By Alhagie Alieu O. Faal (PhD)
I understand you and other National Assembly members are on a four-day retreat to review and analyze the projected Draft Estimates for year 2019 at a resort outside the Greater Banjul Area. This is a welcome development signaling the determination of the peoples’ representatives in the National Assembly, to critically examine the 2019 Draft Estimates of Revenue and Expenditure of the government in line with Section 27 of the Public Finance Act, 2014, which requires members of the House to make due diligence on issues pertinent the review and analysis on the Budget submitted to it by the Minister of Finance and Economic Affairs.
The will of the people is the basis of authority in a democracy and one of the core Mandates of the National Assembly is to ensure that the government fulfil the needs and aspirations of its people. The pre-budget analysis retreat will help you to gather as much information on all issues relevant to your deliberations on the Budget. As a registered electorate at your constituency and as my representative at the National Assembly, I am encouraged by the fact that you are one of few who values the supremacy of the Constitution above all else and your popular mantra underpinning the sovereignty of the people in a genuine Republic is inspiring to say the least.
Financing the budget deficit
Having said that, there have been concerns that this government has been spending more than it can generate from tax and non-tax revenues which has resulted in unsustainable budget deficits. The fiscal deficit in 2018 has been projected to be D0.9 billion (1.7 percent of GDP) as reported last year. In 2017, it was D0.5 billion (1.0 percent of GDP) which amounted to a growth of 80 percent over the period. However, this year the fiscal deficit is anticipated to increase to D3.4 billion as unveiled by Finance Minister Njie. Whilst expecting budget support from development partners to bridge the gap, the absence of accessible stock market in the Gambia to fund the deficit will make it financially imprudent for government to continue flooding the Central Bank with Treasury Bills (TBs) and bonds to finance the gaping budget deficits thus resulting in exponential money growth.
As you are aware, sustained budget deficits are a source of economic vulnerability as it increases government foreign debt. Debt is another form of servitude and taking more debts to service existing debts have economic consequences for job creation, foreign exchange shortages, and threat to macro-economic stability due to exponential growth in money supply pushing up inflation and putting pressures on prices of essential commodities. We are saddled with a huge public sector debt to GDP of 124 percent in 2017 and now over 80 percent as at September 2018. The public debt statutory limit is set at 70 percent as a benchmark to measure the level of acceptable domestic debt. We are still above that target. Questions must be asked about the current domestic debt levels!
Why parastatals are not paying dividends to Government?
A notable omission of the revenue forecast has been the contributions of State Owned Enterprises (SOEs) to government’s revenues in the form of dividends. For over ten-year period, with the exception of Gambia Ports Authority, none of the SOEs have been making regular payments of dividend to government as the majority owner.
As Chairman of the Public Enterprises Committee (PEC) of the National Assembly you are not oblivious to the fact that State Owned Enterprises (SOEs) have not been meeting their financial obligations to Government based on their annual financial returns. With reported turnover of D9 billion in 2016, the 13 commercial SOEs under the radar of government generated a net profit of D804 million for that year. A 40 percent dividend declaration to government could have been helpful in the reduction of the rising fiscal deficits.
While it must be said that all quasi-fiscal activities have been discontinued as they were imposing extra-budgetary commitments thereby worsening the financing gap, parastatals are now in a better financial position to effectively contribute to government’s fiscal consolidation programme. I would like to suggest to include in your review whether the 2019 budgets of the state enterprises have been integrated and included in this year’s Draft Budget Estimates currently under legislative review.
The declining value of the Dalasi against the major currencies
There has been a phenomenal rise in the Current Account deficit as the goods and services we are importing exceeds the value of the goods and services being exported thus creating foreign currency shortages as trading is denominated in foreign currencies. The exchange rates in the parallel market has been anything but stable. The minister correctly notes that the dalasi has been steadily declining in value against the US Dollar, British Pound, the Euro and the CFA.
The astounding increase in imports over exports still continues to have adverse effect on the currency market. The growth in broad money supply (M3) has pushed up inflation and increase the volatility of the Dalasi especially in the exchange rates of the parallel currency market. Both government and the businesses in the private sector need to conserve foreign exchange reserves by focusing on strategic imports only if we want to cut down the trade deficit significantly. My other question is whether there is any proposal to discourage the importation of those goods or commodities mainly denominated in foreign currencies to reduce the deficit in the Current Account.
Given the rise in fuel prices recently and the decline in the service sectors, how the economy is expected to grow by 6.8 percent in 2019 is really a matter of conjecture especially when we want to rely on grants for budget support to close widening gap of the fiscal deficit currently estimated at D3.48 billion. Getting the right diagnosis is crucial for a realistic budget to help stabilize the economy and thus put the country on a growth and development trajectory. The fact that you and other National Assembly members have been capacitized to thoroughly examine everything in the 2019 Draft Budget, has given me hope that you will be doing the right diagnosis for an effective budget scrutiny.
Please accept the assurances of my unbridled support and highest consideration.
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