The unintended side effect of the global financial safety net: elite capital flight

What drives elite capital flight into offshore destinations? While existing literature focuses on regulatory gaps or global tax competition, international bailouts themselves can catalyze elite capital flight. Specifically, we examine how two instruments of the Global Financial Safety Net (GFSN)—the International Monetary Fund (IMF) and the People’s Bank of China (PBoC)’s swap lines—impact elite incentives to move wealth offshore. We develop a two-dimensional framework centered on Disbursement Control and Elite Threat Perception to theorize when and how elites extract and expatriate wealth. Using data from 201 countries between 1990 and 2018, we find that the anticipation of IMF programs increases offshore bank deposits by 14.2%, consistent with elites responding to rising threat perception. By contrast, the introduction of PBoC swap lines increases offshore deposits by 92.3%, reflecting extraction under low disbursement control, enabling moral hazard. We illustrate the core mechanisms of our argument through mini-case studies of Angola, Tajikistan, and Mongolia. Our findings reveal a structural vulnerability in the GFSN stemming from regulatory fragmentation and uncoordinated oversight.