IMF allocates $2m to Gambia for poverty reduction

The International Monetary Fund (IMF) has approved the disbursement of US$2.3 million to The Gambia government to support programmes and structural reforms necessary to reduce the high rate of poverty and boost economic growth in the country.

 

The disbursement is following the IMF executive board’s completion of the first review of the government’s economic performance under a programme supported by the Extended Credit Facility (ECF) arrangement, according to a press release from the IMF-Gambia office on Thursday.

 

This last disbursement makes the total disbursements under the arrangement to about US$16.2 million.  

 

In May 2012, the executive board of the IMF approved a three-year ECF arrangement with an amount equivalent to about US$28.3 million for The Gambia to support the government's economic programme.

 

Economy still recovering

 

“The Gambian economy is still recovering from the severe drought of 2011,” Naoyuki Shinohara, deputy managing director and acting-chair of the IMF, said following the Board’s discussion of The Gambia.

 

The government’s policies and the support of the international donor community played an important role in enabling the recovery in agriculture to take hold, he noted.

 

However, he said there are downside risks related to The Gambia’s economic recovery such as the high domestic debt burden, weaknesses in the balance of payments, and inflationary pressures.

 

The domestic debt of the government increased to D11.3 billion, as at end-March 2013.

 

“High public indebtedness continues to pose risks to macroeconomic stability and significant costs to the budget,” Mr Shinohara affirmed.

 

Gambia Govt’s high debt burden impedes other development endeavours

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.

Mrs Songwe

“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.

Gambia’s currency loses value

As at end-April 2012, the value of The Gambia’s currency, the Dalasi, depreciated against all major international currencies, Central Bank Governor Amadou Colley revealed during the quarterly press conference of the Bank’s Monetary Policy Committee (MPC) on 18 May.

Governor Colley said the value of the Dalasi dropped by 6.86 per cent against the US Dollar, 4.64 per cent against the Pound Sterling.  In nominal effective exchange rate terms, the Dalasi depreciated by 5 per cent.

In the year to end-March 2012, money supply grew by 9.0 per cent but lower than the growth rate of 14.9 per cent in March 2011.

At the same period, the domestic debt increased to D9.2 billion, equivalent to 31.3 per cent of Gross Domestic Product (GDP).  Treasury bills and Sukuk-Al-Salaam combined, and accounting for 78.8 per cent of the debt stock, rose to D7.43 billion compared to D6.0 billion in March 2011. The Gambia’s pays almost 25% of the annual national budget to interest on domestic debt.

GAMBIAN BANKS IN TROUBLE: PROFITABILITY DECREASES, NON-PERFORMING LOANS INCREASE

The 13 banks in The Gambia, competing for less than 25% of the country’s 1.8 million people, are undergoing some turbulent times as their profitability drops while non-performing loans increase, a report compiled by the International Monetary Fund has revealed.

“With 13 banks competing for a small customer base, competition is fierce resulting in narrow profit margins,” the IMF Country Report of the Gambia, given to local journalists in Banjul on Thursday, has stated.  “Non-performing loans have increased from 5 per cent of total loans and advance in 2005 to 14.5 per cent at end 2010.”

IMF Representative to The Gambia
Mr Meshack Tunee Tijorongo

Commercial banks in The Gambia are going though some touch time more than ever before as their loans and advances portfolio continue to swell while increasing sums of monies given out as loans to customers continue to remain as bad debts or non-performing loans, which are debts not likely to be paid, giving rise to banks losing millions of dalasis in profits.

Total earnings for the banking sector as a whole was negative in 2009, provision for loan losses increased and the level of non-performing loans also increased.

RECAPITALIZATION IN 2012: Banks to Increase Capital Requirement to D200 Million

The final round for the increment of capital requirement of banks operating in The Gambia is to take effect December this year, lest the bankers forget. 

The call for the increase of capital requirement started in 2008 when the Central Bank of The Gambia (CBG) issued a directive increasing the minimum capital of banks in two stages from D60 million to D150 million by end-December 2010 and to D200 million by end-December 2012.

 

By the time of the first deadline, December 2010, eight of the fourteen banks, then, were able to increase their capital requirement on time. Five of the six remaining banks did so at the eleventh hour when the Central Bank, through the Ministry of Finance, threatened to revoke the banking licence of any bank that would default in meeting the requirement.

 

GAMBIA’S CURRENCY TAKES DOWNWARD SLOPE

As at end-December 2011, the value of The Gambia’s currency, the Dalasi, depreciated against all major international currencies, Central Bank Governor Amadou Colley revealed on Tuesday at the quarterly press conference of the Bank’s Monetary Policy Committee (MPC).

Governor Colley

Governor Colley said the Dalasi weakened against the US Dollar by 7.7 per cent, the Pound Sterling 6.9 per cent, and the Euro 8.8 per cent. 

Consumer price inflation, which measures changes in the price level of consumer goods and services purchased by households, depreciated to 4.4 per cent in December 2011, lower than the 5.8 per cent in December 2010.

However, according to Governor Colley, average inflation has declined, albeit slightly, to 4.8 per cent from 5.0 per cent in December 2010. 

Dalasi notes

Inflation, he said, is expected to remain in single digit in 2012 predicated on prudent implementation and fiscal policies as well as the easing of the global food prices.

Data from the Gambia Bureau of Statistics indicate that the Gambian economy grew by 5.4 per cent in 2011, slightly lower than the 5.5 per cent and 6.7 per cent in 2010 and 2009 respectively. 

Provisional data indicate an improved government fiscal position in 2011.  The country’s revenue and grants increased from D5.0 billion in 2010 to D5.2 billion in 2011, equivalent to 16.1 per cent of Gross Domestic Product (GDP), which is the total monetary value of all goods and services produced domestically in the country over a specified period. 

Domestic revenue, comprising tax and non-tax revenue, also rose to D4.2 billion representing 6.9 per cent of GDP.

PRICES OF LOCALLY PRODUCED GOODS MAY FURTHER INCREASE

The prices of some locally produced goods will start to skyrocket come 2012 as the government has added more tax on domestically produced goods, something that will surely reflect on the final prices paid for these goods by consumers, whose earnings rarely increase.

As part of measures to remedy the declining revenue performance of the government, the Ministry of Finance and Economic Affairs has announced that come 2012 it will widen the tax base in order to reverse the current decline in revenue and also reduce the swelling deficit of the country to the target that will allow sustainable growth in the economy.

Mambury Njie, Gambia's Minister of Finance

In this light, the Finance and Economic Affairs Minister Hon. Mambury Njie, while delivering the 2012 budget speech, said the government will expand excise tax coverage through the collection of excise taxes on domestically produced goods.  Excise tax is a tax levy on goods produced locally.

“This will certainly increase the cost on local producers,” said Abdoulie Baks Touray, an economist and financial analyst, who spoke to Marketplace Magazine shortly after the minister delivered the budget speech at the National Assembly on 17 December 2011. 

GOV’T INTENDS TO EASE TAXATION BUT WANTS MORE TAX REVENUE

While the Gambia government is grappling with reversing the trend of the “significant drop” in revenues as a percentage to GDP from 17.5 per cent in 2007 to about 14 per cent in 2011, it also plans to put in place fiscal reforms that will review higher tax rates as well as broaden the tax base to make tax payments less burdensome.

With over 80 per cent of the Gambia government’s 2012 estimated total revenue to come from mainly taxation, it is interesting to see how the government could implement tax reforms that would ease out the increasing tax burden on businesses, entrepreneurs and, by extension, the people in 2012.

Gambia's Minister of Finance, Hon. Mambury Njie

However, according to the Minister of Finance and Economic Affairs, Mambury Njie, who read the 2012 national budget on 16 December at the National Assembly, the Gambia government intends to apply fiscal reforms that will include comprehensive tax reforms aimed at easing out the pressure and cumbersomeness of taxation in the country.

The finance minister said: “Fiscal reforms will also include a comprehensive tax reform with broad objectives of making the tax system much simpler, transparent and investment friendly by reviewing higher tax rates as well as broadening the tax base to make tax payments less burdensome.”

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.

Gambia’s economic growth slows down

The growth of The Gambia’s economy is projected to slow down from 6.1% in 2010 to 5.5% in 2011, according to the Central Bank of The Gambia.

The Gambia economy is experiencing increasing budget deficit as the government continues to spend more than its revenue. 

CBG Governor, Amadou Colley

According to the latest quarterly monetary report of the Central Bank of The Gambia (CBG), the deficit of the government has increased by almost D200 million.   CBG Governor Amadou Kolley said the overall budget balance, including grants, on commitment basis was a deficit of D714.50 million.  This is equivalent to 2.2 per cent of the country’s Gross Domestic Product (GDP) and it is higher than a deficit of D530 equivalent to 1.8% of GDP in the corresponding year in 2010.

GDP is the total monetary value of all goods and services produced domestically in the country over a specified period.  The growth of GDP from one period to another is an indication of how healthy the country's economy is.

Gambia Gov’t chop-off more than D200 million from consolidated fund

The government of The Gambia has received green light from the National Assembly to take an estimated whooping sum of D219, 800, 000 from the Consolidated Revenue Fund more than 100% the amount Parliament approved last year.

The National Assembly of The Gambia endorsed the Supplementary Appropriation Bill, 2011, which gives the government the authority to take the additional amount from the Consolidated Fund for the period 1st January 2011 to 31st December 2011, to finance some of its projects and activities. 

Even though D5.65 billion was the estimated amount budgeted as the government expenditure, to finance all its projects and activities for the whole of 2011; the Finance Minister said during the year certain un-anticipated expenditure came up that had to be met with urgency, hence the need for supplementary fund.

Salary accounts for civil servants: a step in the right direction

By Lamin Jahateh, Banjul A recent statement from The Gambia government through the directorate of the National Treasury urges all civil servants within the Greater Banjul Area from grade 2 and above to open salary accounts “through which their salaries will be paid”. The new development has a lot of positive effects it can engender in the national economy, such as giving the banks greater financial intermediation, and enabling them to have more resources to lend to the people, which can spur investment growth and national development. It can also give civil servants a good track record of banking relationship as well as enable them to get loans from banks. The association of bankers in the country has therefore lent its support to the initiative saying “it is a step in the right direction” since it will ensure all civil servants within the Greater Banjul Area open salary accounts. Pic: Mr. Mamour Malick Jagne, Executive Secretary of Gambia Bankers Association “This is a most welcome move. It is a step in the right direction,” said Mamoud Jagne, executive secretary of Gambia Bankers Association (GBA).  “It is a means of incorporating all those who are not in the formal banking sector to come to the banking sector.” Mr Jagne also encourages civil servants in the provinces that have access to banks to also open salary account. “I would even encourage those who are not within the Greater Banjul Area, but they are in the provinces - in places that are not far from banks - to open salary accounts,” he said. Outlining the benefits mass civil servant salary accounts would have in the economy and to civil servants, the GBA executive secretary said: “This has a lot of positive effects in the economy: It helps to strengthen the banking industry; it gives the banks greater financial intermediation, and it enables the banks to have more resources to lend to the people. “Furthermore, on the side of the civil servants, it gives you a history of banking relationship, it enables you to get some loans from the bank, and it also gives you security of your funds and you can access it at anytime. “This is a very good development and I will encourage everyone, whether in the civil service, in the parastatals or anybody who is earning an income to open an account and use the account so that you have a financial history with an institutions that in the day of need they can support you.” Mixed concerns However, since the announcement was made, many people have expressed concern and worries that the new development will give rise to congestion of banking halls and delay in receiving salaries, as lots of employees would swarm the banks at the end of each month to collect their salaries. Some civil servants who spoke to this reporter on the issue, expressed dissatisfaction with the directives from the National Treasury, saying that apart from the hours they will spend at the bank waiting to receive their salaries, their take-home pay will suffer charge cuts and deductions that can be unbearable.  “Really I am not encouraged by the whole system,” said Fabakary Kujabi, a grade 4 salary earner. However, Ousman Sonko, another government employee, said a salary account will make it possible for employees to have loan from the banks. “So it is a welcome move and it has come at the right time”. The banks, it is expected, can live up to the challenge of serving the banking public and the mass of would-be salary account holders. “This is because the banks are businesses that are concerned about quality and efficient service delivery,” the GBA executive secretary said. He added: “The banks are businesses and are concerned about the comfort and the quality of their services. I can say that the banks, as from now, will respond by making sure that people spend less time, and if they know that more people are coming they will employ more staff, and that alone have its own benefits in the sense that you employ more cashiers to attend to these people, and people will spend less time in the banks.” The order of day in the region Creating salary accounts for government employees is fast becoming the order of the day in many countries in the region, such as Malawi, whose government has just issued a similar directive that all civil servants in the country should open salary accounts; although many civil servants in that southern African country have so far condemned the move saying the banks will cut some charges from their already “small salaries”. As similar fears as those of the Malawians loom large among government employees in The Gambia, the GBA executive secretary says favourable terms of accounts and their benefits can be differed from bank to bank. “In The Gambia, we have 13 banks that are competing and I am sure if you go to a bank and negotiate your terms and conditions you will get a good deal that you can afford,” Mr Jagne argued. “So I am not worried about that aspect of it because the competition will force the banks to give customers the best deal possible. When you go to any bank to open a salary account, you can negotiate with them and have a good deal.”