By Janko Camara
I am not an admirer of the IMF as far as their interventions in Sub-Saharan Africa are concerned. This is because generally, they have not been doing a good job in diagnosing the ills of our economies and the one-cap-fits-all panaceas usually provided are even more worrying considering that individual African economies have their own peculiarities. Therefore, without a strong grasp of the realities of our economies (or may be this is deliberate, considering their expertise), they usually rely on data provided by the host countries to prescribe solutions, without satisfying themselves with the integrity of such data.
In its most recent country report on The Gambia, Report No. 15/104, released in April 2015, the IMF said,
“The Gambian economy is facing urgent balance of payments needs triggered mostly by the impact of the regional Ebola outbreak on tourism. Although the country remains Ebola free, the regional outbreak is expected to cut by more than half tourism receipts for the 2014/15 season.”
This is the picture presented to the IMF by the Gambian authorities. But is this true? No, nothing is further from the truth. The statement is false, dishonest and greatly misleading. Why?
First, despite the hype about Tourism, it only contributes about 15% to the country’s GDP. Consequently, even though we acknowledge its relevance especially in terms of job creation, the significance of Tourism, in terms of contribution to the GDP, is usually over-blown. Agriculture remains the mainstay of the Gambian economy.
Secondly, contrary to what the authorities would like Gambians to believe, Tourists Arrival figures for 2014 have not declined by “50-60% due to Ebola, as claimed by both the Tourism Minister (posted on Theafricareport.comon 24th October 2014) and the Finance Minister (Page 6 of the 2015 Budget document). Instead, Tourist arrivals for 2014 declined by only 9% when compared to 2013 figures. Moreover, why would a 9% decline in tourist Arrivals lead to the grounding of the economy when in 2011, The Gambia experienced a 30% decline in Tourist arrivals, yet we managed to thread on despite the effects on the overall GDP? What is even more dishonest is the misleading statements of the former Finance Minister before Gambia’s Zombie Parliament. Read what Minister Touray had to say “The Tourism sector experienced robust growth in 2013/2014 with record arrivals of 171,200 Tourists compared to 157,323 Tourists in 2012/2013 representing 9 percent growth. The impressive growth in tourism in 2013 is being eclipsed [by] the negative International Media Publicity on the Ebola epidemic in some of the West African Countries, resulting in some flight cancellations and low sales for the 2014/2015 winter season”. The above statement is untrue and deliberately made to mislead Gambians and non-Gambians as far as the economic realities are concerned. To enable them use Ebola as a scapegoat and create the impression that they wanted Gambians to believe, the Minister falsified the 2012 arrival figures by reducing the actual numbers from 173,868 to 157,323 (see table below). By so doing, the 2013 figures are made to appear very impressive when compared to 2012. With an “impressive” 2013 arrival figures, the less impressive figures of 2014 drove home the point, i.e. that indeed the Ebola Epidemic was responsible for the country’s current economic woes. Please note that the Minister’s arrival figure for 2014 is very accurate. The table below shows the true numbers of tourist arrivals in The Gambia.
Tourist Arrivals (From both Traditional and Non-Traditional Sources)
From the table, two things clearly stand out:
- Tourist arrivals have already been on the decline since 2013, one year before the outbreak of the Ebola epidemic.
- The real decline in Tourist arrivals in 2014 was just 9% instead of the 50%-60% claimed by the government.
In this digital age, records cannot be easily falsified. One has to work twice harder to do that. The table below is extracted from the GBOS website, the government’s own statistics office. Readers can access and verify for themselves the true figures on tourist arrivals from 2008 – 2014:
It is ridiculous for anyone to believe that a 9% reduction in tourist arrivals in The Gambia should lead to over 50% reduction in revenue from the sector. Does that mean that the 9% that boycotted Gambia in 2014 were the high-spending tourists? If so, then our policy makers in the tourism industry do not need to be told that those tourists worth pursuing are that 9% to enable them achieve the revenue targets from the sector. It is also interesting to note that despite the insults, Great Britain remains the single most important tourist market for The Gambia.
In view of the above therefore, the current state of The Gambian economy cannot be wholly attributed to the Ebola outbreak for the real decline in tourist arrivals was just 9%. The truth is: the chickens have come home to roost. It is the culmination of many years of Economic Mismanagement that has caught up with us and, this time, it is not likely that we will recover very easily as the country’s key economic fundamentals are in far worse shape than any time in our recent history. The IMF Country Rep corroborates this view when he said, “extended period of poor economic performance has left The Gambia facing serious economic difficulties”. This means that some bitter pills will have to be prescribed before the Gambian economy can come out of the woods, if ever it will. Let us look at the Public Debt.
From the IMF Debt Sustainability Analysis, “The Gambia’s total public debt currently stands at 100 percent of GDP in nominal terms and just above 80 percent of GDP in net present value terms, more than 25 percent above the indicative threshold for public debt distress. Even under the significant fiscal consolidation foreseen under the baseline of our framework, public debt would not fall below the threshold until 2019”
“The stock of total public debt is significantly above the indicative threshold and is a major source of concern. Considering the elevated level and recent rapid growth of public debt, The Gambia faces a heightened overall risk of debt distress”.
As scary as the above statements appear, the government of The Gambia did not make any attempt in the 2015 Budget to shed light on this very important matter. The only place where they mentioned Public Debt was on Annex 5, the last page of this 50-page document. Even then, the figures of the government indicate that in the last 8 years (2008 – 2014), Gambia Government has borrowed more from external sources than from the domestic economy, as a percentage of the GDP (pp 50, 2015 Budget). However, the diagram below from the latest IMF Country Report indicates something different.
So, whose account of the story do we believe, The Gambia Government or the IMF?
In fact, according to the IMF, Gambia government’s appetite for borrowing from the domestic economy has become so alarming. Besides crowding out the Private Sector from credit facilities, the domestic banking sector is becoming seriously impacted as the commercial banks, in the words of the IMF Country Rep, “have very limited resources to meet the government’s financing needs”, since they must keep a minimum cash/liquidity reserve to cater for the cash demands of their customers/depositors. In my limited understanding, the message being passed is that there is serious Concentration Risk in the local banking sector with banks being highly exposed to the government. In theory therefore, commercial banks in The Gambia appear to be liquid, as a significant portion of their assets are held in short-term government debt (T-Bills). In reality however, they cannot easily access this money, as government has no means to repay and instead may keep re-scheduling the debt. In the worst case scenario, government can just print more money which will be less valuable than the paper used to print on. This will create a far more severe crisis than we currently have. A crisis in the banking sector will be the last straw to our dying economy.
Debt in itself, is not a bad idea provided it is put to good use e.g. channeled to ventures that will improve the capacity of the economy to produce goods and services, thus increasing the potential for overall revenue generation. The additional productive ventures will help expand the economic base and increase tax revenue even if the tax rate remains unchanged. But has that been the case in the Gambia? Increasing the rate of tax when the economic base is shrinking is, in fact, a disincentive to work. Moreover, it encourages tax evasion. In reality, therefore, whilst the government has contracted so much debt on behalf of its citizenry, the efficient and effective use of this public debt is highly questionable. Looking at the quantum of loans contracted in the last 5 years and the amount of social amenities and economically viable ventures created by the government (if any), one may ponder how we got to this mess if these loans were indeed properly channeled. We all know that basic social amenities in The Gambia remain either non-existent or very poorly provided by the state. For instance, stable electricity and water supplies remain a challenge; health and sanitation remain poor; our road networks remain poor. New ones constructed at supposedly massive costs have deteriorated within very short span of time and Rural Electrification remains partially completed. The former Finance Minister made mentioned of the Public Enterprises that the government is supposedly spending so much on to sustain them. This is proving burdensome for the state. He, however, fell short of revealing how much the state has contributed to their woeful performances. Some of these enterprises, Gamtel for instance, were thriving and in fact once the pride of the nation. Today, they have become a massive liability on the state. Sadly, as I write this piece, Gambia’s Yahya Jammeh is busy celebrating his Birthday with pomp and pageantry. I read from the Gambian online papers that up to GMD 70 Million Dalasi is spent on this event. I cannot confirm the veracity of this claim. However, if this is true, it is highly unlikely that all of that money came from Yahya Jammeh’s private pause and not from the state. Assuming the money came from his private purse, a benevolent leader would have rather channeled such a sum to helping his pauperized population instead glorifying a birthday, the true date of which remains a mystery even to the celebrant himself. But then, the most disappointing part is when those pauperized people themselves continue to hail you as the King that ever lived on this earth? Isn’t this ironical?