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Market Brief - Africa Economic Financial Brief 16-20 September 2013
It is widely accepted that the quality of institutions and governance are crucial determinants of a country’s economic performance. Corrupt practices distort markets and stifle economic growth and sustainable development including robbing countries of critically needed resources. Overall, corruption reduces efficiency and increases inequality. Estimates show that the cost of corruption amounts to more than 5 percent of global GDP (USD 2.6 trillion) with more than USD 1 trillion paid in bribes each year.
The overall effect of corruption on the likelihood of FDI taking place is negative. For instance2 , a recent IMF study has shown that investment in corrupt countries is almost 5 percent less than in countries that are relatively corruption-free. Correspondingly, the World Economic Forum estimates that corruption increases the cost of doing business by up to 10 percent, on average. Thus, it imposes a significant negative impact on a country’s capital productivity.