Monday, December 12, 2011

Gambia Revenue Signals Downward Trend while Expenditure Increases

By all indicators, The Gambia government revenue performance has signaled a downward trend over the years while expenditure has continued to increase giving rise to budget deficit that continues to swell year on year.
The country’s fiscal performance has continued to be challenged by higher-than-projected expenditures by the government that is un-matched by the country’s revenue performance.

Hon. Njie, Minister of Finace
In light of this, the Ministry of Finance and Economic Affairs has said it will widen the tax base to reverse the current decline in revenue and reduce the deficit to the target that will allow sustainable growth in the economy.

“Such measures include broaden the tax base, enhance tax payers’ compliance, and reducing the maximum tax rate,” Hon. Mamburay Njie, Minister of Finance and Economic Affairs (MOFEA), said recently at the National Assembly while tabling the draft 2012 estimates of revenue and expenditure including the development expenditure of the government for the fiscal year January 1 to December 31, 2012.

Hon. Njie said the Gambia Revenue Authority (GRA), the body tasked with the responsibility to enhance efficiency in tax administration so as to harmonize and optimize revenue collection, will strengthen its enforcement of tax laws. 

He said tax tribunal will be established and tax payer education, geared towards enhancing tax compliance, will be reinforced.

Mr Momodou Sabally, Director of Budget
He pointed out that government fiscal operations during the first three quarters of 2011 yielded an overall deficit (excluding grants) of D889.9 million, equivalent to 2.8% of the country’s Gross Domestic Products (GDP), mirroring expenditure of D3.7 billion against a revenue outturn of D2.8 billion during the period under review.

The total fiscal deficit of the country, in 2011, was estimated at D466.36 million or 1.47% of GDP, but the deficit for the three quarters of 2011 has almost doubled the projected amount for the whole year.

The Finance Minister explains: “Volatility in revenue performance has been evident which affects both the budget preparation and execution process.”

2012 budget estimates

Total revenue and grants in 2012 is projected at D5.77 billion compared to D5.65 billion in 2011.  The Finance Minister said revenue is expected to increase in nominal terms from D4.59 billion in 2011 to D4.61 billion in 2012 on account of increased receipts from non-tax revenue.

The GRA is expected to make significant improvements in tax administration by improving compliance levels through better tax auditing practices among other strategies.

Expenditure projected to increase

Total expenditure and net-lending, according to Hon. Njie, is projected to increase by about 10% from D6.11 billion in 2011 to D6.72 in 2012. 

The rise in total expenditure is due to mainly by increases in other current expenditures and anticipated project grants, he said.

Personnel expenditure is projected to increase from D1.67 billion in 2011 to D1.7 billion in 2012, representing an increase of 3%. 

“Other charges are estimated to stand at D2.54 billion in 2012 compared to D2.26 billion in 2011, reflecting a year-on-year growth of 12.6 percent,” he said, adding that the increased provision to accommodate the new sub-vented institutions in the budget contributed to the increase in other charges and expenditures.

Domestic borrowing swell

Domestic borrowing is projected to swell up from D120 million to D541 million in 2012.

Interest paid on domestic debt accounts for almost 20 – 25% of the national budget, over the years

The Finance Minister said revenue projections for 2012 have been cautioned. “Moreover to avoid a spiraling of our already high domestic debt, domestic financing of the budget has been limited to about D541 million,” he said. 

Accordingly there was rigorous prioritization in this budget to ensure that expenditure outlays match revenue projections as much as possible, within a limited scope, for increase in domestic debt to finance the deficit.

Government will continue to consolidate the macroeconomic gains record for the past successive years. The economy remains strong despite the uncertainties in the global economic environment. GDP is estimated to grow by 5.5% in 2011 underpinned by healthy performance of the agricultural and telecommunication sectors. 

Inflation decreases

The Minister says inflations continues to be subdued with end-September 2011 inflation standing at 4.1 per cent compared to 6.2 % a year earlier.  This means the value of the Dalasi is currently decreased by 4.1% compared to a reduction of 6.2%.

“The decline in inflation is explained mainly by food items, accounting for 55 % of the weight of the basket of goods and services,” the Finance Minister said.


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