Amadou Colley was responding to questions yesterday at a joint session of the National Assembly committee on public accounts and public enterprises on the activities of the bank for 2013.
He said: “The Gambia government is competing with borrowers for funds and that is what is giving rise to the huge domestic debt. So in effect, when you talk about government crowding out the private sector, basically the funds that domestic business entities need is taken over by government and because the government’s requirement of this need is huge, the banks and any other lenders for that matter, would go for the so-called risk to lend to the government. This is because they are assured of getting their money back from the government. All governments would have to borrow domestically but not necessarily. In our situation, there is always a mismatch in what we expect to collect in revenue and expenditure. If I want to keep it simple, the government is competing with borrowers, and the banks make the choice. In fact they have a responsibility to the owners of their banks whom they are accountable to at the end of the day. I can assure you that if we are able to achieve the target that we set ourselves of net domestic borrowing by the government to 2.5 percent of GDP over the years, lending rates would come down. Indeed in 2011 and 2012, we did manage through the treasury rate yield to bring down lending rate but each time we are faced with this kind of pressure, the budget rates go up.
“The answer to this problem is to try to limit ourselves to what we have. Under normal situations it works and any economy would find itself in trouble if that is not the case. You may also be hit by an external shock just like what we are facing currently. The Ebola crisis whose impact we may continue to feel deep into 2015 and poor agricultural productivity for 2014 and 2015. But we have to limit ourselves to what we have and borrow what is sustainable as far as repayment is concerned. The economic and financial programme that we had with the IMF is our own programme and was aimed at containing the growth in domestic debt. This is to limit borrowing so that overtime, we don’t only stabilise the domestic debt but in the process bring down the lending or interest rates. As a government we have to consider some physical adjustments to contain expenditure and raise our revenue through other means. This is the solution to the problem. But for other structural issues in this economy, at least we are dealing with them gradually.”
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