Central Bank Governor spilled the beans when he said: “We should limit ourselves on what we have or borrow what is sustainable as far as payment is concern.”
Governor Amadou Colley on Tuesday told lawmakers that the Gambia’s domestic debt stock has picked up significantly in recent years. He said this has raised concerns on sustainability.
Colley appeared before the parliamentary committee on Public Accounts and Public Enterprises. The committee examined the Central Bank’s 2013 Annual Financial and Activity Report.
The annual report recorded a dramatic increase in issuance of short-term treasury bills to finance the government’s fiscal operations. It stated that as at end 2013, outstanding domestic debt, mainly short-term debt, totaled D13.5 billion (39 per cent of the GDP)
– an increase of 25.1 per cent from 2012.
The report indicated that Treasury bills and Sukuk Al Salam, amounting for 81.0 per cent and 2.9 per cent of the debt, increased by 34.5 per
cent and 13.6 per cent respectively. The net domestic debt ceiling for 2013 agreed under the ECF programme with IMF was breached.
Majority leader Hon. Fabakary Tombong Jatta said domestic borrowing has been a concern and many times finance [ministry] has promised to keep it down. He asked Kolley: “In your own opinion what is the way forward?”
“I think we should limit ourselves on what we have or borrow what is sustainable,” the governor replied. “We are working with the ministry
of finance in taking debts that are sustainable.”
He explained that The Gambia government is competing with borrowers for funds and that is giving rise to the huge domestic debt.
“When you talk of government crowding out private sector, basically the funds that domestic business entities need is taken [away] by the
government and because [its] requirement… is huge,” Kolley said.
Mr. Colley said the banks and other lenders would go for “so-called risks” to lend to the government. This is because they are assured of
getting their money back from the government.
“All governments would have to borrow domestically but not necessarily, in our situation there is always a mismatch in what we
expected to collect in revenue and expenditure,” Governor Colley said.
Kolley said the government is competing with borrowers, and the banks make the choice, in fact they have responsibility to the owners of
their banks to whom they are accountable.
He assured PAC/PEC that “if we were able to achieve the target of net domestic borrowing by the government to 2.5 per cent of GDP over the years, lending rates would come down.”
Governor Colley explains that in 2011 and 2012, “we did manage” through the treasury rate yield to bring down lending rate but each time “we are faced with kind of pressure, the budget rates go up.”
He warned: “As a government, we have to consider some physical adjustments to contain expenditure and raise our revenue through other
means. This is the solution to our problem.”