Freedom Newspaper (Raleigh, North Carolina)
Bunama Jammeh
27 December 2007
opinion
In Part I, I challenge Mr. Gaye's facts and figures as largely erroneous and mostly without a measurable base in that country. Part II will cover those sections just mentioned above with similar analysis as to the figures and realities of that country. Next in sequence section is the fiscal outturn.
Part I - Covering Introduction and Real Sector of the Domestic Economy
Good and well executed plans and budgets are the base of success for organizations in this world of cut throat competition. This is true for countries likewise individuals like me and you. One reason quality of life of Gambians are not improved from independence to date is poor fiscal policies, bad monetary policies and above all poor plan and budgets. What our governments have been doing was to put together "a wish list" that is presented to the people through our representatives at the National Assembly in a two-hour jamboree. Neither the Minister and/or Secretary of State for Finance nor the deputies know what is put to them to make it into law. Hence, we continued to drop into deeper poverty while government continued to claim success in improving the economy.
What are fundamentals of a plan (call it strategic plan)? In another words what are a planner's toolkit?
The very first element a planner needs is the planning floor. This is basic of any planning. The planner has to have a base from where to lunch a take-off.
A planner's second toolkit element is the planning ceiling. This is where to get to at some point in time. A good planner will have clarity over goals and objectives. The goal(s) may be medium to long term and broad where as the objective(s) should be what strategic planners called - SMART (Specific, Measurable, Attainable, Realistic and Time bound).
The third toolkit element is planner's answers to the how question. A planner must identify activities that upon implementation will move him/her from the floor to the ceiling and/or at the least towards the ceiling. The resources required to mobilize such activities should be determined. The main resources are human, financial and capital. Are they available, in what quality/quantity, and how it would be acquired and at what cost. This is a very important toolkit and it is largely responsible of failures of many plans.
The fourth toolkit is auditing. Good plans establish indicators of progress that can be tested by either the planner or some outsider. This process usually follows logic of inputs â,' outputs â,' outcomes â,' impact. The assessment examines both the effectiveness and efficiency.
Finally, plans need a provision for corrective action. This is born out of the fact that there are countless number of events that may happen during the course of planned period to necessitate alteration of some sort. A plan that cannot be adjusted to volatilities cannot stand to the test of time.
These toolkit elements has somewhat set a good stage for us to take stock of the Annual Plans and Budgets of the governments of The Gambia. This is what is known by Gambians as budget speech that takes place at the National Assembly every December and at one time in June/July when our fiscal year was July - June. The essence of this two-hour rattling speech and applauses is for our deputies to enact the executive's proposal of what they intend to do in the next 12 months into law. The Constitutional provisions that vested powers in them to put such plan into law or otherwise gave them equal powers to examine the implementation of such plans and take corrective actions when and where necessary. However this can only be perform if they know the existence of such powers and at the same time possess the knowledge and skills required to conduct such task. The actual development of that plan and budget should have been a collaborative venture between these two arms of government to culminate into that two hour formalization into law. The really work should have been done before this day. Since independence our deputies are deficient in all areas of their job including the verification of executive's plans.. Sadly, these deficiencies are on the increase after almost 50 years (half a century) of self rule.
Reading through this 29 page (my copy) document, the first question that comes to mind - is it a plan? In order to answer this question one should know the components of a plan. For simplicity a plan show goals/ objective(s), activities that if successfully implemented will lead to the desired outcome, the resources needed to mobilize such activities, a time frame within which such plan will be undertaking and how do we determine the success and/or otherwise of the plan during, at the end and at some future times. Again can you tell from this 29 page document what your government wants to do for instant in agriculture, health and education? What goals/objectives do they have for these sectors? What activities do they plan to attain such goals/objectives? How much will it cost to implement those activities? When will they be implemented? How do we know the cost-benefit relation of the implemented activities? What is the next step? Certainly the 29 page document does not provide that information. Instead it is one of those traditions no one has attempted to improve to serve its rightful purpose. In fact in the recent past (at least the last 10 year of PPP and all of A(F)PRC tenure) it is one of those political jamborees to portrait the indispensability of government and that they are ever righteous. My description of that document is "an overly long executive summary of government wish-list", the only purpose of which is to reinforce that indispensability notion among the largely illiterate Gambia.
Another equally weighted reason for the impressive make-up (cooked) statistic is to baffle the IMF/World Bank to acquire development funds in the name of Gambians. IMF/World Banks officials are experts in what they do but history has proven that third world politician have always find ways to get around there conditionalities. One of such in the recent past was President Ferdinand Marcos of Philippines in 1986 forced his Central Bank to print more currency with the same serial numbers. He needed the money to fund upcoming elections while the earlier loan agreements with IMF was to limit money growth, which the later monitor/control through serial number of currency in circulation. Hence, do not be surprise that officials in Banjul are cooking the booking to ensure money for A(F)PRC flamboyances. Apparently it is paying off with the recent debt relief package announced and an approval granted on PRSP II by IMF/World Bank. I will reflect on the exact meaning and benefits to the nation as oppose to the political hype of the government. This cat-and-mouse game between third world politicians and IMF/World Bank is politics within politics. Even though there is no prove that these experts benefit from kick backs from the disbursements to the benefactors it remains a serious possibility. The fact is that it serves as a job security of the expatriates to have tangible activities to ensure continuity of assignments in the third world. The direct benefit of this is of course pays and allowances well above the living standards in those countries hence more retirement savings. The other benefit is the enrichment of resumes/CVs for future bigger international assignments.
The first 8.5 pages of the document is what Mr. Mousa Gibril Bala-Gaye, Secretary of State for Finance and Economic Affairs of The Republic of Gambia called introduction. He claimed a 3 year running (2003 - 2006) 6.4% average annual economic growth in real terms (meaning inflation was factored out). He projected a 7% growth for 2008. Agricultural output is expected to grow substantially because of high growth rate in cereal and groundnut. Some recognition is given to commercial farming and the agribusiness industry. Tourism has grown by 10% and financial sector also witness similar growth. Also in the same sector the Credit Reference Bureau has strengthened financial sector service provision. The secretary has mentioned Gambia's favorable standing in the requirements of a regional/sub regional common currency, the appreciation of the dalasi against major international currencies and the creation of certain structures such as Gambia Revenue Authority, Roads Authority, etc. to strengthen government service delivery capacity. He claimed an increase in foreign direct investment (FDI) largely because of improvement in roads and electricity. The government is already working with World Bank on Civil Service Reforms and assumes their close relations with donors will encourage grant funds for identified programs/projects. The Gambia government is not in arrears with her debt servicing and reserves stand at 5.5 months of import cover. The Secretary told the deputies, "the economic fundamentals of The Gambia are strong and outstanding". Accordingly, government policies are reducing poverty and attaining the Millennium Development Goals. The Poverty Reduction Strategy Paper II (PRSP II) is the main policy document for the period 2007 - 2011 alongside Vision 2020. "The long-term goal of PRSP II is to eradicate poverty by significantly increasing national income through sustained economic growth, and reducing income and non-income inequalities through specific poverty reduction priority interventions, ensuring maximum private sector participation and investing in people".
Clearly, the introduction of this document is not helping the reader to understand the context within which this document is developed and to serve. In essence it did not review our goals/objectives of the recent past nor did it establish the planning floor. What did government want to achieve? Well, they said -to reduce poverty!!!!! But what is poverty? This intro did not tell what that is? It did not say how poor are we nor did it say how much has already been done.
Effective problem solving start with comprehensive diagnose of the problem. The government of The Gambia does not know poverty and the poor in that country. Gambia government did not know the number of people she is supposes to serve, where they live, what ages are they, what are they doing for living, and what is their health status, etc. This is why government interventions are only ensuring the continuity of its own structures as oppose to the improvement of quality of life in The Gambia.
Mr. Gaye claimed a significant growth in agriculture due to growth in cereal and groundnut production. However, under the Real Sector he made a projection of slight growth in agriculture for 2007. The two statements are not telling one story. Above all why can't he report on the exact production figures of 2007 in December as oppose to projecting. This is in fact a problem throughout the document, instead of accounting for what is completed to that date in December of 2007, he is projecting. Yet again this is another proof that they don't know what is out there. The inability of government not been able ascertain facts and figures on agricultures should tell every Gambian that they have no idea what poverty is nor do they know how to reduce it.
He could not tell the nation production in crop agriculture, animal husbandry and fisheries. His words are "significantly" at one time and "slightly" at another time. Certainly, those words are his better cushion. This government has no way of knowing current production levels against demand in order to tailor efforts in meeting such demand. There is no organized buying and selling of such products within the country that can capture information on the quantity of those products nor are there an extension network that determines the areas under production per crop type and productivity of a given unit of area.
Easier and yet not available is government forecast of desired and feasible formal sector economic expansion with the corresponding trained human resource requirement. Such estimates are not reported anywhere in the document. This would have partly informs the human development (education and health) policy. We have schools without curriculum tailored to meet our development needs. While we question the quality of our graduates the economy has not created jobs and they do not possess skills to be self employed. An economy without jobs coupled with no/little reward from crop agriculture the only corridor of hope for a Gambian youth is to seek living beyond the borders of that country. Time and time again we are told that a countless numbers are dying at sea en route to Europe. Yet, Mr. Gaye is bold enough to stand on our face to claim that rice cultivation is attracting more Gambian is not only a lie but violation of our Constitution. My message to the Secretary is that my mother was a rice planter and my father groundnut. Both of them are not as I write and those lands are put into a different land use.
The state health service delivery apparatus has failed for not being able to set priorities and as well collapsing to the parallel Yahya Jammeh-medicine. Saikou Sisay, former Head of State AIDS/HIV Program eventually resigned out of frustration. Prominent Gambian medical doctors quit the state establishment to set up their own private clinics. In as much as entrepreneurship is encouraged in a market economy, such a large scale exodus has made access to quality service beyond the reach of an average Gambian in The Gambia.
In addition the health sector lacks statistics to help come up with what is really needed. What are the major health issues that affect most Gambians? What are appropriate actions to address such issues? While most problems seem to be environmental and public health related, they are busy impressing on putting cement blocks together called hospitals. Such problems can be prevented with good population and environmental policies - proper physical planning, well managed refused/sewage disposal systems, appropriate education, population planning, public health inspections and enforcements. These are cheaper and more rewarding than gigantic buildings that are under manned and equipped. Equally, it's more important to redirect state resources towards these efforts than the whole state health sector collapsing into Yahya's claims to have cures for certain diseases.
Tourism is an important foreign exchange earner for our economy. Mr. Gaye projected a 10% growth due to investment in more hotels and changes made in marketing strategy. An increase in hotel rooms will help to accommodate any increase but not a cause of increase in itself. Aggressive marketing could but it will come down to what we can offer differently from our competitors. There are visible indications that tourism is wheeling on a downward trend since the coup in 1994. We know this from flight schedules during the peak of tourist seasons, the amount of employees recalled at off-season break, activities at the various tourist craft markets around the Greater Banjul Area plus Brikama, and emptiness of the beaches. Although there is a possibility of one year improving over another, the 10% projection is an over estimation. We know that Yahya and his cohorts acquired lands in the Tourism Development Area (TDA) where they are constructing hotels which have nothing to do with increase/decrease in tourism. Mr. Gaye is challenged to come up with prove of his claim if he knows something that we don't. For now you are reminded that you are under oath and will be judge by future generations of Gambians.
The progress in the financial subsector is measured by the number of operating commercial banks from 7 to 10 with two other at an advanced stage of acquiring an operational licenses and what they called Credit Reference Bureau. Certainly banks are the nerves of a financial sector in most countries but how much do they and/or can they mobilize resources for growth in our rudimentary economy where less than 20% of the people transact through banks. A bank in The Gambia has no way of determining the creditworthiness of members of the society. Banking services are limited to few businesses that operate demand and time deposit accounts and/or those employed in the formal sector with salary depositing accounts. Unless improvements are made to diversify banking service delivery the full benefits of banks will not be realize. While most of those banks have the capacity to expand services the government will have to decentralize the formal sector and as well maintain some reliable population data that could be use as a basis for financial transaction. Credit Reference Bureau is an interesting development. How can such a bureau help in determining the creditworthiness of businesses and individuals in a country without an intact birth and dead register nor any enforced financial reporting system? It is a good foresight but should be preceded by other very basics.
The new government structures such as Roads and Revenue Authorities in the offing are interesting development. Fundamentally, how are these structures different from public works and/or Treasury Department respectively? Well, there is difference and a good one for that matter. That is some new or old building is renovated somewhere, someone sit there claiming to be the new boss of a new task, new fleet of vehicles, overhead budget cost center and corrupting and abusing the sector of our population that needed their service. It is only a way to encourage and expand corruption in government. Let us examine some of government revenue collection practices. From Brikama to Banjul how many rates/royalty collectors pick cash (no documentation) from tax drivers to dump it in a bag? Can the new authority determine how much was collected and/or have to rely on the mercy of the collector. How about the duties collected from stalls at the various markets - do they even know the number of stalls in each market, from whom collections are made, etc. Again we are at the mercy of the collector. I would assume government has some tax code. Income tax collection is limited to those on a formal payroll. Hardly a yard owner earning rent revenue from his property pays any tax on such an income because there no system to determine such income in the first place. Shops and stalls all around town are pretty much charged the same rate without consideration to their earning. As much as this is unfair both the Area Councils and government do not know their exact number. Yet again it is what the collector decides to turn in. Corporate taxes are base on the information (financial statements) provided by the business. Such information has to meet certain government criteria to serve that purposes. This is not happening in the Gambia; hence businesses are charged some rate that is unfair for both parties. Customs/excise duties collections made on imported goods are not recorded in most some instances, meaning no import pass through that port of entry. This explains why officials in that department are the riches civil servants. Payments received in such transactions filled the pockets of the collector. These and many more should inform the Secretary and his government that new structures are only a burden on our meager resources and no solution to our problems.
The consecutive 3 years 6.4% average economic growth cannot be true. The PPP government was also making similar claims and where able to back it with 6% salary increase of the public service. A(F)PRC is yet to make good on promises to raise salaries of civil servants. Either way the civil service is less than 20,000 people. Over 20 years claims of an average 6% annual macroeconomic growth has not translated to improvement in the quality of life in The Gambia. Maybe, Mr. Gaye has an explanation for this unusual negative correlation. What we can tell Mr. Gaye and his government is that, Gambians are scavenging at the Bakoteh refused dump, increasing number of women have turn to prostitution to make a living, young Gambians are dying at sea en route to Europe and others plying the streets of cities and towns in the Greater Banjul Area to make a living at any cost. The average family is struggling to afford rice and go to the market for condiments on a daily base. The result is congestion and increase in street crime. Elsewhere it is reported revenue will reach 22.1% of GDP and that is the highest in Sub-Saharan Africa. It is also claimed that for the first time in our fiscal history we have a budget surplus of 416 million or 2.6% of GDP. This is understandable because we are charge more on annual yard rates, all taxes, electricity, water, telephones, just to name few. What we wanted was an effective management of every butut collected from us. Revenue is increased by 22.1% and our lives are not improved by a percentage point. Budget surplus and positive budget variances are two different things. It appears to me that the Secretary is reporting a positive variance as surplus. A positive variance of over D400 million can only be a result of bad planning and/or under implementation. It is nothing to be proud of.
Reports on the real sector of the domestic economy show even more impressive statistics. It is reported that communication has grown by 25%, hotels/restaurants 18%, utilities 17%, mining and quarrying 10% and agriculture slightly (whatever that means). These growths cannot be true when Gamtel cannot extend new lines to new homes in Bakau, Serekunda, Sukuta and Brikama. Equally there was no rural expansion. In fact there is a visible stagnation/degeneration of existing services of Gamtel. New hotels have been built but the numbers of tourist visiting the country have gone down since the coup in 1994. That industry is yet to regain its pre-coup status. Electricity and pipe burn water supply have been extended to new areas but 17% of the old area covered areas is small. It is a baffling figure. There is a need for a comprehensive energy plan based on our development priorities than this political postulation of nationwide coverage. Equally long term water resource management both for domestic and agriculture is long overdue. The government may have realized some increase in revenues in these areas as a result of increase in the cost of service charged to the consuming public. Mr. Gaye and his government owed the nation an explanation both the source and accuracy of these figures. Here again another inconsistence of the government over the divesture of Gamtel. Communication cannot grow with that impressive figure when they claimed Gamtel is loser. Gamtel will be discussed under public enterprises.
The estimation of the output of real sector of the domestic economy without agriculture in the forefront is not only misleading but lack of understanding the livelihood of over 80% of the inhabitants of that country. Ironically, government has no output figures on agriculture with poverty reduction their main policy goal. Besides rain fed agriculture most Gambian survives in the informal sector - petty trading, numerous cottage/handy-craft industries, livestock returns, etc. The other important input that influences the domestic economy is cash remittances from outside The Gambia. These remittances do not only put cash in the hands of distress families but also tilt the balance of payment accounts in favor of that country. Government's indicators of the real economy have direct effect on a small proportion of our people. This explains why the reported 6.4% macroeconomic output has not translated into any meaningful improvement of qualities of life in The Gambia.
The draughts and other environmental changes were blamed for lowering food production. However the fact remains that government could have ameliorated all such happenings with good fiscal policy programs. Mr. Gaye in 2008 budget - "Rice production alone has now attracted the attention of many farmers, and if the support and zeal now given to production can be sustained over time, this country is rapidly heading to food self-sufficiency in the medium-to-long term". Clearly, there is no certainty in Mr. Gaye's statement for he has anchored such an outcome on sustenance of what he referred to as support and zeal to production. Importantly though, did he know how many people live in The Gambia, hence how much rice is needed to meet that demand, how much is currently produced, how much addition is needed. These variables are not known to the Secretary. He is only blowing air for the deputies to give the usual applause. Somewhere government may have old estimates of rice growing areas but those statistics are currently insufficient because of enormous change in land use over the last 20 years and/or changes forced by environmental conditions such as siltation and salt intrusion. Mr. Gaye, Gambia deserved honest and ready to work government but not one bent on enriching themselves while the rest are sinking into the very bottom of poverty.
The value added by transportation to the real sector of the domestic economy is reported to be 1%. Mr. Gaye, how can this be a correct? Maybe, difficult, dangerous and under very unusual circumstances but people, goods and services are being transported on daily bases across the length and breadth of that country. Are you counting the limited and failing government transportation investment - GPTC, the Sea Port including the ferries and air (GIA). Important for the domestic sector is what people do to meet their transportation needs. Gambian entrepreneurs have ensured people, goods and services reach Basse and beyond. They have even invested in water transportation at Banjul-Barra, Janjanbureh-Lamin Koto, Bansang-Dobo and Basse- URD-North river crossings. These informal sectors are increasingly vibrant and impact the domestic economy more than your formal sector. Government must find a way to measure that impact in order to reflect the true picture of this sector. It is worth mentioning here that the three transportation agencies where doing fairly well before A(F)PRC. Why are these agencies not performing and what's government's long term strategic plan to fix the problem is what we want to know.
Mr. Gaye, a 10% projected decline in building and construction and a 10% projected growth in mining and quarrying is a negative correlation that should not happen in the real world because the two are complimentary. This is true everywhere including Gambia. The problem is your measure. The measure of building and construction comes from public direct spending which in the previous year was seriously influenced by the preparatory work for the AU summit. On the other hand mining and quarrying continued at the true rate of the real economy - that is Gambians continue to invest in real estate at a rate higher than anytime of our short history. Hence the government, probably through the Physical Planning Office, should capture this information than budget figure as a measure of progress. Such information will provide the rate of growth; it will inform future physical planning policies if there is any, it will inform mining/quarrying planning, and many other public policy goals.
Public accounts have not been audited for 6 years (2000 - 2006). This is very disturbing because there cannot be any reasonable explanation to justify such a failure in the public service. Is it attempts to cover corrupt practices in public office and/or inefficiency/lack capacity at the Auditor General's Office? Either of the two should have been fixed appropriately and quickly. At this point we know the reported numbers are not certified. The problem is how to accept uncertified figures that defy reality in all shape and form.
Part II covering Fiscal Outturn, Monetary Policy, Prices, Foreign Exchange, Financial Sector, External Sector and Micro-Finance.
Performance in this sector is measured in the amount of revenue earned and spent. Certainly, the state needs revenue to run its business. The source of any such revenue is the people of that state whether you contract a loan on their behave and/or direct taxation. Equally grants are for the people and not Yahya and/or any such person in a gown and/or black suit.
The Secretary reported a 22.1% increase in revenue and credited the new Gambia Revenue Authority and as well spending discipline in government. The exact figures as at end-October 2007 is not given. The revised projection of D4, 536 million against the budgeted D4, 402 million is reported. The exact figures are not given/available after three-quarter of the year is gone. Should we praise and/or question the need for that new authority? Added to this confusion he is projecting a 6% increase in domestic revenue from the budgeted figure of D3, 322 million (21.4%) to D3, 535 million (22.1%) of GDP. Notice that the dalasi figures are difference while reporting the same period.
It is good news to learn that our revenue base has increased. Besides the recent increases in taxation and other government charges/surcharges levied on the consuming public, real growth in this sector is an indication of increased consumerism. Having said that, it is worth noting that over burdening the consuming public with taxes and charges will incapacitate their ability to expand the economy. Good government ensures creating a balance because these are two-hands of one person. A 22.1% is a rip-off and we should be told the sources of this increase besides the credit handed to the new revenue authority. For one thing the providing public should be told their contributions.
The net outturn of the said revenues will be lowered by maintaining two offices (Treasury Department and the New Gambia Revenue Authority). One of those offices is enough to handle the required task, hence you're advice to quickly resolve this duplication and save the tax dalasi.
Yet again the expenditure figures are revised projections when three-quarter of the year is gone. Why is it difficult to tell us what happened in the past three-quarter period and then project what is expected in the last quarter? This can only be a serious cover-up scheme or cross inefficiency. The revised projection of expenditure for 2007 was D4, 064 million against the budgeted D4, 512 million resulting to a positive budget variance of D448 million. Factoring in net lending the variance stand at D416 million. This is what the Secretary is calling substantial surplus. This is a complete wrong terminology. In the world of Finance/Accounting budget deficit/surplus has to do with the balance of payment transactional accounts while overspending/under spending a budget is a variance. D416 million sitting idle for 12 months because of poor planning is a waste of resources. If this government is familiar and concern with time value of money, it will concern itself with good planning to timely put resources to use to completely avoid such waste. After all, this is the fundamental purpose of planning.
Our monetary policy goals/objectives - putting inflation at 5%, maintain a viable external position, stable exchange rate, sustained economic growth for increased employment and poverty reduction - are basically similar or the same with most countries and importantly too is that most third world countries are big on exchange rate control/stabilization. This is usually not a bigger issue in the developed world and we have also seen countries devaluing their currencies to make exports cheaper.
The monetary policy is run by Central bank whose real control is over currency supply and its own balance sheet. However this is when the Central Bank is operating independent of executive control. In The Gambia, Central Bank is control by Yahya who has no clue whatsoever what that bank should do. How can a Central bank attain the above goals/objectives when its real control is over currency supply and its balance sheet? The Central bank has to have Policy Instruments (PIs) for that to happen. Unfortunately the Secretary did not tell us what those PIs are in The Gambia. The only relevant PI I know is the buying and selling of government treasury bills. This is what is called Open Market Operations (OMOs) in organized economies. It either injects or withdraws money into/from the economy. The effect goes through several stages (called Two-Stage Policy) before impacting the desired variables. For simplicity this is how it works - Stage I (OMOs) â,' (Operating Target - some desired pre-determined inter-banks rate %) â,' Stage II (Intermediate Targets - market interest rates through money supplies of the different categories of money and credit - basically money demand and money supply) â,' Final Goal Variables such as Real GDP growth, price stability (inflation), lower unemployment, etc. Finally the Central Bank will have some indicators to measure the effect of the policy and take timely adjustment.
In a rudimentary economy like ours you wonder how can these impacts the economy. How much money is attracted by any OMO in Gambia? Few Treasury Bills purchased and sold by a minute percentage of Gambia. Banking services have little direct effect on most people's life. Arbitrarily pegging interest and exchanges rates violate demand and supply rule hence a disservice to the overall economy. Those who have tried short term loans from a commercial bank in The Gambia can attest to higher cost of borrowing while demand for such loans remain low. The higher rates cannot be blamed on risk compensation because most of those beneficiaries are on verifiable stable income as assurance for repayment.
Money supply is reported decelerated from the 2006 standing. I don't know the exact definition of Gambia's money categories (broad and quasi monies), however, this is not a matter of confusion. Money is Currency in circulation plus Demand Deposit plus Time Deposits (Mathematically - M = C + D + T). This is what is manipulated by countries to suit their definition of each category. Although, less than 2006 growth, 2007 registered pretty good growth which Mr. Gaye Secretary credit the strong demand for dalasi denominated assets hence appreciation of the dalasi. What are these assets? We need some help from Mr. Gaye; what are these dalasi denominated assets and what economic factors make them attractive investment instruments for foreign investors.
The basic elements of commercial bank balance sheet assets are vault cash, reserves, treasury bills and loans made. Banks could also possess ownership in private enterprises such as shareholding that will be classified as others. The fact of the matter on the appreciation of the dalasi against major currencies especially the US dollar is both forceful pegging and partly the devaluation of the dollar by the Fed to boost US export market in order to reduce its budget deficit. Currency appreciation and/or devaluation have different effect on the different parts of the economy. It requires some mathematics to determine the desire currency strength and work towards attaining that level. With a free market what should be happening to a cheap dollar against the dalasi - demand will increase forcing the price of the dollar to move up towards equilibrium. During such period imports should be relatively cheaper bringing commodity prices down, but this is yet to be the case in Banjul because the market is not working at will.
Reserve money is reported to have increased by 0.1% annual rate as opposed to 17.9% in 2006. First the 0.1% is not annual rate; it is simply a drop of 17.8% over a year. Reporting as annual rate connote some trend over some period of several years. These figures are really weird and the Secretary blames it on decline in net foreign asset at the Central bank. It also contradicts the earlier assertion of growth in dalasi denominate assets (foreign) resulting to dalasi appreciation. In fact the secretary should not have gone into all this trouble because reserve levels are usually not base on any economic theory. They usually set to provide the necessary insurance in case of need. Care is exercise by prudent economist not to overburden the banks hence contract the economy. Remember that it is the banking system that creates money through loans and credit with an inbuilt multiplier factor. Enlarging reserve requirement cut that ability on the part of the banks. Back to the figures! Isn't it stupid to report a .01% of a change?
The Supervisory role of Central Bank over commercial banks is to ensure stability and soundness in the banking system. Stability is required for growth but it is not growth. In fact reserves and balance sheet control are all part of the basic control for stability. There is nothing there to add or decrease the fundamentals of the economy. In fact, in the intro, Mr. Gaye has blamed commercial banks for some undefined unethical practices. What are they? How has the Central Bank controls help in detecting the problem? How will it deter future occurrence?
Containment of inflation (prices) is a goal at all Central Banks all around the world. The Gambia targets to get it at 5% or below, however, it's not explained how they will do this. The Secretary reported inflation as at end-October 2007 compared to 2006. It is a measure of the National Consumer Price Index, which is a pre-determined basket of consumer goods from which the pricing index is calculated. Look at this numbers to convince yourself if they are true. In 2007 inflation rose to 6% from 1.1% in 2006 which is above the targeted 5%. The report continued that the average standing was 4.4% (below the target) against 2.6% for 2006. These figures cannot be correct. The 2006 are put Gambia's inflation well below that of US and Euro Zone. I'm not saying that is not a possibility but it has not happen in 2006. Either wrong items are place in the consumer basket, erroneous computation and/or deliberate falsification. Simply take the change in prices say, vegetable oil, rice, gas, cement, fish, cereals, peanut, tomatoes, etc. It doesn't matter how many items nor does it matter the span of the period. Divide such changes with the average of the base year prices and further divide it with the number of years within your span. At least from 1994 to date your figure will be above double digits for average inflation in that country. Pricing hike is no secret at the markets in that country. Furthermore, the Secretary gave addition breakdown of inflationary figures - food consumer pricing increased to 8.3% from 0.7% in 2006. The non-food increased to 2.4% from 1.6% in this period. "Core inflation which excludes energy and volatile food prices accelerated to 5.9% from 0.9 in 2006. These figures cannot be correct in anyway, in any case it is serious to learn a jump from less than 1% point to say 8.3% in fewer than 12 months. Because of the conflicting figures, it is hard to determine if the targeted goal was attained or not, but more importantly it is not given how they go about this business.
Foreign exchange stabilization is one of the goals of the Central bank. This is equally true for a large number of emerging economies and it explains the need for hard currency for transactional purposes. Section 33 devoted to this matter said nothing that the government has and will do to help the nation have and maintain such currencies at levels and cost desirable to our overall economic development goals. The one and only one hype of the government of the Gambia is that the dalasi has appreciated against such hard currencies. This is all that is said in the document and the reasons advanced by Mr. Secretary are "implementation of prudent monetary and fiscal policies, coupled with increased foreign inflows and rebounding economic". Currency appreciation/depreciation has a double edge effect - advantage and/or disadvantage. Serious governments work towards attaining a desired level that helps their economic needs. If, government of the Gambia sits on that hype for cheap political point scoring that a dalasi appreciating is all a course of pride, they are mistaking. In fact so far what tangible benefits are realized by the importers, exporters and consumers? The lowering of the value of the dollar is a deliberate effort of the Fed, through OMOs and reductions in the federal funds rate by a quarter (.25%) points to induce export trade that has nothing to do with the state of the Banjul economy. The forceful pegging of rates by the Banjul government will sooner or later back fire and the ultimate price payer will be the consuming public. Market forces are just too powerful for any government to forcefully contain. Some of you may still remember when the police and Para-military personnel pick-up people engage in foreign exchange trade around Greater Banjul Area.
Sections 34 - 37 covered financial sector developments of our economy. The government measured progress in this area by an additional two banks, EcoBank and BSIC (Gambia) Limited, granted operational licenses. They are assuming this will increase banking products and reduce the cost of borrowing. Certainly, those are no outcome yet, they are only hoping. Let us hope too. The fact of the matter is those banks are very likely to offer products and services offered by the existing banks, hence no increase in products and services. It is likely to increase competition that can positively affect cost of borrowing probably with a corresponding increase in risk in a country with no basic society data. Having increased competition and increased risk going at each other will zero out any benefit likely to be realized by consumers just because of two additional banks open their doors.
The Secretary reported both the reinforcement and strengthening of Central Bank supervision on the banking system. This is good and is a basic role of the government to ensure basic stability of the financial system. Said it before, it has no direct consequence on annual growths. The last element on this section is the New Credit Referencing Bureau between Central Bank and the banking system. It is a great idea but cannot work in a country without basic society data such as correct officially recorded names, date of birth, street names, addresses, etc. For now is another bureaucratic layers that will abuse the consuming public while exposing banks to issuing risky loans. What will happen is as long as the consumers want to bride the officials with part of the recommended/approved loan, s/he will be recommended as creditworthy customer. At some future date we will find ourselves in a similar situation of The Gambia Commercial and Development Bank 1970/80s experience. The figures reported in this section relating to increase in banking systems assets from D8.4 billion in 2006 to D9.7 billion in 2007 is not revealing much except we could assume that it is an increase in loans (see the balance sheet of a commercial bank). In addition it is reported that the liquidity of those banks stand at 84.9% we above the required 30% means waste of resources. The additional 54.9% should be put to work while Central Bank stands as the lender of last resort.
The government has no plan to improve this sector, at least not reported. Hence they cannot report on the impact of the sector on our economy nor can they say what they intend to do in the future for additional values. What they could not figure is that this is a private sector driven component. All what a good government do is to create the enabling environment. Such work will start with some basic organization of the society; creating some true social data, maps, etc. That will increase the customer base of the banking system more than the few on salary deposit accounts and businesses. Incentives should be created for business to register with state (Banjul or local government) with certain minimal information provision requirements that will help government to access economic expansion while enhancing their ability to access development capital.
Section 38 covers the balance of payment account, referred to as external sector. It is a one paragraph section that does not made mention of what a balance of payment mean to a nation. Favorability of this account may partly explain the appreciation of the dalasi that government is bragging all over the place. Balance of payment is simply the records of transactions between any person resident in Gambia and those outside Gambia over a specified period of time (usually a year). The person could be people, organizations and/or governments and transactions are imports, exports, cash remittances, gifts, loans, payments, investments, etc. It helps government and businesses to study a nation's competitive position and to forecast the direction of pressure on exchange rates. Hence it has implication on the value of the local currency, ability to acquire hard currency and foreign investment policy.
Earnings represent sources of funds and are called credit transactions while debit transactions represent expending foreign exchange. The individual accounts - current account, capital account, financial account, net errors and omissions account and reserves and related items account are usually self explanatory but capturing all such transactions is the hardest part. That is why net errors and omissions account. A "surplus" is registered with credits exceeding debt transactions. The opposite is "deficit". Again, Mr. Gaye is reminded that this is budget surplus and/or deficit and not a positive and/or negative variance in budget spending.
Clearly, looking at the definition, governments have little direct influence in what happened here. For those residents in US and/or follow the state of US economy, this is what politicians of the two-sides are arguing over. In the recent years there is more leaving US than coming in, hence a deficit in the balance of payment. This has little to do with the strength of that economy except its impact on currency and interest rates. Yet, it is hard for residence to notice that because of the Fed's expertly handle on employing its powerful policy instruments called Open Market Operations and the Federal Funds Rate.
It is good to inform the deputies the state of the balance of payment accounts but not in this confusing manner. It took me an hour to figure out what Mr. Gaye was trying to communicate with Finance being my profession, I wonder if the deputies will within the 2-hour rattle of the Secretary. To avoid going through the jungle of figures, what he says is that they project an overall surplus of the balance of payment accounts. This could be correct knowing Gambia is at the receiving end both in terms of increasing remittance, developments aids and loans. Again this can partly explain the favorable standing of the dalasi and not an economy improvement. On the other hand except for imports costs there are no serious investment (capital) funds leaving The Gambia. Here too, the inability to report the exact figures are understandable because these accounts are usually maintained by IMF which government has no control over. At least this time, bravo, Mr. Gaye!
Sections 39 and 40 dwell on micro finance. Mr. Gaye is a serious joke in this section. Fellow Country men and women, Mr. Gaye has the heart to measure national micro finance efforts by looking at Village Savings and Credit Associations (VISACAs) and Micro Savings and Credit Associations (MISACIs). Please do not be baffled by those impressive names. I cannot remember or maybe I don't know MISACIs, but VISACAs are run by a very small local NGO, one time head quartered at Latri-Kunda/Tallinding, deadly struggling for the survival of its payroll staff. I was one time Partnership/Liaison Officer at ActionAid (AATG), hence I had a good profile of the then NGO community in that country.
Certainly the initiatives were good and so too are those of many other NGOs. In fact it is the A(F)PRC government that has killed some of those establishments in the villages. International and well funded NGOs like AATG has worked with the Department of Community Development and Area Councils to set up Village Development Groups/Committees (VDGs/CDCs) through which funds are injected into villages as seed money coupled with extensive institutional development trainings. Over 20 years of existence AATG alone has injected millions of dalasi of Group Revolving Funds (GRF) into these groups in Kiang, Jarra, Saloum, Nianija, Niani, Falladus and URD. At phase-out AATG left this group strong to continue helping themselves with loans (revolving). A(F)PRC thugs and community henchmen like Kebba Fanta Comma went around to threaten some of such groups to use such funds into wrong ends. Also the same government was undermining the then operations of such International NGOs because of their Right Based Approaches (RBAs) and Para-legal Clinics in rural Gambia against fear that the people will soon start demanding for their rights. My surprise, Mr. Secretary is using those as his yard stick while leaving the giant undertakings of those initiatives. Either way government can only report such as to how its policies supported such initiatives and not claim ownership of them.
Again, Mr. Secretary, government is a facilitator/enabler in this sector and not a doer and unless you make such distinction you cannot help Gambia. Good governments create the enabling environment with good regulations, data, security, decentralization, etc. This is a profit making business - once risks are reduced and rewards handsome, private investors will find it attractive enough to undertake. In that mix, there will be underprivileged sections of the society that may need direct government intervention maybe because they cannot ordinarily meet scoring requirements of the private sector. This can be done by a lump sum disbursement to an independent agent and/or facilitating the NGOs/PVOs programs.
Mr. Secretary, your government is at one end an enemy of itself and at the other a big bluff for nothing. To better serve - you need to know and be willing to serve. Your government's priorities are solving their own poverty and not the people of The Gambia.
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