The governor of the Central Bank of the Gambia, Mr. Amadou Colley, has said that government’s expenditure has been more than the revenue, excluding grants, by about D2.23 billion in the first half of 2015, according to provisional data on the fiscal operations of The Gambia. Mr. Colley added that the deficit is one of the highest in recent times and that it now stands at thirteen per cent of The Gambia’s gross domestic product (GDP).
The governor, who is also the chairman of the so called Monetary Policy Committee, said this in a press briefing with reporters following their delayed second meeting on Wednesday 5th August 2015. Observers who would not be named but volunteered talking to a Kairo News correspondent intimated that the delay in the publication of their quarterly issuance of press release on the state of the economy. “but since now the Gambian one-man ruler knows also outside financial aid is the thing he must resort to he gave the clearance for such a critical release by a government institution of the Third Republic.”
The release issued by Coley continued, “However, thanks to moneys given to the country by foreign governments and/or multinationals, the government’s overall budget deficit, including grants, is estimated at D829.4 million or 5 per cent of GDP. In the first half of 2014, the deficit was D729.8 million.”
“Colley stated that “government’s total revenue and grants amounted to D5.23 billion, more than the D4.34 billion recorded in the corresponding period in 2014.
“Domestic revenue, comprising tax and non-tax revenue, amounted to D3.8 billion which was an increase of 17 per cent from the corresponding period in 2014.
On the other hand, the CBG boss said, the total expenditure and net lending amounted to D6.1 billion, an increase from D5.1 billion registered in the first half of 2014.
According to Colley’s explanation, the government’s interest payment has increased to 81 per cent, which led to the increase in recurrent expenditure to D3.9 billion or by 17.1 per cent.
Now let us hear the IMF version of what the problem is:
A mission from the International Monetary Fund (IMF) led by Bhaswar Mukhopadhyay, visited Banjul from June 9-22, 2015 to conduct discussions for the 2015 Article IV consultations and to take stock of performance under the Staff Monitored Program (SMP) approved in April 20151. At the end of the mission Mr. Mukhopadhyay issued the following statement:
“The Gambian economy experienced sizable exogenous shocks in 2014 on top of persistent policy slippages. The regional Ebola outbreak is estimated to have cut tourism receipts for the 2014/15 season by more than half while the delayed summer rains in 2014 led to a 15 percent decline of the year’s crop with serious implications for food security. These shocks come in the wake of an extended period of weak policy implementation, putting additional pressure on the current account, fiscal deficits and public debt. Real GDP contracted by about 0.25 percent in 2014 while inflation increased to about 7 percent at end-2014 from 5.5 at end-2013. Gross international reserves declined from almost 5 months of imports at end-2013 to 3.7 months at end-2014 while public debt rose sharply to 100 percent of GDP as at end-2014.
“To support the Gambian economy the IMF disbursed $10.8 million in April 20152. The Gambian authorities also undertook to implement corrective policies with the broad objective of achieving a sound fiscal position over the medium-term, which IMF staff agreed to monitor at the authorities’ request. The Gambia’s other development partners committed to provide significant levels of assistance in support of the Gambian authorities’ policy efforts.
“The outlook for 2015 is, however, again clouded by policy slippages. Significant spending pressures have emerged since April 2015, and faced with pressures on the exchange rate at the onset of the lean season for foreign exchange receipts, the authorities issued a directive fixing the exchange rate at a level overvalued by more than 20 percent compared with prevailing market rates in May. The significant revenue fallout from this measure and the spending started to weigh on the government’s domestic borrowing.”
To put it in a nut shell, in the words of the IMF staff, “persistent policy slippages,” were key to the whole problem. In the eyes of Gambians such slippages are seen daily on the streets, on public media and in Gambian officialdom in the form of never-ending incoming of plush and luxurious vehicles that have to be fuelled with tax-payers’ money. The frequent holding of frivolous privately personal celebratory functions treated with official expenses; the praxis of free and licensed immunity from accountability by the executive; executive thievery and lawlessness. But Mr. Colley cannot be blamed as much as Mukhopadhyay can be, in our opinion.
Mr. Colley, an ethnic kinsman of the Gambia autocrat’s, is also only a civil servant of a one- person government, has risked more than just a job, but his life which Mr. Mukhopadhyay is not likely to. So we think much praise is due to Mr. Amadou Colley. Thus he continued :
“As the government continues to register revenue shortfall, it also significantly increases its borrowing from local banks and other domestic sources. In this circumstance, the domestic debt rose to D19.1 billion by 30.4 per cent from a year earlier, whilst Treasury bills accounted for 69 per cent of the domestic debt.”
Colley revealed that the real GDP growth estimate for The Gambia has been revised from an earlier to 0.5 per cent for 2014 to 1.6 per cent due to weaker growth of 3.3 per cent in the transport and communication sectors than previously estimated.Similarly, growth in the services sector was also revised downwards to 5.2 per cent, lower than the earlier projection of 6.9 per cent.
Though the Dalasi is said to have artificially appreciated, because of a May 4th presidential directive, without Mr. Colley being informed, inflation continues to increase unabatedly even beyond the expected level. Measured by the national consumer price index, inflation accelerated to 7.2 per cent in June 2015, from 5.4 per cent in June 2014.
Mr. Colley said the committee is concerned that consumer price inflation has continued to exceed the target of 5 per cent and inflation is forecast to remain at elevated levels.
“Failure to act against these heightened pressures may cause prices to accelerate further and the high inflation expectations to become more entrenched,” Colley said.
However, despite all, Colley continued to pretend as if his toothless Monetary Policy Committee can decide to continue its supposedly tight monetary policy stance by keeping the policy rate unchanged at 23 per cent; and maintaining the reserve requirement at 15 per cent of deposit liabilities. He added that they would continue to monitor domestic and international developments and take actions as appropriate. How appropriate?