Msc Development Finance
Recently, the World Bank released the Gambia Economic update – Spring 2024, titled ‘Jumpstarting sustained and inclusive growth’. The report highlighted that despite heightened ‘external shocks’ the Gambian economy continued its post-pandemic recovery with economic growth accelerating at 5.3 per cent in 2023 from 4.9 per cent in 2022 (in per capita terms growth grew by 2.7 per cent from 2.4 per cent in 2022).
The news was met with jubilation in government circles with officials lauding the international financial institution’s report as the utmost validation of their latest efforts to deliver on their mandate. Notably, the Gambia Revenue Authority (GRA) has congratulated itself on improved revenue collection measures that are as a direct result of and contributor of the positive trajectory on economic growth.
However, social circles, especially social media has been awash with criticism of the government’s premature celebrations, questioning whether the reports from this revered institution truly reflects the economic reality experienced by the average Gambian today. Indeed, much like unpeeling the layers of an onion, delving deeper into the report brings tears to one’s eyes.
Although GDP has been used as the core proxy for measuring national prosperity since the Second World War, it is severely limited in measuring the well-being of citizens, especially in developing countries much like the Gambia. GDP growth has been criticized for not capturing non-market transactions, much like the informal sector in the majority of urban, peri-urban and rural parts of the country. Similarly, GDP does not represent to reality of the large degree of income inequality in the country; or the costs of this growth on human health or the environment. GDP fails to provide an indication of the sustainability of the economic growth that our leaders are so thoroughly fixated by.
The persons loudly celebrating the positive sentiments of the World Bank report have failed to capture the majority of highlights contained in that report that should make any rationale official recork the champagne bottle and get back to the serious task of nation-building in their respective dockets.
Inflation remains sticky
According to the report, headline inflation remained at a decade-high average of 16.9 per cent year-on-year (y-o-y) from 11.5 per cent y-o-y in 2022 driven by among other factors the depreciation of the Dalasi against the US Dollar which has eroded households’ purchasing power and increased the costs of imports. Food inflation has accelerated to 22.2 per cent from 14.5 per cent in 2022. This has negatively affected poor Gambians, increasing the percentage of Gambians afflicted by extreme poverty to 16.9 per cent from 16.4% in 2022 (international poverty line of $2.15, in 2017 Purchasing Power Parities (PPPs)).
The Central Bank of Gambia (CBG), in a bid to control, inflation raised interest rates to 17 per cent in Dec 2023 from 13 per cent in Dec 2022. However, the effect of monetary tightening seems limited due to weak transmission channels as inflation was driven by external factors, according to the report.
High poverty levels
Furthermore, the report noted that ‘National poverty rate was estimated at 48.6 percent in 2015 before declining to 45.8 percent in 2019 thanks to a solid post-elections recovery. These hard-won gains were reversed with the succession of shocks since 2020 compounded with persistent high inflation,which has eroded households purchasing power over the past years. Underemployment is high at 41.5 percent in 2022, while 63 percent of employment are informal.’ This is especially true for rural residents and has limited Gambia’s ability to address social and regional disparities in income and access to basic services.
Inadequate governance structures to boost productivity
The report was also critical of the low productivity and the lack of transformative structural change, hampering job creation and inclusive growth, which is the hallmark of the current political dispensation. The report recommends that ‘The Gambia needs a new growth model’, proposing reforms to strengthen domestic revenue mobilization o improve fiscal and debt stability and the provision of public goods and services; sustaining investments in human capital to ensure that growth in the labor force; increasing public financing on research and development (R&D) to support agriculture productivity growth and strengthening regional integration toincrease the country’s trade performance, among others.
No reason for celebration
Although, GDP growth in the Gambia reversed its previous trend of being sub-par that of ECOWAS and Sub-Saharan Africa, it should be noted with concern that this was only because the performance of her peers in the region was dampened by global externalities. Although exports grew faster than imports, the contribution of net exports toeconomic growth remained negative due to the large tradedeficit, which increased from 29.6 percent of GDP in 2022 to29.6 of GDP in 2022 to 32.3 percent of GDP in 2023. This can be addressed by widening the base of exports away from basic foodstuffs and investing in the growth of the service industry exports and improving the low-quality of our tourism.
More inclusive measures
To better assess the quality of life and the standard of living in The Gambia, alternative indicators should be considered:
1. Human Development Index (HDI): This composite index measures life expectancy, education, and per capita income. It provides a broader understanding of development beyond economic output.
2. According to the World Bank’s Human Capital Index (HCI), which measures countries’ contribution of health and education to estimate the productivity of the next generation of their workers, The Gambia scored 0.42 in 2020, which is relatively low but slightly higher than that of some regional peers such as Liberia, Mali, Chad, Uganda, and, Tanzania. It indicates that, on average, children born in the country today will only be 42 percent as productive when they grow up as they could be if they enjoyed complete education and total health.
3. Gini coefficient: This measures income inequality within a country. A high Gini coefficient indicates greater inequality, which can be detrimental to overall social cohesion and quality of life.
4. Poverty rate: Tracking the percentage of the population living below the poverty line provides a more direct measure of economic hardship and social well-being.
5. Access to basic services: Indicators such as access to clean water, sanitation, healthcare, and education offer a clearer picture of the living conditions of the population.
6. Employment rates: Analysing both unemployment and underemployment rates gives insight into the economic opportunities available to the population.
Conclusion
GDP is a limited measure of a country’s standard of living and quality of life, particularly in contexts like The Gambia. To gain a true understanding of development and well-being, it is crucial to look beyond GDP and consider a range of social and economic indicators that reflect the living experiences of all citizens. Addressing income inequality, improving access to healthcare and education, and reducing poverty are essential for enhancing the quality of life in The Gambia should remain the steadfast focus of those charged with governance and not celebrating the skimmed headlines of reports from the country’s development partners.
Source: Kerr Fatou
