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The Effect of Capital Flight on Economic Growth in Rwanda

Received: 31 May 2023     Accepted: 27 June 2023     Published: 15 September 2023
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Abstract

Capital is the most important factor of production particularly in a developing economy. Capital flight is probable to have negative influences on equality, with wealthy residents escaping better taxation, or decrease after-tax returns at domestic, at the same time as poorer citizens face better taxation and cuts in social offerings. The study adopted the Investment Diversion Theory and Debt Overhang Theory. The study adopted an ex-post facto research design with a sample length of 32 years from 1990 to 2022 and trusted secondary statistics from Rwanda country wide statistics (RNS), the applicable financial group of Rwanda (NBR) and the Ministry of Finance and economic making plans (MINECOFINE). Findings, indicate correlation between paying off external debt and economic development. Profits Repatriations had a coefficient and a great opportunity rate both of which had been large. This showed that Rwanda experiences economic growth in the same year that profit repatriations decrease annually. The foreign portfolio investment outflow has a coefficient and a non-significant probability. This indicates that the relationship between the outflow of overseas portfolio investment and economic. The study encourages Rwanda to comply with its current external debt policy through international credit standards. Governments should issue guidelines to encourage foreign portfolio investors to invest in offshore markets to optimize national economic growth and foreign portfolio investment outflows. Capital controls should be put in place to prevent capital outflow from the country. Furthermore, critical, and conscious efforts may be made to deal with the contemporary macroeconomic conditions uncertainty to mitigate the effect on capital flight.

Published in Journal of Investment and Management (Volume 12, Issue 3)
DOI 10.11648/j.jim.20231203.11
Page(s) 35-44
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2023. Published by Science Publishing Group

Keywords

Capital Flight, Economic Development, Rwanda

References
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Cite This Article
  • APA Style

    Wilson Bashaija. (2023). The Effect of Capital Flight on Economic Growth in Rwanda. Journal of Investment and Management, 12(3), 35-44. https://doi.org/10.11648/j.jim.20231203.11

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    Wilson Bashaija. The Effect of Capital Flight on Economic Growth in Rwanda. J. Invest. Manag. 2023, 12(3), 35-44. doi: 10.11648/j.jim.20231203.11

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    AMA Style

    Wilson Bashaija. The Effect of Capital Flight on Economic Growth in Rwanda. J Invest Manag. 2023;12(3):35-44. doi: 10.11648/j.jim.20231203.11

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  • @article{10.11648/j.jim.20231203.11,
      author = {Wilson Bashaija},
      title = {The Effect of Capital Flight on Economic Growth in Rwanda},
      journal = {Journal of Investment and Management},
      volume = {12},
      number = {3},
      pages = {35-44},
      doi = {10.11648/j.jim.20231203.11},
      url = {https://doi.org/10.11648/j.jim.20231203.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20231203.11},
      abstract = {Capital is the most important factor of production particularly in a developing economy. Capital flight is probable to have negative influences on equality, with wealthy residents escaping better taxation, or decrease after-tax returns at domestic, at the same time as poorer citizens face better taxation and cuts in social offerings. The study adopted the Investment Diversion Theory and Debt Overhang Theory. The study adopted an ex-post facto research design with a sample length of 32 years from 1990 to 2022 and trusted secondary statistics from Rwanda country wide statistics (RNS), the applicable financial group of Rwanda (NBR) and the Ministry of Finance and economic making plans (MINECOFINE). Findings, indicate correlation between paying off external debt and economic development. Profits Repatriations had a coefficient and a great opportunity rate both of which had been large. This showed that Rwanda experiences economic growth in the same year that profit repatriations decrease annually. The foreign portfolio investment outflow has a coefficient and a non-significant probability. This indicates that the relationship between the outflow of overseas portfolio investment and economic. The study encourages Rwanda to comply with its current external debt policy through international credit standards. Governments should issue guidelines to encourage foreign portfolio investors to invest in offshore markets to optimize national economic growth and foreign portfolio investment outflows. Capital controls should be put in place to prevent capital outflow from the country. Furthermore, critical, and conscious efforts may be made to deal with the contemporary macroeconomic conditions uncertainty to mitigate the effect on capital flight.},
     year = {2023}
    }
    

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  • TY  - JOUR
    T1  - The Effect of Capital Flight on Economic Growth in Rwanda
    AU  - Wilson Bashaija
    Y1  - 2023/09/15
    PY  - 2023
    N1  - https://doi.org/10.11648/j.jim.20231203.11
    DO  - 10.11648/j.jim.20231203.11
    T2  - Journal of Investment and Management
    JF  - Journal of Investment and Management
    JO  - Journal of Investment and Management
    SP  - 35
    EP  - 44
    PB  - Science Publishing Group
    SN  - 2328-7721
    UR  - https://doi.org/10.11648/j.jim.20231203.11
    AB  - Capital is the most important factor of production particularly in a developing economy. Capital flight is probable to have negative influences on equality, with wealthy residents escaping better taxation, or decrease after-tax returns at domestic, at the same time as poorer citizens face better taxation and cuts in social offerings. The study adopted the Investment Diversion Theory and Debt Overhang Theory. The study adopted an ex-post facto research design with a sample length of 32 years from 1990 to 2022 and trusted secondary statistics from Rwanda country wide statistics (RNS), the applicable financial group of Rwanda (NBR) and the Ministry of Finance and economic making plans (MINECOFINE). Findings, indicate correlation between paying off external debt and economic development. Profits Repatriations had a coefficient and a great opportunity rate both of which had been large. This showed that Rwanda experiences economic growth in the same year that profit repatriations decrease annually. The foreign portfolio investment outflow has a coefficient and a non-significant probability. This indicates that the relationship between the outflow of overseas portfolio investment and economic. The study encourages Rwanda to comply with its current external debt policy through international credit standards. Governments should issue guidelines to encourage foreign portfolio investors to invest in offshore markets to optimize national economic growth and foreign portfolio investment outflows. Capital controls should be put in place to prevent capital outflow from the country. Furthermore, critical, and conscious efforts may be made to deal with the contemporary macroeconomic conditions uncertainty to mitigate the effect on capital flight.
    VL  - 12
    IS  - 3
    ER  - 

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Author Information
  • Department of Finance and Accounting, University of Rwanda, Kigali, Rwanda

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