Wednesday, January 1, 2014

THE GAMBIA: An Economy dominated by poor currency performance and strict tax rules in 2013

Think tanks say the economy is ‘still recovering’ from the severe drought that hit the country in 2011
In 2013, Gambia's currency, the Dalasi (D), recorded massive depreciation against major foreign currencies.
The performance of The Gambia’s economic growth is said to have returned to pre-drought level of about 6 per cent driven mainly by agriculture and tourism, while think tanks said the economy is “still recovering” from the severe drought of 2011. However, the poor performance of the national currency, the Dalasi (D), against major foreign currencies, strict tax rules and non-stop rising prices of basic commodities top the country’s 2013 economic highlights.

On February 4, Gambia’s Central Bank Monetary Policy Committee (MPC) confirmed the continuous weakening of the Dalasi against all major international currencies traded in the foreign exchange market. Year-on-year as of December 2012, the Dalasi depreciated against the US dollar by 11.6 per cent, pound sterling (18.0 per cent) and Euro (11.5 per cent), the MPC said.

On June 21, the Central Bank of The Gambia (CBG) suspended money transfer operators, Ria, Money Express, and W@ri as the Dalasi continues to weaken. A CBG statement said the three financial bureaus are no longer allowed “to operate in the country’s foreign exchange market until further notice.” It took four months as of October 23 before the suspension was lifted for only Ria Financial Services. Money Express and W@ri are still under suspension.

As recent as May 2013, the Dalasi depreciated against the British Pound by 12.62 per cent, the US dollar by 11.87 per cent and the Euro by 12 per cent, according to the International Monetary Fund [IMF]. IMF’s mission chief to The Gambia, David Dunn, said although inflation has picked up during 2013, it is projected to stabilize at around 5 per cent a year by 2014.

The IMF suggested further tax reforms to strengthen revenues and address costly tax expenditures, while improving international competitiveness. That advice was followed by a crackdown on small businesses like shops and market vendors who were forced to pay taxes on the spot or face closure. The authorities claim they have not been paying regularly. The banking system was regarded “well capitalized and liquid”, however, high non-performing loans required vigilance, including through intensive supervision for individual banks as needed.

While poverty remains a major challenge in The Gambia, projects that the Government said are meant to address poverty were initiated in 2013. A US $65 million National Agricultural Land and Water Management Development Project (Nema) was officially launched on March 5. It is meant to uplift the livelihoods of the rural-poor and increase economic growth in the country’s services sector. The 2013 to 2019 project is designed to increase income level of the rural folks, through improved productivity, based on sustainable land and water management practices. It is expected to directly benefit almost 150, 000 rural households across the country.

On February 20, US $3.5 million Bakoteh Fish Market jointly financed by the government, Arab Development Bank (ADB) and the Arab Bank for Economic Development in Africa (BADEA), was inaugurated. The fisheries sector contributes 4.2% to Gambia’s Gross Domestic Product, GDP, the total value of goods and services that a country produces in a year. In August, its general manager, Duwa Jatta, said the Bakoteh Fish Market produced D1.8 million in daily collection of duties from vendors.  

The Gambia Government faced a financial shortfall as its revenue and grants decreased by D4 billion in one year, from March 2012 to March 2013, data from the CBG. The MPC quarterly report stated that provisional information on government’s fiscal operations in the first quarter of 2013 indicates that revenue and grants amounted to D1.5 billion; lower than D1.9 billion in the same period in 2012.  Expenditure and net lending amounted to D1.9 billion, a contraction of 14.5% when compared to the amount registered in 2012. As a result, the government increased its borrowing from local sources like commercial banks in the country to balance the difference.  The MPC’s quarterly report on the state of the country’s economy stated that the domestic debt of the government increased to D11.3 billion as at end-March 2013.

In June this year, Gambia’s President Jammeh announced his government would ban the importation of rice into the country in 2016. The Gambia heavily depends on rice imports from south-east Asia for local consumption. “Come 2016, we will ban the importation of rice into this country in order to strengthen local food industries as well as promote food self-sufficiency and good health,” Mr Jammeh said. 

On November 21, The Gambia Groundnut Corporation (GGC) made public its readiness to buy this year’s groundnut harvest from farmers. It has been criticised in the past for buying from farmers on credit basis. Agriculture is the leading contributor to the country’s GDP of about 30%. 

On November 28, The Gambia lifted the ban on frozen chicken legs imports after it took effect in September. The “immediate ban” on the importation of chicken legs into the country was made on June 6, and was followed by mixed reaction. The Ministry of Trade, Regional Integration and Employment has said all imports of poultry products will be accompanied by what it called ‘SGS test certificate’ which will indicate that the product meets national food safety standards with no use of hormones.  

On November 5, the Joint Session of the Public Accounts and Public Enterprise committees (PAC/PEC) of The Gambia’s National Assembly criticised the Ministry of Finance and Economic Affairs for “their poor financial discipline” highlighted in the Auditor General’s Report. PAC/PEC members scrutinised and adopted the Auditor General’s Report on the audited accounts of Central Government for the year 2008, but also expressed concerns over the poor weakness of financial practice by staff of government institutions. They also raised concerns over missing $6.5 million, monies from the 50 per cent (%) sale of shares of the telecommunication and cellular companies, Gamtel and Gamcel to Spectrum, a private company in 2007. 
On October 25, President Jammeh withdrew expulsion of Lebanese business tycoon Hussein Tajudeen who was asked out of The Gambia on June 4. The proprietor of Tajco Company Ltd, was declared Persona Non-Grata over allegations he was “involved in undesirable business activities which have very serious health and economic consequences to the people and State [of The Gambia].” Tajudeen runs a collection of businesses including Gambia’s largest supermarket [Kairaba Shopping Centre], and is considered one of the biggest investors in The Gambia. His Tajco Company and an array of business establishments have been blacklisted by the US State Department over allegations of “providing funds to the terrorist-designated Lebanon-based Hezbollah movement” and “having links to Lebanese Canadian Bank accused of engaging in money laundering.”

While it was admitted there are “risks associated” with Gambia’s heavy debt burden,   particularly domestic debt which have intensified significantly in recent months - reflecting difficulties in coping with spending pressures, on December 19, the Government’s D8.6 billion budget estimate for the year 2014 was unveiled at the national assembly. The budget estimate for revenue, expenditure and development for next year will focus on fiscal prudence aimed at minimizing the growing deficit being financed by costly domestic borrowing. It is anchored on containing the net domestic borrowing to 2.5 per cent of the gross domestic product by end of 2014 and to near-zero per cent by end 2016. 
The Gambia’s minister of finance and economic affairs Hon. Kebba Touray said “despite global and domestic challenges including the international financial crises and the recent draught, The Gambia still remains resilient.” “Growth is back to its pre-draught level of about 6 per cent of GDP driven mainly by agriculture and tourism as the anchor. Therefore agriculture remains a priority for government,” he said. He added that inclusive growth, fight against inflation, a stable local currency and employment opportunities remain the medium term goal for government, and this budget is anchored on these parameters.

Compile and written by Modou S. Joof for the Serekunda-based privately-owned The Voice Newspaper.

 Follow on Twitter: @thenorthbankeve

Follow on Facebook: The-North-Bank-Evening-Standard


No comments:

Post a Comment

The views expressed in this section are the authors' own. It does not represent The North Bank Evening Standard (TNBES)'s editorial policy. Also, TNBES is not responsible for content on external links.