Sunday, February 1, 2015

Gambia's current debt crisis is self-inflicted

Will the conservative Economist magazine's piece entitled "Not contagious" about Gambia's mismanaged economy be the final act that will bring the cabinet ministers, civil servants and the favored businessmen to the realization that they are as much part of the problem as Yaya Jammeh?

How much longer and how much damage will be allowed to be inflicted on the economy by a highly corrupt system, led by Jammeh and a handful of unsavory businessmen in name only.

In this week's Economist, the current Gambian debt crisis was in the spotlight as being the result of mismanagement of public resources - an argument we've been making, three years running.

It is true that the Ebola epidemic that ravaged Guinea, Sierra Leone and Liberia in 2014 did not reach Gambian shores but it has impacted its tourism in a devastating manner, causing a 60% fall in a sector that contributes 30% to GDP.   It is equally true that Jammeh has been financing white elephants, driven more by impressing the voters than helping build a viable economy, by borrowing heavily and expensively.

The debts are not only rising exponentially, "they are of unusually short maturity" according to The Economist, and thus they become expensive to service.  In 2013, 22% of revenue collected by the regime went into service the debts.  In 2014, the figure jumped to 33%.  20% is considered the threshold of unsustainability.  Why it took the IMF over three years of irresponsible spending before deciding to finally put The Gambia on a short leash. with a Staff Monitored Program which, we are told, is still being negotiated.

The Ex-Im Bank of India has extended five Lines of Credit since 2004 totaling about $ 80 million at rates higher with shorter credit and moratorium period than the concessionary terms typically extended to highly indebted (HIPIC) countries like The Gambia from the World Bank and regional development banks.  Faced with stricter requirements like feasibility studies and other pre-investment requirements of Gambia's traditional partners, the regime find attractive non-traditional sources.

For example, the National Assembly Building, built on marshy ground without proper and adequate site survey and related technical studies, is estimated to have cost Gambian taxpayers $ 27 million. For a non-revenue generating project, the burden on the public treasury is going to add to Gambia's already heavy debt burden.  It appears the chickens have finally come home to roost.