The Gambian economy is tottering on the brink of collapse, with low economic growth and resurgence inflation. There is a cost of living crisis created by a combination of low wages and high inflation. The economy under the APRC is not creating jobs that we need to raise living standards, with economic growth at only 0.5 percent in 2014, and projections for 2015 and beyond are not encouraging.
In recent years, in the face of exchange rate pressures mostly attributable to inappropriate domestic economic management, the APRC government developed the habit of direct interventions, through exchange rate directives, fixing the exchange rate. It thereby abandoned the market based policy that has significantly benefited the country since its introduction in 1986. Such direct interventions on the part of government, drives foreign investors away and reduces the level of remittances by Gambians in the Diaspora. These inconsistent policies will continue to weigh heavily on the fiscal and external sector viability of the country.
Key state-owned enterprises, particularly NAWEC, GAMTEL and the Gambia Groundnut Cooperation (GGC), face such serious financial distress, due to accumulated financial losses, that they had to be bailed out by the Gambian tax payer. In addition, most of the state enterprises continue to accumulate huge tax arrears to the Gambia Revenue Authority. These lapses in policy implementation and the failure of APRC government to implement the needed reform programme, has led to the cancellation of the IMF programme that would have brought significant donor support to the country.
In the year to end December 2015, the Governor of the Central Bank has disclosed that the domestic debt stood at D22.6 billion, 59.1 per cent from 18.6 billion, 53.0 per cent of GDP in 2014. The government has usurped the functions of the Central Bank of the Gambia through official meddling in the foreign exchange regime. Consequently, the foreign reserve cover has declined sharply.
To address these challenges My Government will take the following short, medium and long term measures:
- Improve the management of our limited resources by taking an immediate step of eliminating all wasteful spending and redirect focus on the productive sectors of the economy.
- Restore soundness in government finances through revenue and expenditure management and restoration of relations with development partners.
- Redirecting expenditure away from non-productive spending to more productive sectors such as agricultural capital spending and the protected sectors of health and education.
- Tackle the root cause of the deficit by building a more productive economy and encouraging a long term investment culture in the private and public sectors and supporting small businesses in their growth.
- In the medium term, a well-designed programme for the strengthening of state owned enterprises would be put in place to make them more autonomous and competitive as well as less dependent on government subventions and bailouts.
- The Central Bank’s independence would be strengthened and measures taken to deepen the financial markets, and enhance their role in mobilizing savings for the investment needs of the private sector, so as to make monetary policy more effective and the financial market more efficient.
- Maintain a liberalized trade and flexible exchange rate regime in order to continue benefitting from high levels of foreign direct investment and remittances.
- Subsistence rain fed agriculture would be modernized, by promoting investment in irrigation schemes, mechanization and processing of agricultural produce on public-private partnership basis. We will create certainty for investors by taking a long-term approach to investment decisions.
For orderly implementation of the needed economic reconstruction and reform programme, we would restore our relations with our traditional development partners. In the long run more export diversification is needed to reduce the over-dependence of the economy on groundnuts and tourism.