By Yusef Taylor @FlexDan_YT and Gibril Saine @GibbySaine
An updated debt sustainability analysis indicates that The Gambia is currently in external debt distress as a signal to a looming economic crisis unless the new government in Banjul embark on major economic reforms. That was the blowing verdict delivered by the International Monetary Fund (IMF) on a recent review of the nations overall finances.
According to the 2018 Budget Speech issued by the Ministry of Finance and Economic Affairs “The new Government inherited a debt burden of over D56.5 billion (120 percent of GDP). For the first nine months of 2017, the total public debt stood at D56.5 billion (120 percent of GDP) compared to D50.1 billion (118.5 percent of GDP) the same period in 2016.”
Due to the high nature and unsustainable levels of the country’s debt, the report shows external debt stocks to be high-risk and susceptible to exogenous (outside) shocks rendering the entire economy vulnerable. As dramatized on the chart below, a combined total of The Gambia’s external and domestic debt stock stood at an alarming one hundredth and twenty percent (120) of gross domestic product (GDP). In real terms, the country’s entire annual economic output is owned by foreign multilateral financial lenders, including the IMF, The Paris Club and Commercial Banks in the country. The external debt stock was recently elevated above 52 percent of GDP, with the ‘Fund’ conceding a minimum grant element of 35 percent to limit further increases in debt servicing costs. The ‘Barrow government’ appears to be playing a game of tied-hands and obey with the International financial creditors dancing to IMF’s tunes in the process.
Reflecting on weaker economic growth in 2016 due to a bad agricultural season and the effects of the political impasse on tourism arrival numbers, we expect an upturn in economic revival and a major boost to the country’s coffers. However, GDP growth rate remains weak and not robust enough to be able to sustain or service the high mountainous debt stock consuming a large chunk of the budget in interest payments alone.
During the 2016 September and 2017 February period, The Gambia racked up some significant amount of debt. Almost doubling its total debt from 25.1 Billion Dalasis to 48.3 Billion Dalasis. The following period showed a significant improvement as the increase was just 8.2 Billion in contrast to the previous year. However, if the current trend of borrowing is to continue then The Gambia is expected to break through the 100 Billion Dalasis debt ceiling by December 2021.
To establish this total debt for the projected years the most recent percentage trend has been used. The percentage difference between February 2017 and December 2017 is approx. 17%. This is over a period of nine months however this has been used to project future debt sums. This means that our projection is very conservative and if the trend is extrapolated over a full 12 month period then the 100 Billion Dalasis debt ceiling will be exceeded well before 2021.
The fact that the percentage difference is lowest between 2017 February and December 2017 is encouraging that the new Government has shown signs of tackling the debt burden. However, this trend will need to reduce significantly if we are to make sure The Gambia can deal with its debt burden. To re-echo, the pertinent question from Foroyaa Newspaper “This is approximately fifty-seven thousand million dalasi (57,000 Million). This means that a newborn in the Gambia will carry a debt of D29,900 (or nearly thirty thousand dalasis) on his or her head. Every Gambian should bear this in mind as we prepare for a new year. Will we be envisaging bequeathing debts or development to the future generation? The future will tell.”
2017 December – In the Budget Speech report published by the Minister of Finance the latest debt figures as of 20th Dec 2017 is 56.5 billion dalasi. http://foroyaa.gm/what-is-the-total-debt-of-the-country/
2017 February – Foroyaa Newspaper reported that “GAMBIA HAS A DEBT OF D48.3 BILLION” http://foroyaa.gm/gambia-has-a-debt-of-d48-3-billion/
2016 September – Foroyaa Newspaper raised the question “IS GAMBIA’S 25.1 BILLION DALASI DEBT PAYABLE?” http://foroyaa.gm/is-gambias-25-1-billion-dalasi-debt-payable/
2016 January – Foroyaa Newspaper reported that “The Domestic debt is 20.7 Billion. The External debt is 23.3 Billion Dalasis.” http://foroyaa.gm/what-is-the-debt-burden-of-the-country/