Dear Editor,
The first-quarter fiscal outturn for 2026, presented by the Minister of Finance and Economic Affairs before the National Assembly, appears on the surface to tell a positive story. Total domestic revenue, excluding grants, reached GMD 7.68 billion compared to GMD 7.54 billion during the same period in 2025, representing a year-on-year increase of 1.8 percent. According to the Minister, this performance represents 21 percent of the annual revenue target of GMD 35.87 billion.
At face value, the numbers suggest fiscal improvement. However, the real question is whether the improvement reflects stronger fiscal fundamentals or merely an accounting outcome driven by temporary factors.
The first issue lies in the nature of the revenue growth itself. A closer look suggests that much of the increase may be linked to tax buoyancy rather than an expansion of productive economic activity. In an economy that remains heavily dependent on imports and continues to experience inflationary pressures, higher VAT collections and import duties do not necessarily indicate stronger economic performance. They may simply reflect rising prices and higher import values.
This distinction is important because not all revenue growth is equal. Revenue generated from expanding domestic production, investment, exports, and industrial activity strengthen fiscal sustainability. Revenue generated largely from consumption and imports leaves the fiscal position vulnerable to external shocks and changing market conditions. The Q1 data offers limited evidence that the revenue increase is being driven by a broadening of the productive base of the economy.
The expenditure side reveals a similar story. Total expenditure and net lending amounted to GMD 7.87 billion against an annual budget of GMD 36.19 billion, representing an execution rate of 22 percent by the end of March. The largest expenditure categories remained personnel emoluments, subsidies and transfers, and debt interest payments.
This spending pattern points to a deeper structural challenge within the fiscal framework. A large proportion of government expenditure continues to be absorbed by obligations that are difficult to adjust in the short term. Wages must be paid. Subsidies and transfers are politically and socially sensitive. Debt obligations cannot be postponed without consequences. As these commitments consume an increasing share of available resources, the government’s fiscal flexibility becomes progressively narrower.
This is where the narrative of fiscal improvement becomes more complicated. A government can reduce its deficit without necessarily improving the quality of its fiscal position. If development expenditure is delayed, capital projects are postponed, or investment spending is compressed, the deficit may decline while underlying structural weaknesses remain unchanged.
Debt service remains a particularly important concern. Interest payments alone reached GMD 1.36 billion during the quarter. This is not merely a budgetary statistic; it represents resources that could otherwise have been invested in infrastructure, education, healthcare, energy, and productive sectors of the economy. Every debt servicing is a dalasi unavailable for development spending.
The headline result attracting the most attention is the fiscal deficit. The deficit narrowed from GMD 587.24 million in the first quarter of 2025 to GMD 195.84 million in the corresponding period of 2026, representing a reduction of approximately 67 percent.
On paper, this appears impressive. Yet the central analytical question is not how much the deficit declined, but why it declined.
The relatively modest growth in revenue makes it difficult to attribute such a large improvement solely to stronger revenue mobilisation. This raises the possibility that expenditure timing effects, delayed capital execution, or temporary spending restraint played a significant role in producing the outcome. If that is the case, then what is being observed may not be fiscal consolidation in the true sense of the term. It may instead represent a short-term fiscal adjustment that improves the numbers without fundamentally altering the structure of public finances.
From a broader macroeconomic perspective, the underlying vulnerabilities remain largely intact. The revenue structure continues to rely heavily on consumption-based taxation, particularly VAT and import duties. While these taxes can generate substantial revenue, they are highly sensitive to inflation, exchange-rate movements, import demand, and global price developments. This creates a degree of fiscal exposure that becomes particularly problematic in a small, open economy such as The Gambia.
Equally concerning is the absence of strong evidence that domestic production, manufacturing, exports, or value-added sectors are becoming more significant contributors to revenue generation. Without progress in these areas, fiscal performance remains tied to consumption rather than production, limiting the prospects for sustainable revenue growth over the long term.
Ebrima Jarra
Aljamdou Village
