By William Davison

(Bloomberg) — Ethiopia, Africa’s second-most populous nation, lost $3.3 billion to {www:illicit} outflows such as bribery and corruption in 2009, Global Financial Integrity said.

Mispricing of trade transactions to facilitate money laundering accounted for $1.9 billion of the funds in the Horn of Africa nation in 2009. The total lost was more than double the amount in 2007, the Washington-based advocacy group said in an e-mailed report.

Ethiopia earns 6.4 percent of {www:gross domestic product} from donor grants, compared with an average of 0.9 percent for all sub-Saharan African nations, according to the International
Monetary Fund. Illicit outflows exceeded the $2.8 billion in aid and export revenue earned in 2009, GFI said.

“There is no excuse for this,” former U.S. Ambassador to Ethiopia, David Shinn, said in an e-mailed response to questions on Dec. 12. “If this trend has continued into 2010 and 2011, then Ethiopia has a real problem.”

The government hasn’t had a full explanation of the figures yet, Communications Minister Bereket Simon said.

“Overall Ethiopia is a country where you can find financial discipline,” Bereket said in a phone interview from the capital, Addis Ababa, yesterday.

Ethiopia scored 2.7 out of 10 on Transparency International’s Corruption Perceptions Index 2010, with zero being highly corrupt. The country ranked 66th out of 157 nations for losing the most in illicit flows in the past decade, averaging $1.2 billion a year, GFI said. China was the highest ranked with $273.7 billion. After adjusting for economy size, only Kenya, Tanzania and Sudan had a better average from over 50 African nations, Shinn said.

“The calculations are largely picking up measurement errors and differences in weak data collection methodologies between countries, even though they will also include smuggling, underreporting to avoid customs duties and capital flight,” Stefan Dercon, chief economist at the U.K.’s Department for International Development, a major Ethiopian donor, said in an e-mailed response to questions yesterday. “But it’s extremely naive to assume that this is just {www:capital flight}.”

[Updated with some corrections]

By Elias Kifle

An Ethiopian man named Yared (his real name is withheld for his safety) went to Ethiopia a few months ago to sell his family house after his parents moved to the U.S. One of the reasons he decided to sell the house was that after hearing about the recent land ownership decree, he realized that a few years from now the house will have little or no value.

Yared succeeded in selling the house for 2 million Ethiopian birr. The buyer, probably some fool from the Diaspora, deposited the money in Yared’s account at the Commercial Bank of Ethiopia (CBE), which is run by the National Bank of Ethiopia (NBE).

After removing his furniture and handing over the house to the new owner, Yared went to the CBE to withdraw his money and either deposit it in a private bank or convert it into hard currency in the black market so that he can bring it to the U.S.

To Yared’s shock and surprise, the CBE management told him that the bank doesn’t have the money to give him and that he has to wait. When Yared asked how long he has to wait, the managers told him they don’t know.

Yared told an Ethiopian Review associate that he has been sitting in Addis Ababa for the past 3 months waiting for the bank to give him his money.

Ethiopian Review has been reporting that the financial system in Ethiopia is in deep crisis. Ethiopia’s central bank, the National Bank of Ethiopia, is running out of money because of huge number of borrowers who stopped making payments, not to mention the massive corruption that has been going on in the bank. NBE is also the personal piggyback of Meles Zenawi and Azeb Mesfin.

Those who are close to the regime know about the financial crisis and are getting their money out of the country as fast as they can.

The Woyanne junta recently ordered National Bank of Ethiopia (NBE) to print 50 billion birr [read here] to in preparation for further devaluation of the currency.

By Janice Winter

{www:COP17} is being hailed as “groundbreaking” as a deal was agreed after 14 days of difficult and, at times, deadlocked talks. One of the most contentious issues for Africa was the Green Climate Fund, which will go ahead despite anger at the overall failure of developed countries to commit investments. JANICE WINTER explains why this compromise is the best possible scenario.

Headlines last week declared: “Meles Zenawi cries foul over climate money pledges”. Well, that’s rich.

Leading Africa’s heads of state and government panel at the COP17 climate talks in Durban, the Ethiopian prime minister’s biggest emphasis was on the Green Climate Fund. Not only did he complain that funds pledged at Copenhagen COP15 in 2009 had failed to materialise, but also that, rather than being “new” money, much of it seems set to be recycled from existing aid budgets. He warned that such disingenuousness risked undoing the modest gains made towards the Millennium Development Goals and undermining the credibility of the entire process “in the eyes of the people of our whole continent”.

His position seemed reasonable enough: there was compelling scientific evidence that climate change will have a disproportionate impact on socio-economic development in Africa and that considerable financial investments were required from developed countries to assist Africa to adapt to the impact of climate change. But I am “of this continent” and something else risks undermining the credibility of the process in my view: that a corrupt dictator is provided with such an influential platform from which to hijack a critical cause for his own, probably illicit, interests. Coming from Meles, statements about credibility are hypocrisy at its most nauseating.

The Green Climate Fund is aiming for about $100-billion a year by 2020. The man clamouring for this considerable fund is regarded as one of the most repressive leaders on the continent. His government claims to have won a ludicrous 99.6% in the 2010 elections, jails the highest number of journalists in Africa using a law that criminalises dissent as terrorism and brutally tortures critics and opposition figures. Most crucial for this discussion, his government faces widespread, credible and sustained allegations of abusing Ethiopia’s enormous $3-billion of annual developmental aid as a tool of political repression and as a co-option mechanism to bolster his 20-year rule. Detailed and robust investigations include those by Human Rights Watch, The Bureau of Investigative Journalism, and Newsnight.

According to a report to be published by Global Financial Integrity later this month, Ethiopia has lost $11.7-billion to outflows of illicit funds in the last decade. In 2009 alone, the figure was $3.26-billion, exceeding both the value of its total annual exports and the total development aid it received that year. And it is on the increase. The candid finding: “The people of Ethiopia are being bled dry. No matter how hard they try to fight their way out of absolute destitution and poverty, they will be swimming upstream against the current of illicit capital leakage.”

Yet despite these exposés and a significant deterioration in the country’s human rights situation since the brutal post-election crackdown of 2005 (in which 199 people were killed in just four days), international development aid to Ethiopia has doubled since 2005. Something as critical as the Green Climate Fund should not repeat the serious failures of developmental aid in this regard.

Meles Zenawi’s international credibility lies largely in Ethiopia’s official double-digit annual growth rates since the questionable 2005 elections and its asserted progress towards the Millennium Development Goals. As exiled Ethiopian journalist Abiye Teklemariam writes, Meles has forged an image as “a technocratic, if dictatorial, leader who had been able to crack the code of east Asia’s rise and download it into an Ethiopian hardware.”

Conveniently for Meles, no independent institutions in Ethiopia exist to check the veracity of his government’s figures, despite the credible scepticism by some international economists and substantial discrepancies in conclusions about Ethiopia’s performance and progress toward the MDGs. Indeed, the average growth rate for Meles’ entire 20-year rule (including the purported fast-paced period of the past few years) is less than 5% (below the African average of 6%) and that the country only overtook its 1975 GDP in 2006. Even if we take his spectacular recent figures at face value, which would be very generous, these are not representative of his rule. And despite these impressive, if contentious, figures, the Ethiopian economy is characterised by very high inflation, widespread unemployment, a stagnant private sector and corruption.

Before the enormous intended investments are endowed to the Green Climate Fund, far closer interrogation is needed of the ways in which this money might be spent and by whom – whether, in fact, there would be effective guarantees that the funds would be spent on projects to counteract the impacts of climate change, or would instead risk being used by undemocratic leaders such as Meles to counteract the challenges of political opposition and dissent.

The figures for the Green Climate Fund have been calculated by the African Climate Policy Centre, based in Addis Ababa. As it currently stands, African countries and institutions would be eligible for direct access to the fund. Oh, and some of these countries would also be part of the governing structures ensuring their own transparency and accountability.

Before the Green Climate Fund becomes operational and offers developing countries direct access to significant sums of money, it is vital to establish firm eligibility criteria of countries based on an independent corruption index and a strong accountability mechanism to ensure funds are spent transparently. This is necessary to prevent the situation of other aid endeavours where direct access to funding and weak accountability procedures enable corrupt and undemocratic governments to augment their rule through the politicisation of foreign funding.

If the Arab Spring has taught democratic leaders and donor nations anything, it is surely the need for far greater caution before financially assisting – and inadvertently bolstering – repressive leaders and a climate of corruption.