By Gibril Saine, @GibbySaine and Yusef Taylor @FlexDan_YT
A Looming Debt Crisis
A couple of months back in March 2018, a colleague & I came up with a research piece on The Gambia’s mounting debt burden which is projected to exceed one hundred billion dalasis (100,000,000,000) by 2021. For a country that has just paid 40% of its national budget allocation in interest alone servicing mounting debts for no faults of its own, something has to give if West Africa’s smallest nation-state is to meet its sustainable development goals target.
IMF Report – External debt: $619.7 million (31 December 2017 est.) As of December 2016, the total amount was $571.2 million. This translates to a 10% increase on GDP figures. External debt is described as the total public and private debt owed to non-residents repayable in internationally accepted currencies calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.
More surprising, however, the international community, IMF & World Bank, in particular, continue to saddle the country to new loan regimes and the so-called structural reform conditionalities, tying hands further of a poverty-stricken nation unable to pay off its bills. Earlier this week, it was reported that Gambia’s debt stock stood at an alarming 130% of GDP, up by a mile from the 2017 figure of 120%GDP. For developing nations the recommended debt to GDP ratio is not more than 40% while for developed countries it’s 60%. The Gambia has now exceeded twice the recommended limit for a developed nation.
The Debt to GDP ratio is an estimate of how a nation can repay its debt and also gives investors an indication of their likelihood of receiving payment from the government. It highlights if a country is exceeding its amount it can pay based on how much services and goods they produce over a period. If a country has a 20% of GDP ratio that means they owe 20% of the goods and services they produce that year. In The Gambia’s case, we owe 30% more than our entire national GDP. Meaning we will need at least two years of paying off our loans if we invested our entire GDP into debt repayments.
On a recent visit to the Gambia, the IMF team stated that “Reform of SOEs remains critical. Efforts are needed to strengthen the financial oversight of SOEs, including through the conduct of special multiyear audits, and enforcement of SOE compliance with monthly, quarterly and annual reporting requirements.”
The Fund further enjoin onThe Central Bank of The Gambia (CBG) to maintain its flexible exchange rate policy and take concrete steps to strengthen the monetary policy framework to help ensure price stability. Looking forward, the establishment of an interest rate corridor for the policy rate will help to ensure that monetary conditions are consistent with the objective of keeping inflation at or below 5 percent.
Although one was quite reticent buying into Hon: Sedia Jatta’s assertion on IMF’s reputation given history spanning several decades in the Gambia, one does worry about tricks and brinkmanship on a newly instituted government grappling with extreme poverty, unemployment crisis amid empty national coffers.
That, simply, amounts to financial ‘gangsterism’, for the simple fact that there are no two ways about it. Questions about ‘sincerity’ ought to be asked about Gambia’s development partner institutions. On a phone call with Jan Molby, who conducted the country review, from IMF HQ in DC, we exchanged difficult but frank (confidential). The Fund has to realise it simply cannot play games with innocent lives oblivious to the plight & sufferings of ordinary Gambians struggling to make ends meet.
Today I do not care for protocol, for Gambia’s development partners are mere so-called friends. So-called in the sense that the mounting debt burden, unsustainable as it is, continues to stifle its national development plans, likelihood to cause a major banking crisis on our hands.
With all mounting evidence in regards to the country’s economic governance and situation therein, we felt that a looming debt crisis is on the horizon unless the international community mobilises to Gambia’s aid. To be clear, we are not economists as such, but analysts have given data & the evidence out there in respect to the precarious inherited economy from the previous regime. The only other available option is for DEBT WIPE-OFF if the Gambia is to succeed in improving the dire conditions of its citizens – in the process bring sanity to the economy.
A Ticking Debt-Bomb
With regards to the looming financial crisis, i blame the politicians, not just ‘Jammeh’, but the current lot too. On our previous offering on the national debt trauma on budget priorities, finance minister ‘Sanneh’ came out throwing stones, countering that ”it is normal for government to go around the world contract loans and borrow money from international partners” Fine, i hear you, but it is otherwise disingenuous of the honourable minister to lead that way the state of the nation’s finances – which he perfectly understood. From our findings, today, The Gambia is facing a debt time-bomb, under the cusp of the most corrosive debt stranglehold in the region as a measurement of gross domestic product (GDP).
China has joined the fray, so is Turkey and the EU each heaping more loan burden and such strangulating conditionalities on the country for a piece of tomorrow.
In international diplomacy, it pays well when an adversarial state senses weak leadership and to pounce as such push forth its national interest ambition, even aggressive. It is interesting to watch the influence of Senegal on the country, or the indulgence of China across the ‘Golden’ land sic.
A case in point resonates with the Philippines president, Rodrigo Duarte, emboldened, embarking on a murderous craze unchecked, sensing weak leadership in the United States under Trump. That is why it is a win-win for Russia but also China having a visionless & clueless demagogue in the White House in pursuit of their own national interest ambition around the world. That is the nature of international relations sometimes, more the reason to concern about president Barrow’s inexperienced or sophistication to extrapolate what the National Interest truly represents.
Even more disturbing is the fact that there is not a single fishing company ‘The Gambia owned creating jobs and wealth for the economy. And you tell me the country has a dedicated fisheries ministry – as the Golden Lead run riot in total disregard to the law & environmental best practices. On commercial farming ventures, one wonders how many Gambian companies are registered on that front and what moves are afoot to transform to a commercial agricultural system for an all year round quest geared towards food self-sufficiency.
I have often said the Gambia is a social democracy that government has to somehow involve in the economy revive growth give incentives to local startup and companies to get a foothold discourage monopoly and excessive profiteering. In 1960 after the Korean war, South Korea did just that with local companies like Samsung and LG, big heavyweight multinationals today. European firms benefit in the form of incentives and various forms, and China is on a similar trend from some twenty-five years ago – the rest is history as they say.
Liberals will tell you to let the market decide, fine, but for the Gambia and Africa’s success, it pays well for state involvement in the economy however minimal.
Fellow Gambians – the country is under the grip of a rising debt mountain growing worst by the day. A crisis within banking is in sight, a drawback to potential investors. Even if it all looks cool and dandy above the surface, there exists a deep hole at the heart of the nation’s finances, which Finance Minister Amadou Sanneh and the ‘Paris Club’ players stood well aware of.
The administration ought to do away with corrupt CEOs & unqualified civil servants manning big posts for well-trained rearrangement and restoration process across the civil service – Meritocracy and Truth over nepotism & falsehood, thus the norm.