Tuesday, October 8, 2013

Economic challenges add to Jammeh's woes

The political fortunes of Yaya Jammeh started to head south just as the economy begins to show enormous strain across sectors with unemployment still showing little or no sign of improving anytime soon.

The tourism sector is not expected to perform better this season than last year despite projections indicating otherwise.  The Commonwealth debacle will undoubtedly impact the sector but the prevalence of checkpoints of armed uniformed security personnel making tourist areas look more like occupied areas than vacationing spots is causing tourist to look for alternative destinations.  The reputation of Jammeh as a human rights abuser has finally penetrated a once impregnable naivety of the typical tourist who visit Gambia, and declining figures in repeat visitors is testimony to increase awareness of the deplorable condition that ordinary Gambians live under the dictatorship.  Tour operators in some European markets are telling tourism authorities that unless the tourism areas are demilitarized, the Gambia should expect a continued decline in tourist visit.  It is common for rogue soldiers to harass both locals and tourist, especially in the beach areas.

Agriculture is under-performing due to government neglect despite the public posturing by a regime that has has it's slogan "grow what you eat, and eat what you grow", and a leader of government that prides himself of owning dozens of farms from one end of the country to the other that are farmed by ordinary citizens instead of working their own lands.  The sector that contributes 30% of GDP and employs over 70% of the rural population has experienced a continued decline in production since Jammeh seized power illegally.  Under Jammeh, investment in agriculture declined with extension services neglected, and investment in agricultural research all but abandoned.

On the monetary front, the dictatorship seized authority from the Central Bank of The Gambia (CBG) and started managing monetary affairs from State House threatening the very monetary infrastructure that had been painstaking built nearly thirty years ago, starting with the Economic Recovery Program (ERP) in 1986. The flexible exchange rate system formed the centerpiece of the foreign exchange reforms. But for it to succeed, it had to be accompanied by comprehensive and consistent set of policy changes.  Specifically, the budget deficit would have to be under control, and the rate of growth of money and credit has to decline.

Of course, these set of policy changes had to be accompanied by other equally drastic measures designed to Gambia's economic house in order.  These policy changes came at a high human cost and sacrifice.  Jammeh seized power in 1994 and all these sacrifices became threatened by an incompetent and arrogant regime. Presently, the flexible exchange rate system has been tampered with by Jammeh's frequent interference in the foreign exchange market resulting in artificial shortages due primarily to market uncertainty.  Despite warnings to refrain from interfering in the market, Jammeh and his State House staff continue to issue administrative fiats that fix rates in contravention of existing laws.

The banking sector is currently experiencing cash shortage as a result of the disequilibrium caused by a regime that has its hands in monetary policy as well.  The extraordinarily large number of banks serving a relatively small economy only adds to the problems facing the banking industry.  The foreign exchange squeeze has caused shortages on imported goods, including rice which is the staple food.  These shortages threaten to be a permanent fixture unless the regime reverses course and stop interfering in the market, and allow the Central Bank to assume its proper and legal role.

Exogenous factors always play a critical role in economies, especially in small ones like Gambia's, but most of the current economic problems are self-inflicted.  The dictatorship's persistent interference in all aspect of economic management, coupled with inadequately trained economic managers appointed on the basis of political affiliation than on competence which has made the successful management of the economy a near impossibility. Rules and regulations are disrespected and proven policies discarded because of the high level of corruption that has been institutionalized since the 1994 coup d'etat.