Journal of Investment and Management

Submit a Manuscript

Publishing with us to make your research visible to the widest possible audience.

Propose a Special Issue

Building a community of authors and readers to discuss the latest research and develop new ideas.

The Effect of Capital Flight on Economic Growth in Rwanda

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.

Capital Flight, Economic Development, Rwanda

APA Style

Wilson Bashaija. (2023). The Effect of Capital Flight on Economic Growth in Rwanda. Journal of Investment and Management, 12(3), 35-44.

ACS 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

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

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

1. Fjeldstad, Odd-Helge, et al. Lifting the veil of secrecy: Perspectives on international taxation and capital flight from Africa. Chr. Michelsen Institute, 2017.
2. Otieno, S., Mose, N., & Matundura, E. (2022). External Debt and Capital Flight in East Africa. Journal of Economics and Sustainable Development, 13 (6), 23-29.
3. Nerea, A. (2017). The Impact of Illicit Financial Flow on Economic Growth of Ethiopia A Time Series Empirical Analysis, 2000-2015 (Doctoral dissertation, St. Mary's University).
4. Integrity, G. F. (2014). Hiding in Plain Sight.
5. Orji, A., Ogbuabor, J. E., Kama, K., & Anthony-Orji, O. I. (2020). Capital Flight and Economic Growth in Nigeria: A New Evidence from ARDL Approach. Asian Development Policy Review, 8 (3), 171-184.
6. Bailliu, J. (2000). Private capital flows, financial development, and economic growth in developing countries (No. 2000-15). Bank of Canada.
7. Bond, I., Odendahl, C., & Rankin, J. (2015). Frozen: The politics and economics of sanctions against Russia. Centre for European Reform.
8. Baubeau, P., Monnet, E., Riva, A., & Ungaro, S. (2021). Flight‐to‐safety and the credit crunch: a new history of the banking crises in France during the Great Depression. The Economic History Review, 74 (1), 223-250.
9. Integrity, G. F. (2010). The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008. 2014-09-17]. http://www. gfintegrity. org/report/country-case-study-india.
10. Owusu, F. A. (2016). The impact of capital flight on cconomic development: Ghana and Nigeria compared (Doctoral dissertation).
11. Fish, T., & Whymark, R. (2015). How has cash usage evolved in recent decades? What might drive demand in the future?. Bank of England Quarterly Bulletin, Q3.
12. Undji, V. J. (2018). The effect of fiscal policy on capital flight in Namibia (Doctoral dissertation, University of Namibia).
13. Ndikumana, L. (2014). Capital flight and tax havens: impact on investment and growth in Africa. Revue d'economie du developpement, 22 (HS02), 99-124.
14. Leykun Fisseha, F. (2022). Effect of capital flight on domestic investment: Evidence from Africa. Cogent Economics & Finance, 10 (1), 2105975.
15. Ngunjiri, J. M. (2019). Effects of Capital Flight on Economic Growth in Kenya (Doctoral dissertation).
16. Kar, D. (2013). Illicit financial flows and the problem of net resource transfers from Africa: 1980-2009. Available at SSRN 2334910.
17. Otieno, J., Kiprop, K., & Muluvi, S. (2021). Determinants of Capital Flight in the East African Community. Journal of Economics and Sustainable Development, 12 (10), 1-9.
18. Massa, I. (2014). Capital flight and the financial system. Capital Flight from Africa: Causes, Effects, and Policy Issues, 200.
19. Khan, M. F., Pervez, A., Modibbo, U. M., Chauhan, J., & Ali, I. (2021). Flexible fuzzy goal programming approach in optimal mix of power generation for socio-economic sustainability: A Case Study. Sustainability, 13 (15), 8256.
20. Bredino, S., Fiderikumo, P., & Adesuji, A. (2018). Impact of capital flight on economic growth in Nigeria: An econometric approach. Journal of Business and Economic Development, 3 (1), 22-29.
21. Moran, T. H. (1998). Foreign direct investment and development: The new policy agenda for developing countries and economies in transition. Peterson Institute.
22. Jordà, Ò., Knoll, K., Kuvshinov, D., Schularick, M., & Taylor, A. M. (2019). The rate of return on everything, 1870–2015. The Quarterly Journal of Economics, 134 (3), 1225-1298.
23. Vannukul, V. (2003). Thailand's economic crisis of 1997: Its continuation and possible cure. A case study. Capella University.
24. Naceur, S. B., Cherif, M., & Kandil, M. (2014). What drives the development of the MENA financial sector?. Borsa Istanbul Review, 14 (4), 212-223.
25. Kerner, A., & Lawrence, J. (2014). What's the risk? Bilateral investment treaties, political risk and fixed capital accumulation. British Journal of Political Science, 44 (1), 107-121.
26. Ndikumana, L. (2014). Savings, capital flight, and African development. Political Economy Research Institute Working Paper Series, (353).
27. Yusuf, A., & Mohd, S. (2021). The impact of government debt on economic growth in Nigeria. Cogent Economics & Finance, 9 (1), 1946249.
28. Kadozi, E. (2019). Remittance inflows and economic growth in Rwanda. Research in Globalization, 1, 100005.
29. Gomez, G., Rivas, A. M., & Bolaños, E. R. L. (2014). The determinants of capital structure in Peru. Academia Revista Latinoamericana de Administración.
30. Karagol, E. (2012). The causality analysis of external debt service and GNP: The case of Turkey. Central Bank Review, 2 (1), 39-64.
31. Umaru, A., Hamidu, A., & Musa, S. (2013). External debt and domestic debt impact on the growth of the Nigerian economy. International Journal of Educational Research, 1 (2), 70-85.
32. Timuş-Iordachi, V., & Ciobu, S. (2019). External debt implications on the development of national economy. Economie şi Sociologie, (2), 32-41.
33. Jilenga, M. T., Xu, H., & Gondje-Dacka, I. M. (2016). The impact of external debt and foreign direct investment on economic growth: Empirical evidence from Tanzania. International Journal of Financial Research, 7 (2), 154-162.
34. Omodero, C. O., & Alpheaus, O. E. (2019). The effect of foreign debt on the economic growth of Nigeria. Management Dynamics in the Knowledge Economy, 7 (3), 291-306.
35. Julio, B., & Yook, Y. (2016). Policy uncertainty, irreversibility, and cross-border flows of capital. Journal of International Economics, 103, 13-26.
36. Akinwunmi, A. A., & Adekoya, R. B. (2016). External reserves management and its effect on economic growth of Nigeria. International Journal of Business and Finance Management Research, 4 (1), 36-46.
37. Prasad, E. S., & Rajan, R. G. (2008). A pragmatic approach to capital account liberalization. Journal of Economic Perspectives, 22 (3), 149-72.
38. Mccauley Jr, M. S. (2018). Providing Retirement Savings Plans with Alternative Investments to Allow Participants Greater Diversification (Doctoral dissertation, Baker College (Michigan)).
39. Sengupta, R., Mukherjee, S., & Gupta, M. (2015). Financing for infrastructure investment in G-20 countries. National Institute of Public Finance and Policy Working Paper, 144, 1-45.
40. Koepke, R. (2019). What drives capital flows to emerging markets? A survey of the empirical literature. Journal of Economic Surveys, 33 (2), 516-540.
41. Huberman, G. (2001). Familiarity breeds investment. The Review of Financial Studies, 14 (3), 659-680.
42. Mohamed, I. A., Evans, K., & Tirimba, O. I. (2015). Analysis of the effectiveness of budgetary control techniques on organizational performance at Dara-Salaam bank headquarters in hargeisa Somaliland. International Journal of Business Management and Economic Research (IJBMER), 6 (6), 327-340.
43. Rovai, A. P., Baker, J. D., & Ponton, M. K. (2013). Social science research design and statistics: A practitioner's guide to research methods and IBM SPSS. Watertree Press LLC.
44. Osei-Assibey, E., Domfeh, K. O., & Danquah, M. (2018). Corruption, institutions and capital flight: evidence from Sub-Saharan Africa. Journal of Economic Studies.
45. World Health Organization. (2015). Global status report on road safety 2015. World Health Organization.
46. Acharya, A. S., Prakash, A., Saxena, P., & Nigam, A. (2013). Sampling: Why and how of it. Indian Journal of Medical Specialties, 4 (2), 330-333.
47. Ndikumana, L., & Sarr, M. (2019). Capital flight, foreign direct investment and natural resources in Africa. Resources Policy, 63, 101427.
48. Battaile, B., Hernandez, F. L., & Norambuena, V. (2015). Debt sustainability in sub-Saharan Africa: Unraveling country-specific risks. World Bank Policy Research Working Paper, (7523).