The Gambian citizens, including the country’s well-established economists, have expressed concerns over the rising debt the West African nation continues to owe to both external and domestic creditors.
The Monetary Policy Committee of Central Bank of The Gambia has released its periodic economic outlook earlier this month indicating that, the outstanding domestic debt stock of The Gambia has increased to 34.8 billion dalasis (about 672 million dollars) at the end of November 2020 from 33.1 billion dalasis as at the end of December 2019.
To repay these loans, most of which have been credited from the International Monetary Fund (IMF), World Bank, African Development Bank, Islamic Development Bank etc, the government announced the allocation of 40 percent of tax revenue to debt servicing. This has consequent effects on other state priorities as productive sectors such as agriculture and social sectors such as health and education remain under budget.
A university student, Isatou Conteh said she was worried about the rise in the country’s debt level. For her, the essential services, such as electricity and water, remain a luxury in the country as she wondered where the huge loans are being spent on.
“What I cannot understand is, all these loans that are coming, our university is lacking basic needs like desks and other needed equipment, almost no drugs at the hospital and poverty rate are increasing,” she told Xinhua.
The Gambia’s Finance and Economic Minister Mambury Njie presented the 2021 budget at parliament two weeks ago. He revealed to the lawmakers that the country’s external debt constitutes 35.5 billion dalasis, which is 37 percent of the country’s GDP in 2020.
The Gambia’s latest loans include IMF Rapid Credit Facility to the tune of 21.3 million U.S. dollars to finance the government’s COVID-19 expenditure. Additionally, the Catastrophe Containment and Relief Trust (CCRT) provided 4.4 million U.S. dollars in debt relief, with the Debt Service Suspension Initiative (DSSI) amounting to 4 million U.S. dollars.
Minister Njie admitted that debt management is crucial given the unsustainable trajectory of the public debt, adding that the government has engaged most of its external creditors to secure a debt restructuring program.
“The recently published Medium-Term Debt Strategy would ensure a cost-effective public debt level with a prudent degree of risk as well as promote the development of our domestic debt market,” he said.
The 2020 Gambia’s Debt Sustainability Analysis (DSA) published by the Finance Ministry has indicated that The Gambia remains in debt distress as its debt is unsustainable.
Economist Nyang Njie indicated that debt servicing is basically a burden on the country’s development priorities. He said once loans are taken and repaid, the balance in the budget is always too little for the government to address other essential needs.
“Basically, a higher debt service takes away key priority areas like education, health and agriculture. We need to prioritize as a nation. As a country, we need to take a critical look and invest heavily in human development such as the welfare of Gambian people,” he continued.
According to him, while external creditors can restructure the debt to allow debtors some space of payment plan, domestic debt must be paid at due time which causes the reliance on the meagre tax revenue.
“The problem is that our domestic debt is basically a treasury bill. When the government takes the money from the general public, we don’t restructure the debt for them. They have to pay because they are not NGOs. So, when these debts are due, the government has to pay, it’s an obligation,” Mr. Njie explained.
He suggested the enactment of debt legislation ceiling that will cap the amount of borrowing.
Another economic analyst and former Gambian Minister, Sidi Sanneh warned that the debt level could even increase as the current government would prefer taking more loans to implement more infrastructural projects just to impress voters ahead of next year’s election.
“In The Gambia, an election is scheduled for 2021 which will inevitably give rise to expenditure overruns. Weak management of state-owned-enterprises also are highly susceptible to corruption and political capture of the public investment program”, the former minister said.
For him, the domestic component of the public debt is set to increase discernibly in 2021 due to the presidential elections.
In order to bring down the debt level, Mr. Sanneh suggested that The Gambia must bring fiscal discipline to bear on public finances, adding that prudent fiscal measures must be strictly applied across the public service, evenly and without exception.
“Domestic borrowing must also be brought under control. Revenue collection must improve significantly,” he added.
The Gambia’s Debt Sustainability Analysis 2020 carried out by the Ministry of Finance and Economic Affairs with its partners such as the World Bank, has advised the government to pursue a strict fiscal consolidation program to ensure that debt is brought to sustainable levels by improving revenue collection and managing expenditure.
The report also highlighted the need for the West African nation to gradually reduce the usage of expensive debt facilities, as this is a major drag on the external debt service burden. Enditem