An analysis of the Budget Speech 2019

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By Basil Jones, PhD

The 2019 budget speech discussion was overtaken by the debates and discussions on the Supplementary Budget, and hence little time was spent on an analysis of the 2019 budget. Just out of curiosity, while reading the budget speech, I was jotting down what are the key targets of the sectors, by the time I finish reading the speech, I had come up with a matrix of commitments and outcome and targets that could be monitored. Overall the quality of the budget speech could have been better presented. It brings back memories when I was at the Central Bank of the Gambia and worked under two fine economists in the Economic Research Department, Momodou Ceesay and Momodou Foon. We use to prepare the developments in the international economy and its impact on the Gambian economy as well as the section on monetary developments. Foon was the expert on monetary developments and Ceesay knew the Balance of payments to his finger tips. In those days we did analytical work and use to calculate the total revenue accruing to the economy from Tourism as well as estimates of agriculture output mainly groundnut production and revenue from groundnut exports. This is what is relevant for Gambian farmers and it is not enough for the speech to just mention that an increase in export will boost foreign currency earnings without giving numbers.

One figure that was just glossed over and which is very significant especially for Diaspora Gambians is the current transfer (mainly REMITTANCES) figure of USD136.7 million. Compare this to the total reserves of the country of USD153.3 million (or 3 months of import cover). The magnitude of remittances contributes significantly to the Gambian economy almost close to the total reserves of the country. There is a huge potential in harnessing remittances for development in the Gambia rather than just for consumption. Some countries have been successful in issuing diaspora bonds for example to develop infrastructure.

Fiscal outlook. Total revenue and grant for 2019 is D25.3 billion of which domestic revenue is D11.8 billion (with D10.9 billion as TAX revenue), this means that D13.5 billion which is more than what is raised domestically need to be found either from raising taxes and from grants. The revenue generation is structurally low in the Gambia due to the low level of institutional capacity and economic development.

On the expenditure side, total expenditure and net lending is projected at D28.7 billion. The fiscal deficit in the budget is given asD3.4 billion. For 2019, the government needs to raise 53.4% of its revenue target. It is clear that the domestic tax base is low and if you just take the domestic taxes as a percentage of total revenue, it amounts to 43% ONLY. Using the D3.4 billion deficit figure also assumes that the government will be able to close the revenue gap of D13.5 billion which is a huge assumption to make. What would have been prudent is to give a breakdown of the total grant expected in 2019 and how much the new tax measures will raise. It is not evident from the figures provided how much the new tax revenue measures will raise and trying to raise revenue of D13.5 billion is a tall order. No wonder we are now seeing tax increases in cement, etc which were not factored in the budget speech. These figures are not communicated in the budget speech.

One major problem that this deficit or financing gap can lead to is increasing the level of debt especially domestic debt that will crowd out the private sector.

Clearly, the macro-fiscal situation in the economy is very challenging and expenditure control measures need to be made if the government is to meet its deficit target.

Attaching the matrix of commitments and targets from the budget speech. Ideally, each government ministry, department and agency needs to come up with a detailed annual implementation plan to which they will be held accountable for delivering results based on the resources provided by the budget. What is in the budget speech is just the tip of the iceberg.

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