According to CBG, Sub-Saharan Africa’s growth improved for the second consecutive year to 4.5 percent in 2014 compared with 4.2 percent in 2013. It noted that despite headwinds, regional GDP growth is projected to remain steady at 4.6 percent in 2015 and rise gradually to 5.1 percent in 2017 supported by infrastructure investment, increased agriculture production and buoyant services.
However, some of these major developments have impacted either negatively or positively on our domestic economy. In terms of real Gross Domestic Product, growth has contracted by 1.4 percent in 2014 compared to a growth of 4.6 percent and 5.9 percent in 2013 and 2012 respectively. The slump in economic activity in 2014 has been largely blamed on late rains and the negative impact of the Ebola epidemic.
Perhaps, what has raised even greater worry is the issue of the huge domestic debt paradox and its long-term implications. The domestic debt at December 2014 stood at 18.7 billion dalasi or 38.7 percent from a year earlier. The treasury bills and the Sukuk Al Salaam accounted for 78.1 percent and 3.2 percent of the debt stock increased by 32.2 percent and 48.5 percent respectively.
The above notwithstanding, other money and banking sector developments must also be put into context and its potential implications. To CBG officials, the Gambian banking industry ended 2014 with strong fundamentals. The industry, despite the risks surrounding the capital adequacy ratio, managed to meet the minimum requirement of 10 percent to an average of 30 percent in 2014.
Meanwhile, it has to be maintained that the instruments of treasury bills and government bonds are the CBN’s favourite tools for controlling the scourge of excess liquidity which is instigated when distributable dollar revenue is substituted with the dalasi allocations every month. Now, it is no more a secret that banks’ profits become bloated by the enormous profits they continue to make from collecting government’s deposits for free while lending back to government at atrocious interest rates.
This practice of idle loans is what has caused the debt problem and indications are that accumulated debt service charges will continue to rise. Clearly, Gambian banks are the prime beneficiaries of the juicy rewards from such risk-free investments which make no contribution to economic development; no wonder the banks pay little attention to supporting the real sector with credit!
It will be hard to analyse how 2015 will turn out as we set ourselves on course in moving our economy forward. There are indications that the government is poised to take a path of strong growth of at least 6 percent. But any analysis that it will take such a path must be backed by facts and not guesstimates. What is even more important is that focus needs to be placed on the reduction of the net domestic borrowing to the 1 percent target.
While we commend the government for its effort to fine-tune the economy, it is equally important for us to mention that it is riddled with challenges. However, the 2015 budget has stated the clear need to contain the challenges posed by the debt burden. It is also said to be in line with the steering our economy towards long-term fiscal sustainability.
Therefore, the government must continue to pursue policies that support fiscal discipline. The government in its capacity should not shy away from the necessary restraints in spending because deficit is a huge and growing problem. Our economy has gained many achievements at such great effort and cost and these we must not forfeit. Moving the Gambian economy forward is everyone’s business.
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