The following is culled from FRROYAA BURNING ISSUEs NO: 86/2002
23 - 25 December, 2002
Halifa Sallah's Reaction To The Budget Speech
On Friday 13 December, 2002 the Secretary of State for Finance and Economic
Affairs, Mr. Famara Jatta delivered his budget speech at the National
Assembly from Monday to Thursday last week, NAMs conducted their debate on
the budget speech.
In the last issue, we started with Halifa Sallah's reaction focused on
work, savings and investment being the base of the sustainable development.
He pointed out that the government is relying on domestic debts to meet its
budgeting outlays and this has grown as high as 2.9 billion dalasis and
over 200 million dalasis annually as debt service charges. He emphasised
that we are living above our means and this cannot continue. We shall now
continue from where we stopped.
Subventing budget deficit with debts is unsustainable.
The nature of the budget this year is not about development, it is a coping
mechanism. Let us call a spade a spade.
It's like being driven to the wall and when you have nowhere to turn to,
you say, "well, let's scrape the back of the people to continue to exist
that is the reality. And this is the taxes are going to increase and the
tax base is going to expand.
The Secretary of State has indicated that grants are going down, so we have
to rely on loans. Thus the strategy that has been adopted is to depend on
domestic loans to try to reduce or contain the budget deficit and rely on
external loans to carry out development projects.
The loans are unsustainable, the external debt is also unsustainable. And
in this regard, the Honourable Speaker, it is important to go back to
history. The implications can be known but if the implications are not
brought to book, we may think that the strategy, which we are adopting, is
a correct strategy.
In 1984/85 the economic recovery programme was introduced. At the time,
something was said and it is important to bring it back to memory. "Today,"
it was said, "we are talking about the economic difficulties we have been
experiencing recently and more particularly, about (the programme) which we
just embarked (upon) in order to recover the economy and achieve economic
growth over the medium term."
What is the ailment?
"The volume of our exports fluctuated on a downward trend. The trade
deficit added up to 395 million dalasis. In the early 1970s the Gambia was
able to cushion herself from effects of the deficits in the balance of
payments cost of imports and availability of high external reserves that
has accumulated."
"The Gambia also benefited," and substantial capital inflow in the form of
aid which further helped in the offsetting of any deficit that emerged in
the current account."
No Difference. It was lamented that by 1985 the inflow of aid had reduced
substantially" (we are being told that the grants are reducing) "over the
recent past as a world wide recession created economic difficulties for the
major external donors. Our development efforts under the first and second
five years plans were supported by concessionary loans."
We are dealing with concessionary loans with large grant elements to be
paid over a long period. It was summed up that from 1980 to date the
payment of the interest from external loans had risen to such a level that
they absorb a sizeable proportion of our domestic exports.
"The consequence........is imbalance between import and export and between
revenue and expenditure."
Honourable Speaker, we are experiencing the same problem today between
revenue and expenditure and between import and export. This is very clearly
stipulated Honourable Speaker at page 11 paragraph 57.
It says in 2002 imports are provisionally valued at 2,946 million dollars
while exports stand at 4175 million dalasis. The trade balance deficit is
2.5 billion dollars. We are not exporting. We are not an export oriented
country.
Vision 2020 is not being accomplished to transform Gambia into an export
oriented economy. We are far from it. A trade deficit of 2.5 billion! We
are in the same situation and it is therefore important to look at this
economy whilst calling. It is out of that ||ERP, the government then took
the posture that it was helping our economy to recover, but, in essence, it
was cushioning the deficit while introducing the treasury bill.
The treasury bill kept mounting year after year and what they were saying
is that they were mopping up excess liquidity. Today, we are seeing the
same thing, that the country is mopping excess liquidity by issuing
treasury bills.
In reality, it was a mechanism for cushioning treasury bills. And it is not
sustainable but it was ignored.
Yesterday, the same would be said. They cannot continued to sustain the
deficit with the treasury bills because as it has been said the Secretary
of State said it here that it crowds out the price of debt.
Can we say that yesterday, today that is going to lead to development?
"Prophets of doom! When you see something you should say it, some would
say. But we are dealing with economics. We are dealing with logic. And
economics means life and death.
Development or degeneration. It means accept facts or speaking the language
of facts. The Secretary of State has said firmly that that is what the
government intend to do.
Let us accept reality. This reality should be accepted right now,
Honourable Speaker. We do not have that engine of growth that was claimed
and is being claimed today. Either the government comes out seriously and
help to create it or accept that it has no solution.
If we say the private sector is the engine of growth and the private sector
has a banking system which is experiencing excess liquidity and tell the
government to mop it out rather than that money being given as loans to
build up the productive base of the economy, then something is terribly
wrong. What is wrong must be examined. It has been acknowledged that in
fact the banking system prefers excess liquidity because they are making
serious investment, not taking risks. But clearly no bank would prefer
excess liquidity. It's just that the banks don't see where they can invest
to make the profit that they desire.
Risks must be sensible risks and these banks do not see the type of private
sector they can lend which can generate the type of income they desire.
That is the reality. Otherwise they would have given the loan. So something
is wrong what is wrong?
What is wrong?
What is wrong is very clear, Honourable Speaker for years the Gambian
economy, as one IMF official (Robert Macnamara) , described. It is a
parasitic economy.
This is not simply criticizing. It is helping to focus on the problem. Why
did he call it a parasitic economy? It is because Gambia is dependent on re-
export trade. It is not producing but it is selling. Selling to the
neighbours is what is helping it to maintain its economy. Any change in
those countries can put the Gambia's economy at risk.
When he says parasitic he is just trying to save a situation. This is the
problem of the country. A mind set needs to change. We need a mind that
should think more regional rather than sitting here like yesterday and
today and thinking that Gambia is the breadbasket of the subregion; that
everybody is coming here. Gambians have failed to realize that we are
relying on others to survive, thinking that we are helping others to
survive. The most that can be is for people to help each other to survive.
But it is absurd to sit here and say that Gambia is feeding the subregion
when in reality they are being fed by the subregion. That mind set needs to
change. Then we move away from economic nationalism to have a more regional
perspective.
Honorable Speaker, it is important to look at the debt of the country. The
country is becoming more and more indebted because of the loans and we will
see how that affects the foreign exchange as well as the policy that is
being envisaged to see how to handle that problem which needed to be
revisited.
We are talking about a debt of $6.01 I million dollars would assume that is
over thirteen or fourteen speech of the Secretary of State last year. It
was put at 10.3 million dalasis. Now, we are talking of 14 million dalasis.
That is not sustainable.
We are not exporting. We are taking loans. What is the implication? The
value of the dalasi? To solve this problem, we are not only simply going to
look at monetary policies. We have to look at the production base. Monetary
policies play a part. The Secretary of State had suggested that the
parallel market would have to be regulated to ensure that the differences
in the values at the parallel market and the banking system would be
minimal.
But on close observation the gap is very small. If purchase the CFA for D76
may sell it for D175. The gap is very small
The question is, how are those people making money? The Secretary of State
needs to study this closely. The speculative dimension is there but it may
also be that all these small dealers that we feel are just hoarding foreign
exchange are actually working for big importers who rely on that foreign
exchange to import goods into this country.
If you encroach on that and they fail to have foreign exchange, what would
happen to the importation of goods? I don't know, I'm just saying this
needs to be closely studied. Let's move away from economics into studies to
know the realities of the situation. Otherwise, we act disastrously just
like the GGC case, Just like the petrol case, we are having today. Yes,
intervention, but intervention based on studies, not sentiments, Honourable
Speaker.
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Source: FOROYAA (Freedom) NO: 86/2002 23 - 25 December, 2002 ISSN: 0796-
08573
Address: FOROYAA, P.O.Box 2306, Serrekunda, The Gambia, West Africa
Telephone: (220) 393177 Fax: (220) 393177
Email address: [log in to unmask]
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