The Gambia government’s high domestic debt burden, which continues to rise by the day and interest payment of which consumes more than 22% of the public revenues, is crowding out other public expenditures as there is no space to increase funding for employment creation, purchase drug for the hospitals, and other pressing national needs.
“The debt dynamics today are dragging down in the economy and cold undermine growth in the future,” the World Bank regional director for The Gambia, Senegal, Cape Verde, Guinea Bissau, and Mauritania, Vera Songwe, has said.
Speaking at the recently ended (12 – 13 July) resource mobilization and investment for the Programme for Accelerated Growth and Employment (PAGE), Mrs Songwe said The Gambia’s debt has increased from 61.7 per cent in 2009 to 68.4 per cent in 2011. Interest payments on debt are 22.5 per cent of public revenues. The World Bank director observed that if this trend continues, the government will have to forgo necessary infrastructure investments in energy and road construction.
Apart from reducing government’s power to channels fund to other areas, the high domestic borrowing is also pushing up interest rates and denying the private sector of the much needed fund for investment to generate employment.
“The private sector does not have access to affordable financing to step in where the government cannot. This makes The Gambia uncompetitive and you lose investments, which means no jobs for the youth,” Mrs Songwe said.
If this macro-economic challenge of the government is not addressed, the World Bank said it could take The Gambia down the path of a vicious low growth cycle. “The Gambia needs to make sure it remains vigilant in this area,” Mrs Songwe said.
As strategy for renewed and sustained growth, the World Bank states The Gambia, must tackle the debt issue head on.
Poor private sector business environment
Various indicators of The Gambia’s business environment has pointed out that the country’s business climate still needs a lot of improvement.
The Gambia is 148 out of 183 in the World Bank Doing Business report, a loss of 13 points between 2009 and 2011.
The World Competitiveness index also shows Gambia’s competitiveness declining. On the logistic front, the country is also slipping but the recent signing of the trans-Gambia bridge with the African Development Bank the situation might improve somewhat.
The World Bank representative said The Gambia’s private sector lamented tax, access to finance, the exchange rate regime and energy as big impediments to investments in the country.
“We encourage the government to continue improving the business environment and to maintain an active dialogue with the private sector,” she said, adding: “The Gambia must work to attract more private sector investments.”
The government must be focus on creating an environment conducive for private sector investment, for the economic growth to be pro-poor.
If the macroeconomic challenge is not addressed and business environment for private sector investment improved, the World Bank noted, The Gambia is at risk of not achieving the goals set out in the Programme for Accelerated Growth and Employment (PAGE) which is Gambia’s national medium term development strategy by which it hopes to transform the country into a middle-income level by 2015.
Through the PAGE, the government hopes to significantly improve the rate of investment in productive sectors, modernize the infrastructural base, and create a vast pool of skilled and healthy populace to manage available resources more effectively and efficiently.