The minister of Finance and Economic Affiars has said that the 2013 budget will focus on the objectives of the Programme for Accelerated Growth and Employment (PAGE), which is the Gambia's development strategy and investment programme for 2012-2015.
Abdou Kolley made this remark last Friday while presenting the bill entitled an 'Act to provide for the services of The Gambia for the period 1st January 2013 to 31st December 2013 (both dates inclusive)' widely known as Budget Speechat the National Assembly that was attended by the vice President and Minister of Women's Affairs, Her Excellency Aja Dr. Isatou Njie-Saidy; Cabinet ministers, members of the diplomatic community, senior government officials, heads of institutions and departments, the media, and a cross-section of the community.
The page aims to accelerate and sustain economic growth and development while creating employment opportunities for Gambians in order to improve their socio-economic condition. The PAGE has put appropriate mechanism in terms of monitoring and evaluation of progress made by sectors. The Monitoring and Evaluation techniques are meant to measure whether the PAGE is implemented as planned and how successful it achieves its intended results. The government of The Gambia aims to achieve this objective through strategic investment in infrastructure, education, agriculture, tourism, health and energy.
Minister Kolley in his marathon speech explained that the fiscal prudence at all levels of government continues to be a top priority for government, as government's fiscal position has weakened in recent years due to growing expenditure demands which have yet to be offset by growth in revenue mobilization.
His words: "The shortfalls in revenue have led to fiscal deficit, which have been finance mostly by costly domestic borrowing. A principal objective of government's fiscal policy is to sustain and gradually reduces the domestic debt burden by minimizing government's dependence on domestic borrowing. This would not only ease pressure on interest rates, but also allow for expenditure on development projects."
Along these lines, he said government is implementing policies and programmes supported under an Extended Credit Facility (ECF) arrangement approved by the IMF Executive Board in May 2012, noting that the main objective of the current ECF arrangement is the reductions of the current level of Net Domestic Borrowing (NDB) to near zero per cent of GDP by end 2015.
Global economic outlook
The Finance minister said the global economic outlook recovery has been encountering major setbacks with fears at another major downturn, adding that output growth slowed considerably in 2011 and anemic growth is expected in 2012. "The financial uncertainty and sovereign debt crises in a number of European countries escalated in 2013 with heightened concerns of debt defaults in some economies such as Greece, Italy, Portugal, and Spain," he stated, adding that the fiscal uncertainty in the United States and the less-than-expected growth in emerging and developing economies are all contributing to the rapidly cooling global economy.
He continued: "The World Economic Outlook projects the global economic growth to be moderate from 3.8 percent in 2011 to 3.3 per cent in 2012. However, output growth is expected to pick up slightly to 3.8 per cent in 2013. In sub-Saharan Africa economic growth is expected to remain robust in 2012 and 2013 aided mainly by strong domestic demand and favorable commodity prices."
Developments in the domestic economy
Economic growth in The Gambia during the year under review, he said, was largely affected by the recent drought experienced in the agricultural sector, which led to a contraction of agricultural production of about 60 percent. Consequently, real GDP growth is estimated to decline to 3.9 percent compared to its initial projection of 5.5 per cent in 2012. He said with the exception of 2011, economic growth has been quite moderate with a three-year average of about 6 percent.
He revealed that the industrial sector, which comprises of mining and quarrying, manufacturing, Electricity, Gas and Water Supply, and Construction, grew by 3.9 per cent in 2011 compared to a growth of 4.7 per cent in 2010, representing a decline of 0.8 per cent. He further noted that the sector is estimated to further contract in 2013 largely attributed to a significant drop in manufacturing activities of-5.0 per cent and an estimated zero growth in construction in 2012.
Minister Kolley also disclosed that the services sector remains the second driver of the economy after the agricultural sector, noting that the sector is estimated to contract to 0.7 per cent in 2012 down from 9.3 per cent in 2011.
On the agricultural sector, he said the sector is estimated to grow by 21.8 per cent in 2012 as compared to a contraction at 36.6 percent in 2011. "The estimated rebound in the sector is mainly attributed to the recovery from the drought during the 2011/2012 cropping season. Agricultural sub sectors such as crop production, livestock, forestry and fishing are estimated to grow by 50 percent, 2.9 percent, 3.0 percent, and 4.0 percent respectively in 2012."
According to the Finance minister, preliminary estimates of government fiscal operations in the first nine months of 2012 showed an improved position compared to the same period last, adding that during the period, the Government's Net Domestic Borrowing (NDB) was just under one percent of annual GDP, down from 2.1 percent during the same period in 2011. "For the year 2012 as a whole, NDB is bow expected to be limited to D720 million, or 2.5 percent of GDP, compared with 3.4 percent in 2011," he observed.
He continued: "Total revenue and grants as at end September 2012 stood at D4.7 billion, or 16.9 percent of GDP and its end-year estimate is projected at D 6.1 billion, or 20.7 percent of GDP against a budgeted sum of D5.7 billion. Tax revenue as at end September 2012 stood at D3.2 billion, or 10.8 percent of GDP with an end year estimates of D4.3 billion or 14.6 percent of GDP. This represents an over performance of D300 million over the D4.0 billion budgeted for the year 2012."
Minister Kolley further stated that the total expenditure and net lending for 2012 is budgeted at D6.7 billion or 22.8 percent of GDP against an estimate outturn of D6.9 billion or 23.5 percent of GDP. He explained that the current expenditure composed of Personnel Emoluments and other Charges is budgeted ad D5.8 billion for the year, whilst the estimated outturn is D4.6 billion. "Total interest payments for the fiscal year 2012 is budgeted at D960 million while the estimated outturn for end December 2012 is D1.1 billion against an estimated outturn of D1.7 billion by end December 2012," he said, adding that fiscal deficit for 2012 is estimated at D950 million or 3.3 percent of GDP while the actual overall fiscal deficit including grants for end 2011 stood at D1, 210.2 million.
The Finance minister said the Central Bank of The Gambia monetary policy in 2012 aimed at containing inflation below 0.5 percent, maintaining stable exchange rate and building the Bank's foreign reserves to at least five months of import cover. He said monetary policy in 2012 was conducted amid challenging domestic and external economic environments.
According to him, growth in money supply was 7.0 percent in September 2012 compared to 11.5 percent in September 2011, with an end year estimate of 8.5 percent, adding that the growth in money supply reflects the increase in both the net foreign assets and net domestic assets of the banking sector.
Financial sector developments
Minister Kolley explained that the Gambia's financial system continues to remain sound as the average risk-weighted capital adequacy ratio of the banking industry stood at 26.4 percent in September 2012, higher than the minimum requirements of 10.0 percent. He said total industry assets stood at D19.3 billion at end September 2012 compared to D18.1 billion a year earlier. Total deposit liabilities increased to D12.8 billion or 6.6 percent from September 2011.
He said that the second phase of the increase in minimum capital requirements for banks is due by December 31st, 2012 when all banks will be required to raise their share capital to D200 million.
"Let me emphasise that the Central Bank, with support of government, will not entertain any request for forbearance from any bank that fails to meet the requirements. The capital augmentation is meant to ensure stability in the banking sector while strengthening banks in their funding of development projects, and is also in line with international developments in the sector. The Real-Time Gross Settlement System and the Automated Cheque Processing and Clearing House were launched in December 2011, while the Core Banking Application and Securities Settlement System went live in the first quarter of 2012," he explained.
His words: "Inflation in The Gambia has been low and subdued despite elevated and volatile global food and commodity prices. Consumer price inflation measured by the National Consumer Price Index (NCPI), rose to 4.2 percent in September 2012 from 4.1 percent in September 2012. Inflation is expected to remain under control at below 5.0 percent for the remainder of the year."
According to him, consumer food items, which account for more than 50.0 percent of the weight of the basket of goods and services, continue to be the main driver of headline inflation, noting that food inflation decelerated from 5.5 percent in September 2011 to 4.9 percent in September 2012. "Non-food price inflation rose to 3.4 percent in September 2012 compared to 2.2 percent in September 2011. The increase was due, mainly to the price increase in housing, water, electricity, gas and other fuels," he said.
Reflecting on the slowdown in global activity, Minister Kolley said the volume of transaction in the foreign exchange market, measure by aggregate sales and purchase of foreign currency, decreased to US$1.48 billion in the year to end September 2012 from US$1.60 billion a year ago. "Total sales (indicating demand) amounted to US$774.8 million in the year to end-September 2012 relative to US$787.6 million a year ago."
Balance of payments
Minister Kolley said balance of payments development for the half of 2012, indicates an overall deficit of US$38.03 million compared to a surplus of US$46.67 million in the first half of 2011. "The current account surplus of US$61.65 million recorded in the first half of 2011declined to US$17.35 million in the first half of 2012, reflecting higher deficit in the goods account during the second quarter of 2012," he noted.
Public financial management reforms
As part of ongoing public financial management reforms, Minister Kolley said the government is in the process of implementing a Medium Term Expenditure Framework (MTEF). This, he said, will have significant impact on the budget formulation process, given that MTEF integrates policy, planning and budgeting within a medium term perspective and provides a link between ambitious poverty reduction targets and the annual budget priorities of Government.
"Under MTEF, each line ministry will be required to provide a clear statement of objectives, programmes and activities to be funded from the budget. MTEF is scheduled to be piloted in January 2013 at the Ministry of Finance and Economic Affairs and the ministry of Basic and Secondary Education," he said.
In the area of Public Procurement, he went on, reforms are already ongoing to amend the Gambia Public Procurement Act (GPPA) to separate policy and regulatory (Ex-Ante Review and Post Review) functions of the GPPA; create an independent Complains Review Board; and strengthen the definition of sanctions and fines within the Act. "The Gambia will introduce the Value Added Tax system (VAT) in January 2013 replacing the existing Sales Tax. The aim of VAT is to simplify the tax system, broaden the tax base and improve compliance," he added.
Developments in the productive sectors
Shifting his lengthy budget speech to the developments in the country's productive sectors starting with agriculture, Finance Ministry Kolley explained that due to the poor weather conditions and uneven rains in many parts of the country, key crops (rice, millet, and groundnuts) have suffered losses of 60 percent during the 2011-2012 crop season, compared with production in 2010-2011. "This led the Government to declare a state of food and seed emergency and requested assistance from development partners and aid agencies," he stated, while thanking all those that supported Government and people of The Gambia for their wonderful show of solidarity.
He reaffirmed the government of The Gambia's commitment to transforming the agricultural sector into a major food supplier to both local and international markets in the medium term. The sector, he said, continues to contribute about 29 percent to the GDP, producing about 50 percent of the National Food Supply.
"To improve agricultural productivity to export levels, the government has made it a priority to increase investment in this sector to reduce the reliance on rainfall and ensure that the sector is modernized. In this regard, the agricultural and natural resource sector will continue to receive incremental resource from government budget to gradually reach the 10 percent in line with the Maputo Declaration," he added.
Fisheries and water resources
In the area of artisanal fisheries, Minister Kolley said government with its development partners is providing fisheries infrastructural facilities, fishing related equipment and means for fish preservation and distribution within the country. "The implementation of the Artisanal Fisheries Development Project co-funded by the Government of The Gambia, the African Development Bank and the Arab Bank for Economic Development in Africa is progressing satisfactory," he noted, adding that the construction of the Fisheries Jetty in Banjul is at the completion stage and estimated to be operational in the first quarter of 2013.
He added: "Under the African Development bank funded Rural Water Supply and Sanitation Project, the main objective is to increase access to safe drinking water and improved sanitation in the rural areas of the Gambia from the current level of about 70 percent to 72 percent for water supply and from 40 percent to 44 percent for sanitation by 2015."
Forestry and Environment
In the area of forestry, he explained that community forestry concept introduce since 1991, attempts to fully involved the local population in the management and sustainable utilization of their local forest resources by vesting them with legal ownership over land and trees. "It is expect that in future most of the country's natural forest will be owned and managed by the local population in the form of community forests," he added.
The environmental pillar, he said, includes climate change adaptation and mitigation, biodiversity, desertification, land degradation and drought poses serious threat to national development and requires concerted efforts at both national and international level to ensure sustainable development. He revealed that plans are underway to restructure the Department of Parks and Wildlife Management into an Autonomous body.
The Finance minister averred that the recent positive developments in terms of Air Access, caused by the return of Condor from Germany, the scheduled Air Europa flight from Madrid and African European Express or Cosmo from Barcelona which replaced the defunct Spanair as well as the advent of Correndon Airlines from Holland, all point to a new era of life for the tourism sector. In effect, he said the season commenced with the first batch of tourists arriving on 1st October 2012 with Correndon Airlines, a company that is new to the shores of The Gambia.
He added that the birth of 'Gambia Bird', a Gambian based Airline which is the result of German/Gambia collaboration flying the West African route as well as the United Kingdom with plans to reach other destinations in Africa and beyond, is a significant development in the air transport sector.
He said by mid-2013, a new Museum is expected to be opened at Fort Bullen in Barra thanks to assistance provided by the British High Commission. According to him, in the Arts and Culture domain, the conservation of the National Heritage Sites some of which have been acknowledged as World Heritage Sites by virtue inscription in UNESCO's prestigious World Heritage list, continue to impinge positively as added value to the tourism product.
He said that with the support of the West African Quality Programme, the drafting of a National Consumer Protection Bill and a Legal Metrology Bill was initiated in 2012 adding that these two legislations would enhance the protection of Consumers and ensure a fair trading environment.
"A National Quality Policy is also being drafted to ensure that goods and services imported into or exported from The Gambia are designed, manufactured and supplied in a manner that meets the standards. The policy will also aim at raising quality awareness amongst both the suppliers and the consumer," he said.
Communication and Information Technology
Minister Kolley stated that the Africa Coast to Europe (ACE) project, which seeks to provide high-capacity and reliable bandwidth by delivering direct connectivity to the information super highway, is effectively completed and The Gambia would host the international launching of ACE Submarine Cable System on 19th December, 2012. The System Acceptance Certificate has been duly signed, after the requisite testing by the Alcatel contractor.
Works, Construction and Infrastructure
According to him, in its efforts to ensure sustained economic growth and employment generation, the government continues to ensure safe and reliable road network in the Gambia, thus facilitating the free movement of people and goods throughout the country.
He said from 2011 to 2012, the national assessment test results for grade three indicate an increase in student's pass rates in English and Mathematics from 35.5 per cent and 36.9 per cent to 41.1 per cent respectively. Similarly, he noted that the Gambia Basic Education Certificate Examination (GABECE) shows an increase in the number of candidates with aggregate 6 to 24 from 1, 840 in 2011 to 1702 in 2012. The West African Senior Secondary Certificate Examination (WASSCE) results also show improvement in terms of number of students with University entrance requirement increasing from 281 in 2011 to 394 in 2012.
He said that following the President's declaration of 2012 as year of Science, Technology and Innovation (STI) in the Gambia, which is a result of the realisation of the significance of STI in national development, a number of activities to commemorate the year have been embarked upon, all of which should contribute ultimately to leveraging STI for productivity and economic growth. An expected outcome of this declaration is a strategic plan that would be linked to the National STI Policy as well as the Higher and Tertiary Education Policy, both of which are at an advanced stage.
According to him, the Gambia has one of the best immunization records in the sub-region noting that a cost effective strategy for the control of communicable diseases has helped maintain over 90 per cent immunization coverage for all antigens for children under five whilst this is a very significant gain as they have over the years witnessed a marked reduction in the incidence of childhood diseases.
Personnel Management and Local Governance
Minister Kolley further revealed that while working to consolidate on the above gains, in 2013 the key focus would be on building the capacities of Ministries and Departments to deliver on their mandate for the effective realisation of the PAGE, finalising the Pay and Grading Review in order to help boost attraction and retention strategies, finalising the Pension Actuarial Study to establish an appropriate benchmark for the civil pension reform and providing systems, tools and processes for improved service delivery.
Energy and Petroleum Resources
The Finance and Economic Affairs minister reiterated that the promotion of renewable energy is necessitated by the fact that it is more sustainable than conventional energy, which is compounded by rising costs of Heavy oils and Light Fuel Oils.In this regarded, he added that government is piloting a project on solar energy streetlights solar trackers while the project, which is at an advanced stage, is meant to demonstrate the technical and economic viability of this new technology, and if successful, the government intends to replace conventional streetlights to solar energy streetlights in the future.
Foreign Affairs, Peace and Security
He stated that the Gambia continues to champion the principle of good neighbourliness and remains and active player in global, regional and sub-regional political arena.In this regard, His Excellency the President of the Republic continues to play a pivotal role in the negotiations and maintenance of peace within the sub-region in particular.
Women Empowerment, Population and Youth
He disclosed that there is a growing recognition by government of the importance of macroeconomic policy in shaping women's living standards and their prospects for economic empowerment. In this regard the formulation and implementation of the Gender and Women Empowerment Policy 2010-2020 and the drafting of a National Action Plan on Gender Based Violence as well as Sexual Offence and Domestic Violence Bill would contribute largely in the realisation of the objectives of the fifth Pillar of the PAGE.
He went on to reveal that The Gambia would in 2013, conduct a Population and Housing Census as well as a Demographic and Health Survey while preparation work for both started this year and they call on their partners to support these important exercises and both national enquires would provide gender disaggregated data which are vital in addressing gender imbalances and inequities.
"Government's efforts to mobilize the positive energies of the youth is already bearing fruit with youth participating effectively in agriculture and picking up heighten interest in fisheries, which would contribute significantly to reducing poverty and unemployment. Similarly, efforts are being intensified to refurbish the Independence Stadium running tracks as well as exploring options to rejuvenate the Friendship Hostel in partnership with private entrepreneurs to enable the facility generate adequate revenue to ensure continuous viability and growth. Furthermore, noting that the availability of essential infrastructure in the regions would help greatly in promoting sports development local stakeholders are urged to participate in the prioritization and implementation of sports infrastructure development in the regions" he said.
Performance of Public Enterprises
He revealed that the government has made clear intention of introducing Public Private Partnership (PPP) arrangements to bridge the gap between the public and private sector and facilitate the realisation at the PAGE. A PPP framework is being established and this would go a long way in helping government address the ailing state of some of these PEs.
Fiscal outlook for the year 2013 Revenue
According to him, the 2013 budget is prepared on the basis of various macroeconomic assumptions, real GDP at 10.7 per cent, initiation at 6.0 per cent while overall budget deficit and current account balance excluding budget support are projected at 2.1 per cent of GDP and 15.6 per cent of GDP respectively. The exchange rate he said is estimated to slightly appreciate against the major international trading currencies during the fiscal year 2013. Gross international reserves are projected at US$192.8 million represented 5.0 months of imports covers.
He announced that the total revenue and grants for 2013 is projected at D7, 608.8M (22.6 per cent of GDP) against a total of D5, 771.3M (19.6 per cent of GDP) in 2012. "Tax revenue is estimated to register D4, 787.2M (14.2 per cent of GDP) in 2013 compared to D4,042.7M (13.7 per cent of GDP) in 2012" he said.
He added: "Expenditure and net Lending is estimated at D8, 301.5 million or (24.7 percent of GDP) for 2013 compared to an estimated figure of D6.722.8 million or (22.8 percent of GDP) in 2012. Current expenditure, which is made up of Personnel emoluments, interest payment and other charges for 2013 is estimated at D5, 204.7 million and projected to be D5, 230.7 million in 2012. Capital expenditure and net lending is estimated to increase to increase to D2, 781.5 in 2013 up from estimated D1, 492.1 million for the current fiscal year," he said.
Revenue and policy measures- Reform of the Personal Income Tax
He revealed that the tax free threshold would be raised from D7,500 to D18,000 representing an increase of about 140 per cent noting that it would be recalled that the existing threshold was adopted in 1991, thus the proposed increase is justifiable based on the increase in the prices of essential goods and services over the years.
Simplified Tax Procedures for Small Taxpayer
According to him, in the line with the best practice, the GRA will introduce a simplified presumptive tax regime for the small and micro taxpayers in 2013. The new reform measure would reduce the compliance burden of small taxpayers by getting them to keep simplified records of their daily sales. He said small taxpayers shall be required to charge a tax rate of 3 per cent on their total monthly turnover to be paid quarterly.
"The tax is a final tax meaning that no deduction shall be allowed for business expenses. It is expected that lower tax rate and the simplification of the processes and procedures would significantly reduce the cost of compliance thus increasing compliance for these taxpayers. The presumptive tax regime would be applied on taxpayers with an annual turnover at less than D0.5 million," he said.
Revenue Neutral Tax Measures
He added: "With the introduction of the VAT to replace Sales Tax, in January 2013, there is need to realign certain tax items, which would not increase the cost of those goods, including but not limited to the following: Rice, which used to be duty free with a sales tax of 5 per cent would be zero-rated under VAT and would attract a duty of 5 per cent; Sugar, flour and cooking oil, which attract 5 per cent duty and 15 per cent sales tax, would be zero-rated under VAT and attract 20 per cent duty; Onions and potatoes, which attract 20 per cent duty and 15 per cent sales tax, which will be zero-rated under VAT and would attract the same 20 per cent duty and a 15 per cent excisetax on CIF Value; Telecommunication, which attracts 20 per cent sales tax, would now attract a VAT of 15 per cent and an excise tax of 5 per cent; to meet government's obligation to ECOWAS institutions, the ECOWAS levy of 0.5 per cent would be temporarily adjusted to1 per cent," he stated.
Taxation of Tobacco Products
According to Kolley, following interactions with the WHO-framework Convention Tobacco Control (WHO-FCTC) in September 2012, it was agreed that basing specific excise taxes on weight is less effective for a government with the dual objective of controlling tobacco consumption and maximising revenue collection from the product. In order to address this problem, he said they wish to move from a weight based specific tax to one based on the number of cigarettes as follows: a D5/pack excise tax on cigarette from 2013 and increasing to D7/pack in 2015; an excise tax excise tax of 37.50/kilogram on the rest of the other non-cigarette tobacco products that are not in packs.
In conclusion, Minister Kolley reiterated that the government of the Gambia remains committed to maintaining and improving the socio-economic condition of all citizens. "As we are only three years away from the 2015 MDG target date, special attention would be paid by government to ensure that investments are scaled up in the areas that are still major challenges for the Gambia namely; the health and poverty targets. The Gambia has already been rated as one of the good performers in terms of progress towards achieving the MDG targets and government would continue to build upon these achievements," he added.
He stated that fiscal prudence at all levels of government must be adhered to if they are to meet the top government priority of reducing domestic borrowing levels and create the necessary fiscal space for further investments. He called upon all sectors to operate within their approved budgets adding that the onus lies with the accounting officers in government ministries, departments and agencies to ensure that government resources are effectively utilised.