Recent bad economic news from the IMF prompted the revisit of an article on the Gambian economy written in 2010, but updated for the readers. Since the article was first published four years ago, the regime has closed several questionable banks, but the basic problems of severe economic mismanagement continue to slowly unravel the Gambian economy.
By Mathew K. Jallow
The performance of the Gambian economy has been lackluster at best in spite of the glowing and often misleading reports by The World Bank and IMF. The World Bank and IMF have often prepared glowing reports on the performance of the Gambia’s economic, but contradictory views are apparent by so many uncontestable indicators; not the least of which are increased poverty, capital flight, lack of skilled manpower, declining agricultural sector, which resulted to a marked drop of the national GDP, among others. The defective appraisal methodologies the World Bank and IMF’s utilize to measure the performance of the Gambian economy are prone to conclusions that have absolutely no bearing on reality, primarily because the data provided by the regime, is based on fudged and manufactured numbers, and false and deceptive accounting practices and procedures. Most of the reports the World Bank and IMF prepared on the Gambian economy are disproportionately rosy, and clearly contradictions to their reports are also manifest in the total lack of improvements in the quality of life of Gambians. Moreover, marginal gains registered have primarily benefited an insignificant percentage of the population most of who either have direct access to foreign aid funds by virtue of their positions in the regime, or can access easily government administered funds through the crony culture. In spite of the World Bank and IMF reports, the Gambia has accrued a massive international debt of over $1.6 billion with a debt service of 25% of GDP, which is stifling economic development. The Gambian economy is burdened with pervasive illegal practices in the financial and banking sectors, exacerbated by pervasive corruption, chronic lack of accountability, money laundering, and recurrent budget deficits. But another failure of the Gambian economy is its dependence on foreign aid, rather than investment, as the primary engine for economic growth.
In addition, existing multitude of financial institutions are not setup to provide investment capital, either because of lack of total of liquidity, or the institutions are designed to suit small savings and micro lending; hardly enough to spur economic growth. The necessity to overhaul Gambia’s banking and financial institutions is overwhelming for several reasons; but mainly to exclude banks, which lack the capital to lend for investment, economic expansion and growth; secondly to protect Gambian consumers from losses that could be incurred in the likelihood of bank failures. Banks and fictitious financial institutions setup primarily to launder illegal drug money, counterfeit currency, other illegally money, or for the exclusive purpose of generating quick profits at the expense of Gambians, must be completely excluded from participation in the nation’s economic activity due to the likelihood of failure they pose. The mere presence of such illegal financial activities is devastating to the economy, and Gambians who entrust these banks with their life savings. However, one of the most contentious issues facing our country is Yahya Jammeh’s multiple business interests, which spread the depth and breadth of Gambia’s economy; from butchery, transport, mining, communication, construction bakery, agriculture, manufacturing, import and export, food processing, property development and management. These businesses, under Kanilai Group International, KGI, entirely owned by Yahya Jammeh, not only stifle competition, but Yahya Jammeh’s use and monopoly of state resources and state apparatus to expand the various business ventures of his company has created an unfair disadvantages for competitors, even as it dampens business morale, discourages investment and entrepreneurship, and created a near monopoly that adversely affects the entire business sector to the detriment of the country’s overall economy growth.
Despite the positive spin the World Bank and IMF reports have put on the performance of the economy over the years, Gambia’s GDPs have contracted significantly every year since 1975. The regime’s annual working capital, or the budget, if you will, is still heavily dependent on and financed by foreign aid, principally from Britain and the U.S. The Gambia’s GDP is insufficient to generate adequate revenue from export, as well as personal and business taxation in order to finance public projects, make payroll for the civil service, invest in the education, build roads infrastructure, and provide adequate health care and security for Gambians. To date, Gambia’s debt forgiveness, or debt relief, amounts to billions of dollars, and the regime is in part reliant on an existing debt-forgiveness regime to stave off total bankruptcy. The Gambia’s productivity decline can be measured by the drop from $378 per capita GDP in 1985, to $353 in 2000. And agricultural production, which previously accounted for 75% of Gambia’s GDP only two decades ago, now accounts for a paltry 22% of Gambia’s GDP, but employs 74% of the labor force. The service industry; communications, electricity generation, hotels, among others, now account for 64% of Gambia’s GDP, yet employ a mere 15% of the labor force and producing nearly two thirds of the annual GDP. This anomaly can best be explained in simpler terms resulting to 60% or more unemployed and underemployment of Gambia’s productive labor force. Significantly, Gambia’s export earnings have dropped from $.044 billion in 1975 to $.019 billion in 2000, a massive deficit of $.025 billion. In short, the Gambia is now producing far less for export, both for the international as well as the parallel, mostly local and regional markets. Additionally, the rural population, mostly self-sufficient two decades ago, are for the first completely reliant on imported food for even their daily sustenance.
Over the past two decades an increasing number of farmers have abandoned farming life and the rural countryside to migrate to metropolitan centers in the Kombo region in a rural urban drift that has completely changed the character of the Gambian economy. Clearly, there is no longer an incentive to farm due primarily to the lack of markets outlet. And farmers across the country are owed monies for produces relinquished to private merchants and traders acting on behalf of the state, but have been unable to recover their hard earned monies, some for several years. The result is a new cross-border trade; at a great loss to Gambia’s economy. Justification of the natural pull towards new market sources is found in a theory of market economy; “capital, inherently growth generating, yet constantly limited by the market in which it has grown, has historically attempted by all means-including conquest, banditry and piracy-to push the frontiers of its market.” This analogy aptly explains the phenomenon of Gambian farmers abandoning the inadequate market outlets in Gambia for alternative markets sources across the border in Senegal. The Yahya Jammeh regime will be hard pressed to show where the $1.6 billion or 48 billion dalasis of external debt was spent in Gambia. With schools in terrible state of repair and lacking teachers, the health care sector under-staffed and lacking supplies, roads in metropolitan centers and around the country in poor state of repair, economic deterioration is evident for all to see. What Yahya Jammeh is heading is not a government but a cartel of drug dealers and shady financial deals. The Gambia’s future with Yahya Jammeh at the head looks bleak, but Gambians cannot lose hope. For, someway and somehow, the Gambia will persevere and emerge from this deep political inertia as a better country. But as long as Yahya Jammeh continues his arbitrary and unilateral dictation of our fiscal and monetary policies, the Gambian economy will continue its downward slide to an inevitable meltdown and complete collapse.
Picture: Former Minister of Finance