Nations has stirred up significant concerns as it ranks Kenya as the top African country with high illicit financial flows. The report sheds light on the ongoing issue of corruption that continues to undermine the country's economic growth and development prospects. To delve deeper into the implications of this alarming ranking, CNBC Africa interviewed Ken Gichinga, Chief Economist at Mentoria Economics, who provided valuable insights on the matter. Gichinga highlighted the disappointments stemming from the failure to fully address illicit financial flows despite the government's previous efforts, such as the large-scale currency demonetization process carried out last year. The ranking comes as a stark reminder of the persistent challenges faced by Kenya in tackling corruption and its far-reaching consequences. Illicit financial flows have detrimental effects on the economy, with capital flight posing a significant threat. Capital flight not only hampers the ability to form businesses but also impedes job creation, exacerbating the country's unemployment crisis, especially in the context of the ongoing COVID-19 pandemic. The adverse impact of illicit financial flows is further exacerbated by the burdensome costs of doing business, as businesses face higher taxes and operational expenses. This unfavorable business climate can lead to businesses diversifying or relocating, thereby contributing to economic instability and perpetuating cycles of poverty and unemployment. The conversation also turned to the government's efforts to combat corruption and curb illicit financial flows. While the report signaled Kenya's proactive stance in recovering lost assets abroad, it also underscored the need for stronger anti-corruption measures and enhanced foreign policy coordination. Gichinga emphasized the importance of strengthening policies and adopting digital mechanisms to track and deter illicit financial activities. By bolstering foreign policy initiatives and implementing digital taxation systems, the government can improve transparency, enhance accountability, and mitigate the risks associated with capital flight. The findings of the United Nations report serve as a wake-up call for policymakers and stakeholders to address the root causes of illicit financial flows and prioritize effective strategies to combat corruption. While the road ahead may be challenging, proactive measures and collaborative efforts are essential to safeguard Kenya's economic future and foster sustainable growth.