By Yusef Taylor, @FlexDan_YT
The Ministry of Finance and Economic Affairs (MoFEA) published the approved 2021 Budget in the first week of January 2021 featuring a total expenditure of D35.1 Billion from all government funds. According to the budget approved by The Gambia’s National Assembly, total expenditure from the Government’s Local Fund (GLF) comes to almost D22.1 Billion. According to the 2021 Budget Speech delivered by Finance Minister Mambury Njie, “the coronavirus pandemic has impacted negatively on general economic activities, resulting in less than anticipated revenue collections and increased expenditures”.
More Revenue from Loans and Grants
On the revenue front, the Budget plans to raise over D15.5 Billion in Revenues in 2021, with D12.2 Billion coming from Tax Revenue, D1.5 Billion from Non-Tax Revenue and almost D1.8 Billion from Capital Revenue. This highlights that the Government continues to rely on tax to generate most of its funds.
According to the Finance Minister’s Budget Speech “Revenue and Grants for the first nine months of 2020 increased by 16 per cent from D12.3 billion (14 per cent of GDP) in the first nine months of 2019 to D14.2 billion (15 per cent of GDP). This is largely owing to an increase in indirect taxes and nontax revenue during the period.”
Counting last years losses, Hon Mambury Njie highlighted that “the revenue loss from tax expenditure for the first 9 months of 2020 stands at D2.4 billion (2.5 per cent of GDP), compared to D1.9 billion (2.2 per cent of GDP) in the same period of 2019.” During a media engagement with the Gambia Revenue Authority (GRA), their Director of Technical Services revealed that “as at end of October GRA collected D9,834,031,253 Dalasis” meaning that GRA collected over 84% of its Tax Revenue collection target for 2021 within 10 months.
70% Price Hike on Tobacco and Tobacco Products
This year the government has planned a significant number of tax reductions, according to the Budget Speech “the Air Transport Levy” and “the environmental tax of D1 per employee will” both “be eliminated”. “Excise Tax on new vehicles will also be reduced from 25 per cent to 15 per cent.” However, tobacco and tobacco products will face an increase of “at least 70 per cent of the retail price”.
One of the notable tax reforms this 2021 is the increase of the voluntary Value Added Tax registration threshold which should signal income-generating entities to voluntarily declare their tax. The budget speech highlights that “to align the voluntary Value Added Tax (VAT) registration threshold with the mandatory thresholds increased at the beginning of the year, the Voluntary threshold will be increased from D500,000 to D1,000,000.”
To better understand the Government’s revenue estimates we consulted a former Finance Minister Hon. Abdou Kolley. We asked him his view of the estimates and how realistic they were. He explained that “to determine how realistic the revenue projections are, one has to look at the underlying assumptions. As these are not handy, my opinion based on the trend, and taking into account the ongoing covid19 situation, is that the projections look reasonable. That said, our economy remains largely dependent on sources of revenue (agriculture, tourism, International trade taxes) that are highly volatile and susceptible to various domestic and international shocks, thus the need to rethink our strategy.”
D35.1 Billion Expenditure Estimated for 2021
Turning our attention to expenditure, the Gambia Government’s total expenditure of All Funds from domestic and external sources is expected to exceed D35.1 Billion in 2021. In 2019 the Gambia spent less than half of that, D15.64 Billion and approved a total expenditure of D33.46 Billion for 2020. The 2021 Approved Expenditure estimates are similar to the previous year (2020) which highlights that the total Approved Expenditure has increased by D1.64 Billion in 2021.
According to the Budget speech even though “other components of expenditure registered increases, capital expenditure declined by 17 per cent from D5.3 billion in 2019 to D4.4 billion in 2020”. According to the MoFEA “this is mainly due to a decline in the disbursement of the externally financed capital expenditure in 2020”.
This year the Government has committed a significant number of funds to Infrastructure projects. The Budget shows that the Government has appropriated over D1.9 Billion on the Ministry of Works, Transportation and Infrastructure from Government Local Funds. However, when the All Funds Appropriation estimates are observed the Government has appropriated over D5.4 Billion on the Ministry of Works. This means that the Government has committed an additional D3.4 Billion from funds outside its consolidated revenue funds. (See the 2021 Appropriation Bill below)
Looking at expenditure statistics from 2019 to date we asked Hon. Abdou Kolley to comment on how realistic the expenditure estimates were. To this, he said: “expenditure estimates largely reflect the structure/composition of the budget and the relative sizes of the various components (e.g., personnel emoluments, other recurrent expenditures, capital expenditures, debt service). So, the question is less about how realistic but more about how sustainable is the expenditure pattern. At this macro level, looking at total revenue and total expenditure and the resulting deficit, one can safely say that the expenditure pattern is not sustainable, thus there is a need to restructure the budget.”
GLF and All Funds
Below is the 2021 Approved Appropriation Bill which includes all of Government’s expenditure in 2021 from Government’s Local Funds and All Funds. We asked Hon. Abdou Kolley to define the two terms and explain their differences for better understanding.
Government Local Funds – These are monies that the National Assembly approves to meet government operations from the Consolidated Revenue Fund (which comprises of domestic resources and any donor contributions channelled through the budget (budget support grants)).
All Funds – This is a nomenclature used in the budget to refer to the sum of government local funds (Consolidated Revenue Fund) and all other donor funds (loans and project grants) that are estimated to meet the overall government expenditure for the year.
What is the difference between the two? The difference is that Government Local Funds are resources that must first be lodged in the Consolidated Revenue Fund and then appropriated for use by the National Assembly, while All Funds include resources that do not go to the CRF.
Link to 2021 Approve Budget http://www.mofea.gm/downloads-file/approved-budget-2021
Link to 2021 Budget Speech http://www.mofea.gm/downloads-file/2021-budget-speech