Barely a month after Jubilee Debt Campaign, an international campaign group that advocates for the write-off of “unjust” debt owed by developing countries, name Gambia among the 22 countries in the world that are facing external debt stress, the country’s central bank announced the domestic debt is at 49% of the GDP.
Dr Boro Susso thought there is a need for the Government to take a breath and priorities its spending.
A development studies lecturer at Stratford College, he said the government of The Gambia could run itself into what he described as a “cash-trap” if it continues to get its spending priorities wrong.
Borro who was speaking to torchongambia in reaction to the rising domestic debt which stood at D19 millions, said such a higher government borrowing within the domestic economy could squeeze out the private sector and reduce government’s investment into the local economy due to the high interest rates associated with them.
“Domestic debts are incurred through national saving schemes and selling of government bonds. They are merely transfers from one group of people to another group of people. There are problems. The problem is that the servicing of such debts takes the much needed resources away from facilities that should be provided to achieve development, to improve the quality of life. So the more you increase your domestic debt, the more you are depriving the provision of necessary services for the improvement of the quality of life,” he said.
“So, if the quality of life is not improved, I cannot see how you can transform this country into a superpower because the quality of life is being compromised. Government borrows money and there are high interest rates which are called for in the use of that money. In fact the interest rate incurred for the use of domestic rate is higher than the interest rate incurred for external debt. That is what makes it serious. Those interest rates have to be paid for. In the process of paying that the high interest rate you are going to use more resources to pay it. Where do you get those resources from? You get the resources from tax revenue and other revenues of the government. It is that revenue that is used to provide the much needed services to improve the quality of life of the people.”
He added: “As long as government becomes more indebted domestically, the private sector is squeeze out. That is another limitation of increasing debt…One obvious implication is that government, through these internal debts, tries to seek debt relieve from its own citizens. These funds are provided by the domestic economy, because you borrow it. Is that fair? Increasing domestic debt was intensified in 2014 by the over 1 billion dalasi supplementary appropriation bill that was brought before lawmakers. The 2014 budget was 10.2 billion and you ask for supplementary allocation bill of 1 billion. Does it make sense? No wonder the domestic debt is increasing. Now when you look at this one billion dalasi supplementary allocation bill and break it down: 459, 000, 000 dalasis is allocated to the President’s office. There is an amount of 86, 000 000 dalasi which is also part of this supplementary allocation bill for travelling expenses and 186, 000 000 dalasi for other miscellaneous expenses and then finally 96, 000 000 dalasi for hotels accommodation. These huge amounts of money are spent on unproductive activities. No wonder, not only did it result in the increase in internal debts but also it resulted in low economic growth because these amount, if it were used for increasing agricultural production it would have been different…If you take a loan, you should put it into productive use… These are monies which are obtained for productive use of our resources to create more wealth for the future generation. Internal government revenue is decreasing and at the same time revenues from outside are also decreasing. At the end of the day we may find ourselves cash-strapped. So development will be retarded, much retarded because the resources are not there… Really, I wonder whether we know our priorities or not…”
Dr Susso recommended that the Government should create means by which it can generate revenues to invest in the local economy by creating links between agriculture and processing, establishing vibrant public sector institutions and improving on judicious public finance management.
“If the government were to generate sufficient revenues and do away with too much borrowing making the country indebted, we could strengthen the public enterprises to generate some money. There are lots of interference in the running of these public enterprises- all the parastatals. The government could bring back the performance contract that the then government had with public enterprises,” he said.
“This helps in putting them on check without undue interference because interference affects the productivity of these units. The other solution is to enhance food self-sufficiency because importation takes huge chunk of our resources. I really want to associate myself with the pronouncement made by the President on food self-sufficiency. It is just that I have disagreed with the timing because the potentials are there but there also has to be proper planning. There also has to be a strong linkage between agricultural production and processing. This will improve the growth of the economy and income of the people. There should also be a better financial management strategy- they could for example place a debt ceiling to prevent the government from borrowing beyond certain amount of money. And most importantly, we have to encourage participatory development. Policies can’t fall from the air like that. There should be opportunity for all Gambians to say anything about a particular government policy.”
However, during the 2015 budget speech the finance minister of the country has promised lawmakers at the National Assembly that the government will endeavor to keep the domestic borrowing rate at a record low and spend within the budget.