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Momodou
Denmark
11634 Posts |
 Posted - 28 Dec 2007 : 20:59:34
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Foroyaa Editorial
THE 2007 BUDGET SPEECH
35 MILLION DOLLARS SALE FOR 50 PER CENT OF GAMTEL/ GAMCEL
The Nation Needs Further Explanation
The Secretary of Finance and Economic Affairs delivered his budget Speech on 14 December 2007. A comprehensive analysis of the speech will be made in the New Year. What is important now is to concentrate on the burning issues.
On the Dalasi
First and foremost, Gambians expected the Secretary of State to give clear information regarding the uncertainty which surrounds the appreciation of the dalasi and the prices of commodities. Other than his position that the appreciation of the dalasi is due to Macro Economic stability, the Secretary of State indicated that “During the recent months of the dalasi appreciation, our commercial banks
displayed inconceivable and unimaginable Greed, and conducted foreign currency transactions in a manner that is unprofessional, unethical, and unwarranted. The banks have behaved inappropriately, and the inappropriate and unacceptable practices must cease, and must never be repeated again.”
Foroyaa will conduct interviews to find out what the concrete allegations are and further document the reactions of the banks in order for the people to know exactly what happened.
Auditing of government accounts
The second controversial issue is the auditing of Government accounts. It is incontrovertible that without audited accounts, no body can actually indicate the true state of government finances. Section 160 subsection 1(d) of the Constitution of the Gambia states that “The Auditor General shall within six months of the end of the immediately preceding financial year to which each of the accounts referred to in paragraph (c) relates , report to the National Assembly on the accounts and draw attention to any irregularities in the accounts audited and to any other matter which, in his or her opinion, ought to be brought to the notice of the National Assembly.”
The accounts referred to are the accounts of The Gambia, the accounts of all offices and authorities of the Government of The Gambia, the accounts of the courts, the accounts of the National Assembly and the accounts of all enterprises. The Government has been in arrears for 6 years in the submission of its accounts for auditing. In fact the previous audited accounts revealed gross anomalies, which led to recommendation by the National Assembly for the enactment of supplementary legislation to write off the gross anomalies before the accounts can have a legitimate opening balance in the next following year after the mess is cleared up. The Secretary of State mentioned the efforts made to deal with the arrears in the auditing of Government accounts as follows:
. “One issue which has featured prominently in previous Budget Speeches has been the status of the Government Accounts. I wish to report to the National Assembly that the 2000-2006 Government Accounts have now been prepared, and have been submitted to the Auditor General for auditing. We look forward to the Public
Accounts Committee deliberations on the audited accounts in the near future.” A government which has not been able to submit its accounts for 7 years cannot be said to be transparent and accountable by any standard.
On Debt Relief
The Secretary of state promised that “In few days time, precisely on the 18th and 19th December, 2007, the Boards of Executive Directors of the World Bank and the International Monetary Fund will determine whether The Gambia has reached HIPC Completion Point. This country has already traveled a long, difficult and tiresome journey of far- reaching reforms.”
The World Bank and the IMF have indeed met and according to press release No.07/302, issued on 20 December 2007, by the external relation Department of the IMF, the two institutions, i.e, the World Bank and the International Monetary Fund Support The Gambia’s Completion Point Under the Enhanced HIPC Initiative and Approve Debt Relief under the Multilateral Debt Relief Initiative. The press release stated among other things that “Debt relief to The Gambia under the Enhanced HIPC Initiative amounts to US$66.6 million in net present value (NPV) terms 1, equivalent to a 27.2 percent NPV reduction of The Gambia’s debt after traditional debt relief. The US$66.6 million in reduced debt is attributable to all creditors. Total assistance under the Enhanced HIPC Initiative is estimated to correspond to approximately US$140 million in nominal terms.2
“In reaching the HIPC completion point, The Gambia also becomes eligible for further debt relief from the IMF, IDA, and the African Development Fund (AfDF) under the Multilateral Debt Relief Initiative (MDRI). Total debt service savings under the MDRI will amount to approximately US$373.5 million in nominal terms over the next 43 years.
“As a result of reaching HIPC completion point, The Gambia is expected to receive in total the equivalent of US$514 million in nominal debt relief under both the Enhanced HIPC Initiative and the MDRI, on principal as well as interest payments.
“The World Bank’s IDA committed itself to provide assistance of US$35.9 million in nominal terms, of which US$9.1 million has already been delivered. Under the MDRI, the World Bank’s IDA will cancel a debt stock of approximately US$183 million of debt disbursed before end-2003 and still outstanding on December 31, 2007, corresponding to a total of approximately US$202 million in debt service savings.
“The IMF committed itself to provide MDRI/HIPC debt relief totaling SDR 9.4 million (US$14.2 million). Under the MDRI, the IMF will provide 100 percent debt relief on obligations incurred before end-2004 and still outstanding at the completion point.”
Those who have little understanding of the international and national credit market and the unique roles of the World Bank and the IMF tend to believe that The Gambia is being rewarded by the two institutions. A patient is a patient regardless of whether it is in an emergency ward or a normal ward. In order to deal with the emergence of highly indebted poor countries which would be strangulated by debt if there is no relief, the World Bank came up with theheavily indebted poor countries initiative to encourage creditors to provide debt relief to reduce their debt service burden. The debate among development oriented thinkers is whether such initiatives are actually designed to eliminate constraints in economic growth and the fight against poverty or a mechanism for loosening the debt noose so that the country will continue to pay at its pace until the noose tightens again.
In our view, the Gambia had to engage in a lot of domestic borrowing to meet its budget deficits. If the relief it receives merely enables it to lower its domestic borrowing, the country will still be in a terrible state if the productive base is not built to ensure the availability of more revenue to deal with poverty. Why would that be so? The answer is simple. The two institutions are not giving debt relief without conditionality. In fact, the World Bank and IMF did not hide this in the Press Release which we will publish in full.
According to the World Bank representative the Gambian authorities “must take this opportunity to ensure that future borrowing is prudently managed in order to prevent a reoccurrence of debt distress, and to continue implementing reforms outlined.” The IMF representative added that “Looking forward, a key challenge is to maintain a sustainable external and domestic debt position through careful borrowing and prudent fiscal policy’’
In short if the budget deficits are not controlled and the loans reduced on an annual basis, the debt relief shall be meaningless. Debt relief can lead to lower interest rates and more savings for the national budget. For example, by the end of 2007 the interest payments are 15 percent lower than anticipated. It is estimated that this expenditure component reduced from D846 million to D782 million, due mainly to lower interest rates.
However, without reduction of loans and control of expenditure, the situation will remain the same. For example, the Secretary of State indicated that Domestic credit grew moderately to D4.4 billion, or 0.9 percent, of which credit to Government and public entities increased by 0.1 percent, and 9.2 percent to D1.6 billion and D295.3 million, respectively. Such domestic debts are the scourge to any gains from debt relief from the World Bank or the IMF. In fact, the Secretary of State has exposed the conditionality imposed by the World Bank in his speech as follows: “Recently, the World Bank and the IMF conducted a Debt Sustainability Analysis (DSA) on The Gambia’s external debt, and this has indicated that while debt relief should move The Gambia to a sustainable debt path, Government should promote a strategy of careful management of the country’s external debt to finance PRSP II priorities, without compromising debt sustainability. But, let me state categorically that The Gambia has no external payment arrears problem, and Government has always been meeting its external debt obligations regularly, and on time, and has the capacity to continue to do so. Government has, therefore, decided to increase the grant element in new external borrowings from 35 to 45 per cent, and limit new borrowing in 2008 to US$50 million. However, Government will undertake its own independent Debt Sustainability Analysis by end-July, 2008, and the results of that analysis will inform further Government policies on new borrowings. What is now evident is that The Gambia needs massive injection of grant funds by the Donor Community to finance the projects and programs in PRSP 11, and this is the message that Government will take to the Donors Roundtable Conference on The Gambia’’ Will debt relief impact on Poverty if there is no meaningful development of the productive base of the economy? Our answer is in the negative.
On the Groundnut Trade
Finally the groundnut trade is in shambles. However, the Secretary of State did not state how this major problem is to be addressed. He mentioned that “The objectives of establishing the Assets Management & Recovery Corporation (AMRC) are to recover and manage the non-performing assets of the defunct Gambia Commercial & Development Bank, and the Managed Fund of Gambia Government, and the forfeited properties/assets from the various Commissions of Inquiry set up after 1994.”
He did not indicate how much has been collected by this institution and to what use the money has been put. We have always maintained that the funds should have been utilised to provide resources for the purchase of groundnuts. If the groundnuts of the farmers are not bought, they should ask the government where the funds of the Company are going.
It goes without saying that the funds from the sale of Gamtel/Gamcel could have helped to cushion the groundnut industry. If the groundnuts of the farmers are not bought they should ask why the funds for the sale of shares from Gamtel/Gamcel have not been used for their very survival The Government sold 50 percent shares in Gamtel/Gamcel to Spectrum Investment Holding for an amount of US $35 million. Government has started to utilise some of the funds paid in the 2007 Budget. An amount of D390 million has been incorporated in the 2008 Budget, and the remainder of the funds will be utilised in 2009. The proceeds from the privatisation sale are being used to fund non-debt creating expenditures and assets in the social sectors, and in the security area, which Government will not have been able to fund ordinarily from revenue resources.
“The government has started to utilise the funds in the 2007 budget,” said the SoS. We would like to know how much had been utilised and how it was incorporated 390 million dalasi will be incorporated in the 2008 budget. In which areas will this amount be incorporated ?
The remainder will be spent in 2009. Where is the remainder kept? How much? Is it kept in an interest bearing account? Why spend the money in the security area and not on agriculture to purchase groundnuts? We will continue our inquiry.
Source: Foroyaa Newspaper Burning Issue
Issue No. 150/2007, 27 December, 2007
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