By the end of the period, accumulated capital outflows amounted to USD 606.7 billion compared to a total of $460.8 billion of ODA, $2345.9 billion of net private inflows and $58.1 billion of debt relief. Clearly the amounts of the usual forms of external development financing to SSA pale compared to the volumes of capital that have fled the continent.

**Table 1: Capital flight and other flows, annual averages and totals over 1970-2004**

||_Annual average flows per country_<br>_(million$)_|_Stocks and total real values (billion $)_|
|---|---|---|
|Stock of KF||606.7|
|Total real KF|299.9|419.9|
|Net foreign assets||398.4|
|ODA|329.1|460.8|
|Debt relief|41.5|58.1|
|FDI|147.6|147.6|
|Debt service|384.2|384.2|
|Net transfer on debt|96.3|96.3|
|Netprivate inflows|234.9|234.9|

Sources: Capital flight is from Ndikumana and Boyce (2007); other series from Global Development Finance (2006). Note: except for “Stock of capital flight”, other flows and totals are in constant 2004 dollars.

At the same time, the sub-continent has also experienced further drainage of resources in the form of payment of external debt. Over the period considered, the 40 countries in the sample paid $384.2 billion in debt service. Net transfer on debt amounted to only $96.3 billion. In fact, net transfers on debt to this group of countries have trended downward since the early 1980 and have recovered only recently thanks to debt relief. However, further efforts by the international community are needed to increase debt relief while also raising the share of grants and concessional lending in new official resource inflows to SSA.

We examine potential gains from capital flight repatriation in terms of economic growth by focusing on one of the key drivers of economic growth, namely physical capital accumulation. The argument is that capital flight repatriation would boost domestic saving, which in turn would induce higher investment. In addition repatriated capital flight would increase the taxable base, raising government revenue, which would allow the government to increase public investment. This will ultimately boost capital formation, a key driver of long-term growth.

To examine the potential gains from capital flight repatriation we use two sets of empirical relationships. First, we estimate econometrically the effects of capital flight on gross domestic investment, public investment and private investment. We control for real GDP to account for accelerator effects. As the results in Table 2 show, capital flight depresses private investment while it has no discernable effect on public investment.

The results suggest that the negative effects of capital flight on domestic investment operate through private investment more than public investment. One of the reasons is that capital flight, part of which is operated by private actors, reduces the volume of private savings that can be allocated to productive investment. Another reason is that given that environments that are conducive to capital flight are most likely to be characterized by uncertainty, both macroeconomic and political, this implies that private agents will prefer to either defer investment or simply hold alternative assets, including foreign assets

**13**