Tuesday, November 18, 2014

Reckless handling of the Gambian economy

Gambia's National Assembly passed a supplementary appropriation bill worth over D1 billion to add to an already ballooning domestic debt.  The bill was introduced by Ousman Sonko, the Interior Minister who was standing in for the Finance Minister who's on a junket with Yaya Jammeh to Qatar looking for financial assistance.

The 2014 budget, according to Minister Ousman Sonko, is focused on fiscal prudence, aimed at addressing the growing deficit that is being financed by costly domestic borrowing when the request before the National Assembly achieves the opposite.

One of the budget items that attracted the attention of reporters is the D 86 million request to defray the cost of celebrating the 20th anniversary of the so-called 22nd July Revolution, a figure that is more than the entire annual budgets of many Ministries and Departments of government.  The Jammeh regime has to celebrate one thing or another.  A month doesn't go by without a celebration being organized in Jammeh's village of Kanilai involving huge expenditures that will be underwritten by an over-taxed population.

The regime has come under pressure from Gambian dissidents abroad over its human rights record but economic management issues are increasingly gaining ground.  In anticipation of a public backlash over the latest supplementary appropriations, Amadou Colley, the Governor of the Central Bank went before the joint National Assembly committee to prepare the ground for what he hoped would be a soft landing should the D1 billion bill reaches the National Assembly.

Supplementary budget requests and approvals have become routine, with five such requests since 2009. Previously, multiple annual budget requests were the norm, but now a single request is preferable by the regime to limit the number of public outcry to a single, as opposed to multiple outcries from the public.

The $1 billion appropriation request will be financed internally, a practice that started in 2009.  Prior to this date, donors were approached to assist in its financing but because of the lack of discipline and fiscal prudence, no donor will encourage such irresponsibility by encouraging the regime in destroying the economy.

By resorting to domestic borrowing, the government is competing with the private sector for investment funds that would have made it possible to finance expansion of the sector to create more employment for Gambians.  The 'crowding out' effect resulting also in higher interest rates is a recipe for disaster.  The effects are everywhere - businesses are fleeing to neighboring Senegal, locals are closing their market stalls and youth unemployment is hovering around 80%.

The D 1 billion rise in borrowing will most certainly exacerbate the fiscal deficit problems of the regime by slowing growth resulting from lower domestic demand.