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Gambia
Overview
Click to enlarge The Gambia has made major progress towards macroeconomic stability in recent years, with growth averaging 6.5 per cent since 2004 on the back of prudent monetary and fiscal policies alongside structural reforms. For 2008, however, GDP growth is estimated to have slowed to 5.7 per cent because of the global financial and economic crises.Unfavourable global developments are likely to lead to reduced exports, tourism receipts, remittances and foreign direct investment flows which will restrain growth over the near term. GDP growth is projected at 5 per cent in both 2009 and 2010. The Gambia has performed well under the IMF Poverty Reduction and Growth Facility (PRGF) programme approved in February 2007, making it possible for the country to reach the Heavily Indebted Poor Countries (HIPC) Completion Point in December 2007 with substantial debt relief ofUSD513.5million (US dollars).


Recent Economic Developments

Economic growth is estimated at 5.7 per cent in 2008, down from 6.3 per cent in 2007. Agriculture picked up strongly but services and industrial production dropped sharply.

The Gambian economy is dominated by services, reflecting the importance of tourism and transit activities. Tourism is the largest earner of foreign exchange and a major source of employment. The Gambia is a regional transit hub, including large reexport activities to Senegal and other countries of the region. Services accounted for 60.5 per cent of output in 2008, agriculture 27.2 per cent and industry 12.3 per cent. Agriculture and industry are dominated by groundnut cultivation and processing. Agricultural output is estimated to have jumped 28.4 per cent in 2008 as groundnut output soared 45.7 per cent after growth of just 3.9 per cent in 2007. Better weather conditions, increased acreage under cultivation and the use of improved farming methods boosted production. Elsewhere in the sector, growth was modest.

Industrial production edged up 0.7 per cent in 2008, well below the 3 per cent growth rate recorded in 2007. Industry was adversely affected by the rising cost of rawmaterials in addition to the chronic problem of insufficient and costly credit, which was exacerbated by unsettled conditions in the financial markets.

Construction has stagnated, largely due to the completion of large road and hotel projects in 2006. Electricity output expanded at an average of 16 per cent over the past two years, partly remedying dire power shortages.

Service sector growth slowed to 6.9 per cent in 2008 from 11.3 per cent in 2007, reflecting weak performances in the crucial trade and tourism sectors. Trade is estimated to have declined 12.9 per cent after growing 7.1 per cent in 2007, while tourism improved from a sluggish 1.7 per cent but only to 3 per cent.The decline in trade reflects the difficulties of the re-export sector which accounts for about 80 per cent of export earnings. Regional integration has also resulted in lower import duties in Senegal while Senegalese port efficiency has improved, eroding The Gambia’s competitiveness as a trading entrepot.Other services weremostly weaker– transportation grew 6 per cent after 8.5 per cent in 2007; communications rose 10 per cent, down from 25 per cent, while real estate and business services expanded 3 per cent, little changed from 3.1 per cent. Public and private consumption each grew more than 17 per cent in 2008 after a 20 per cent increase in public sector salaries implemented as part of ongoing civil service reform. Public investment also rose strongly in 2008.The external sector was a negative contributor to growth as imports soared and exports fell.

Government spending is projected to continue to lead growth in 2009 and 2010. Exports are expected to post modest growth in the next two years.


Macro Economic Policy
The Gambia’s IMF Poverty Reduction and Growth Facility (PRGF) was suspended in 2002 due to misreporting of foreign exchange data by the central bank and irresponsible monetary and fiscal management. Inflation soared and the currency plummeted. Since 2004, the government has made major progress in macroeconomic stability on the back of prudent macroeconomic and monetary policies, which the IMF recognised with a new PRGF in 2007.

While the IMF’s recent Article IV review of The Gambia’s performance was broadly satisfactory, the Fund waived some of the criteria on structural reforms that the country had failed to achieve. The IMF urged the government to adopt policies to sustain long-term growth. The discussions centred on trade and other policies to enhance the country’s international competitiveness. It is expected that fiscal and monetary policy will remain prudent in 2009 and 2010.

Fiscal Policy
In 2008, the government maintained a tight fiscal policy to complement the monetary stance and so maintain low inflation and sustain economic growth.

On the revenue side, the main focus was to strengthen tax administration. The Gambia Revenue Authority (GRA) was established to co-ordinate the government’s revenue collection efforts, broaden the tax base and reduce tax evasion. On expenditure, the emphasis was put on monitoring, accounting and control, while giving priority to social and other sectors such as health, education and agriculture for poverty reduction purposes. The Integrated Financial Management Information System (IFMIS) was launched in 2007 to improve all aspects of the budget process (formulation, execution, monitoring and reporting).

Total revenues rose to an estimated 23.9 per cent of GDP in 2008 from 22.9 per cent in 2007 as both the tax take and grants increased. Direct tax revenue increased 23.3 per cent due to gains in corporate and personal taxes attributable to the creation of the GRA and related efforts. Non-tax revenue fell 26.5 per cent due to a drop in receipts from government services and charges, and proceeds from telecommunication licences.

Total expenditure and net lending increased to an estimated 24.9 per cent of GDP in 2008 from 22.7 per cent in 2007, with current expenditure rising to 18.3 per cent from 16.2 per cent. Interest payments fell 15.5 per cent, reflecting the impact of debt relief.

The overall budget balance moved from a surplus of 0.2 per cent of GDP in 2007 into an estimated deficit of 1.1 per cent of GDP in 2008. The deficit is projected to widen further to 2.4 and 3.8 per cent of GDP in 2009 and 2010. The deficit will be financed mostly through external borrowing.


Monetary Policy
Monetary policy aims to ensure low inflation and exchange rate stability while supporting fiscal policy.

The Central Bank of The Gambia (CBG) follows a monetary targeting regime with broad money the intermediate target and reserve money the operating target. In implementing this policy, the CBG monitors on a weekly basis net domestic assets, which must be kept below a specified ceiling, and its net foreign assets, which must be maintained above a designated floor.

Monetary policy is conducted primarily through open market purchases and sales of Treasury bills. In addition, the CBG occasionally sterilises inflows to moderate exchange rate volatility.

Broad money is estimated to have grown 2.2 per cent in the 12 months to end-November 2008 compared to 7.9 per cent a year earlier. The CBG forecasts money supply growth at 8.7 per cent in 2009 and 10.7 per cent in 2010.

Reflecting the rise in global food and energy prices, inflation rose sharply from less than 1 per cent at the start of 2007 to 6 per cent by the end of that year.

Relatively tight monetary conditions and currency appreciation, coupled with the elimination of the sales tax on basic commodities, helped contain inflation in early 2008 but by November it was higher again, at 6.5 per cent. Inflation is expected to fall to 6 per cent in 2009 and 5 per cent in 2010.

The average bank capital adequacy ratio is 23 per cent, well above theminimum 8 per cent requirement.

The average non-performing loan ratio stood at 7 per cent at end-September 2008 while the loan to deposit ratio was 39 per cent. Interest rate spreads are high compared to other developing countries, contributing to the low level of financial intermediation. The CBG has taken several measures to broaden and deepen the financial sector, including encouraging new entrants, extending banking hours and setting up a credit reference bureau.

Microfinance is one of the cornerstones of poverty reduction. The CBG oversees microfinance institutions and has licensed 63 Village Savings and Credit Associations (VISACAs) and five finance companies.

These organisations currently serve 78 660 depositors and borrowers.

External Position
The Gambia’s open economy, heavy reliance on groundnuts, re-exports and tourism make it inherently vulnerable to developments in other countries, so requiring an adequate level of reserves which were equivalent to 4.9 months of imports in 2008.

The current account deficit is estimated to have widened to 18.3 per cent of GDP in 2008 from12.5 per cent in 2007, reflecting a widening of the trade deficit to 30.5 per cent of GDP. The services balance and current transfers deteriorated from surpluses of 10.3 per cent and 11.2 per cent of GDP in 2007 to 8 per cent and 9.7 per cent in 2008, respectively. These figures reflect the impact of a deepening global downturn which has cut exports, tourism receipts, remittances and foreign direct investment flows.

The capital and financial account surplus is projected to fall to USD 85.7 million in 2008 from USD 113.8 million in 2007. The overall balance of payments is estimated at a deficit of USD 54.6 million in 2008 following a surplus of USD 32 million in 2007.

Foreign direct investment flows, which amounted to 10 per cent of GDP in 2007, are projected to decline in 2009 and 2010. Remittances will likely fall as employment opportunities become scarcer abroad and exports may suffer due to weaker global demand.



Structural Issues
Private Sector Development
The government’s privatisation programme aims to reduce demands on the national budget and improve the use of scarce resources.

The Gambia is in the middle rankings of widely-used indicators for business climate and economic competitiveness when compared to other sub-Saharan African countries.

In the 2008 World Bank’s Doing Business survey, The Gambia was ranked 113 out of 175 countries, better than its neighbours, including Senegal on 146, but below others in the region such as Ghana.

For ease of international trade transactions, The Gambia ranks third in sub-Saharan Africa. Customs administration and international trade procedures in general are among the least onerous in West Africa. Inflows of FDI in recent years, mostly in construction and tourism, reflect these findings. The Gambia is ranked favourably on labour regulation but poorly on investor protection, tax rates and procedures.

The private sector complains about inadequate government support. The Gambia Investment Promotion and Free Zone Authority (GIPFZA) and some representatives of the private sector claim that the exemptions and privileges in The Investment Promotion Act (2001) are not uniformly applied and held up by red tape. Other problems include weak infrastructure, especially energy and transport; lack of credibility in monetary and fiscal policies; high interest rates and slow progress on privatisation. The government, however, sold 50 per cent of telecom CAMTEL-GAMCEL Co. Ltd. in 2007 and identified 14 public enterprises for divestiture. One of these, the Management Services Agency (MSA), was sold in 2008.

An Alternative Dispute Resolution (ADR) Act was passed in 2005 to ease pressure on the commercial court and the ADR secretariat is currently in operation. There are plans to review the Companies Act in order to improve reporting and auditing standards.

The Gambia’s investment promotion strategy, known as the Gateway Project, started in 2002 and aims to make the country the entry point for West Africa. Setting up GIPFZA as a one-stop shop for investors brought some improvement in the business climate but it has not been effective in revitalising the private sector and export activity.

Commercial banks in The Gambia do not seem to have any significant direct exposure to the “toxic” securities at the heart of the current global financial crisis. Limited external borrowing by the banks and the composition of existing credit lines suggest the banking industry is sound.

Other Recent Developments
Since 1996, The Gambia’s score has deteriorated on three out of the World Bank’s six measures of governance– “government effectiveness,” “rule of law” and “control of corruption.” Progress has been made in “voice and accountability,” “political stability” and “regulatory quality.”

In 2000, the government, with assistance from the World Bank, commissioned a study on the institutions of the legal system, leading to a framework for reform. Judicial sector reform was a major theme at the Poverty Reduction Strategy Papers roundtable conference held in London in February 2008. Improving Civil Service in The Gambia, which has been the foundation for the Civil Service Reform Strategy (Medium Term Plan 2008–2011). The average civil service salary in The Gambia is three times per capita income but lower grade levels are still minimal. Private sector salaries can be up to 20 times those of civil servants, depending on the grade, and this has been taken to justify wage hikes to retain government staff. Two pay reform proposals were suggested in the civil service reformstudy. One proposes salary increases of 68 per cent to 83 per cent, with a bias toward the lower grades.The other focusesmore on higher grades, seeking to stop losses among professional and managerial staff in government.

In 2007/08 the government, in collaboration with the World Bank, AFDB and the UK’s Department for International Development (DFID), prepared a study entitled Improving Civil Service in The Gambia, which has been the foundation for the Civil Service Reform Strategy (Medium Term Plan 2008–2011). The average civil service salary in The Gambia is three times per capita income but lower grade levels are still minimal. Private sector salaries can be up to 20 times those of civil servants, depending on the grade, and this has been taken to justify wage hikes to retain government staff. Two pay reform proposals were suggested in the civil service reform study. One proposes salary increases of 68 per cent to 83 per cent, with a bias toward the lower grades. The other focuses more on higher grades, seeking to stop losses among professional and managerial staff in government.

The government is aware that it has to improve transport infrastructure to bolster the country’s status as a regional trading centre. A National Transport Plan (NTP) focuses on port development and transport links, both domestic and international.The government set up the Gambia Roads and Technical Authority in 2004 for this purpose. Banjul Port is relatively efficient in terms of speed and cost of clearance of goods but improvements could still be made.The River Gambia was the original foundation of The Gambia’s role as a regional hub, as well as the main way to transport groundnuts. However, river transport has been in decline and is underutilised. Roads account for more than 90 per cent of freight and passenger movement.

The National Water and Electricity Company (NAWEC) generates power in oil-fired facilities and supplies it to the Greater Banjul Area and to other towns and villages. Electricity consumption per capita is very low at 65 kWh compared to the African average of 512 kWh. NAWEC cannot meet demand and there are numerous power outages. Government policy encourages private sector involvement and in 2005, NAWEC signed a Power Purchasing Agreement (PPA) with Global ElectricalGroup (GEG) as an Independent Power Producer (IPP). In September 2006, GEG inaugurated a first set of generators producing 22MW in Brikama, Western Region. The first phase of the Rural Electrification Project financed by donors has commissioned six stand-alone systems at various locations, with a total generating capacity of 4 MW.

Reliability of supply improved in early 2007 but at the cost of a 30 per cent increase in tariffs. The system overall is inefficient with power losses of up to 45 per cent.

Alternative energy resources include wind, solar and biomass, with the latter having the geatest potential. The government lifted import taxes on all forms of renewable energy and energy efficiency equipment in March 2008.

The Gambia Renewable Energy Center (GREC) was set up to promote renewable energy technologies and advise the government. The non-profit Renewable Energy Association of The Gambia (REGAM) was established in 2008, bringing together companies, institutions, other organisations and individuals. The main domestic energy sources are firewood and charcoal – at 95 per cent usage – with kerosene and Liquefied Petroleum Gas (LPG) only marginal.

Innovation and ICT
The telecommunications industry comprises one fixed-line company – GAMTEL – and three GSM providers – GAMCEL, AFRICELL and COMIUM. A fourth mobile operator Q-cell recently secured a licence and a frequency. The government holds 50 per cent of both GAMTEL and GAMCEL while the other mobile operators are privately owned. AFRICELL is the leading operator with about 500 000 subscribers, followed by GAMCEL with 250 000, COMIUM 100 000 and then GAMTEL with 47 000. The telecoms penetration rate is above 50 per cent.

The Public Utilities Regulatory Authority (PURA) oversees the telecommunications sector as well as water and electricity supply. PURA guidelines ensure that tariff changes are made transparently and on the basis of the principle of cost recovery. In collaboration with the International Telecommunication Union (ITU), PURA commissioned a study in 2008 to improve interconnection charges and then cut them by more than half.

The government introduced the National Information and Communications Infrastructure Policy to foster information and communications technology (ICT)-based development. The Department of State for Communication Information and Technology (DoSCIT) is responsible for promoting ICT in public service delivery. Work is ongoing on the Pan-African e-Network to provide Tele-Medicine and Tele-Education services. The authorities plan to establish ICT centres around the country so as to help bridge the digital divide between urban and rural areas, and to enhance ICT use in general.

An e-government project is in progress to network all government departments. Government officials have been assigned email addresses under a dot.gov sub-domain. Funds have been secured to develop a government-wide web portal but implementation has been delayed due to slow disbursements from donors. The Gambia Radio and Television Services agency has been reorganised and is upgrading its equipment, infrastructure and programming.

Political Context
The country benefits from a relatively stable political system. For three decades following independence from the United Kingdom in 1965, The Gambia was led by President Dawda Jawara and evolved as a multi-party democracy led by the People’s Progressive Party (PPP).

President Yahya Jammeh has been in power since a military coup in 1994. In September 2006, he was reelected as the candidate of the ruling Alliance for Patriotic Reorientation and Construction (APRC) with 67 per cent of the vote. International observers described the elections as generally fair. Legislative elections in January 2007, which were marked by splits in the opposition, returned the APRC to power with 60 per cent of the vote. The President and the APRC are expected to retain a firm grip on power. The next presidential elections are scheduled for 2011, with parliamentary polls to follow in 2012.

The Gambia has been accused of human rights abuses and critics have expressed concern over press freedom and the place of the opposition. The Gambia Independent Electoral Commission consists of a chairperson and four other members. Under the Constitution, the President, in consultation with the Judicial Service Commission and the Public Service Commission, appoints and has the right to dismiss the Commissionmembers, including its head.

Social Context and Human Resource Development
A government priority is to expand access to education, particularly for girls, under its National Education Policy for 2006-2015. Education is the largest single budget item. The gross enrolment rate (GER) in primary and basic secondary education rose to 77 per cent and 45 per cent respectively in 2007 from 70 per cent in 2005. Gender parity was also attained at these levels. At the senior secondary level, the overall GER was low at 31 per cent in 2005 and the gender gap still significant but this GER is expected to reach 39 per cent in 2011. The government has programmes to recruit and retain qualified staff, including hardship allowances and improved working conditions for teachers assigned to rural areas. Nevertheless, education quality remains a major challenge.

Health care is important for poverty reduction. The health sector faces numerous problems – shortage of skilled staff; high attrition rates of personnel to the United Kingdom and other places; uneven use of existing human resources; limited funding for essential drugs and equipment, and weak managerial skills. Health is the third largest budget item.

Life expectancy, estimated at 55.9 years in 2008, is better than the sub-Saharan Africa average. Among other indicators, the infant mortality rate, recorded at 76.1 per 1 000 live births as of 2008, remains considerably higher than in Senegal and Ghana, the best performers in West Africa. The Maternal Mortality Ratio (MMR) is high but has improved over recent years.

The prevalence of malaria and diarrhoea are estimated to be 15 per cent and 22 per cent, respectively. Anti-malarial drugs are being provided for effective case management for the entire country. The annual incidence of tuberculosis is estimated at 118 per 100 000 persons but more reliable data are needed. The latest surveillance data available, from 2005, showed that HIV/AIDS prevalence had fallen, suggesting that education and prevention programmes may have had some impact. The fight against HIV/AIDS requires a national and effective institution that can muster support from the highest level of leadership.

Country Statistics

Statistic 2008 2007
Basic Indicators
Real GDP growth (%) 5.7 6.3
Gross Domestic Product (US$ million, current prices) 612 643
GDP per capita (Current US$) 349 377
GDP per capita (PPP) 905
Demand Composition
Total Final Consumption (% of GDP) 104.8 90.9
Private Consumption (% of GDP) 92.1 80.2
Public Consumption (% of GDP) 12.8 10.7
Total Gross Capital Formation (% of GDP) 23.7 24.9
Private Capital Formation (% of GDP) 11.9 13.1
Public Capital Formation (% of GDP) 11.7 11.9
Trade balance (% of GDP) -30.5 -26.7
Exports (f.o.b) 11.2 14.2
Imports (f.o.b) 41.7 40.9
Public Finance
Total revenue and grants (% of GDP) 23.9 22.9
Tax revenue (% of GDP) 19.5 19.0
Grants (% of GDP) 1.6 1.2
Total expenditure and net lending (% of GDP) 24.9 22.7
Total expenditure and net lending (US$ million) 15,266 14,612
Current expenditure (% of GDP) 18.3 16.2
Wages and salaries (% of GDP) 4.2 4.3
Interest on public debt (% of GDP) 3.7 5.1
GDP per capita (Current US$) 349 377
Capital expenditure (% total expenditure and net lending) 0.2 0.3
Primary balance (% of GDP) 2.6 5.3
Overall balance (% of GDP) -1.1 0.2
GDP local currency (Local currency) 12,584 16,007
Fiscal balance (% of GDP) -1.1 0.2
Fiscal balance (US$) -659 112
Monetary Indicators
Inflation (%) 6.4 5.4
Exchange rates (LCU/US$) 20.6 24.9
Broad Money - level (LCU billion) 9.3
Broad Money (% of GDP) 51.8
Reserves, excl. gold, at year end (US$ million) 142.1
Reserves (Eq. months of imports) 6.7
Current account balance (US$ million) - 112 - 80
Current account balance (% of GDP) -18.3 -12.5
Diversification index 6.6
FDI inflows 64
FDI outflows -
Aid Flows
ODA net total, all donors (US$ million) 72
ODA net total, DAC countries (US$ million) 33
ODA net total, multilateral (US$ million) 36
External Debt Indicators
Total external debt (US$ million) 314
Total external debt (% of GDP) 56.4 48.7
Debt service (% of exports of goods and services) 23.7 193.9
Worker remittances (US$ million) 64