The Gambian economy has continued to perform satisfactorily over the past four to five years. Real GDP growth has averaged some 4.9 percent between 1995 and 1999. For 1999, real GDP was estimated to have grown by 4.1 per cent, compared to 5.2 per cent in 1998. Most of this growth emanated from the agricultural sector, which is estimated to have grown by 7.8 per cent as a result of the good rains experienced during the growing season. The industrial sector registered an estimated 0.7 percent while the services sector grew by 3.9 percent. For the year 2000, real GDP is forecast to grow by 5 percent. However, it is unlikely that this target will be achieved on account of the lull in the tourism sector and the introduction of the pre-shipment programme. It will be recalled that FTI, one of the largest tour operators in the country reduced its rates resulting in the dislodging of relatively small operators. It also bought Kairaba Beach Hotel and Sunwing, the latter is currently closed for renovation . These developments have constrained the activities of the tourism sector.

One of the areas where the impact of the stabilization and adjustment programmes have had a significant impact Government finances. Generally, public finances have been performing quite well, in that the fiscal deficit has been on the decline over the past few years. Such good performance has been the result of both concerted expenditure control and revenue enhancing efforts. Preliminary figures indicate that fiscal performance in 1999 was quite satisfactory. Total revenue including grants is estimated at D1026.4 million while total expenditure and net lending is estimated at D1298.1 million, thereby culminating in an estimated overall Government deficit (excluding grants of -5.7 per cent of GDP.

( In Millions of Dalasis)

For the first quarter in 2000, the revenue picture is quite encouraging, compared to that in the corresponding period in 1999. Tax and non tax revenue increased by 13.3per cent and 34.2 per cent respectively, while grants increased by 21.9, percent from 18.3 million Dalasis in the first quarter of 1999 to 22.3 million Dalasis for the corresponding period in 2000.

Domestic taxes are estimated to have increased by 9.4 per cent, albeit a 20 per cent drop in domestic sales tax, signifying strong performance in direct taxes. International taxes are also estimated to have amounted to D143.4 million in the fist quarter of 2000, that is some 12.1 per cent above the level in the corresponding period in 1999. Total revenue excluding grants increased by 16 percent from 221.6 million Dalasis in the first quarter of 1999 to 257.1 million Dalasis for the corresponding period in 2000. This is rather surprising given that it is alledged that the introduction of pre-shipment has resulted in a drop of imports and re-exports. Perhaps, there is a time lag in the impact of such a development.

Monetary Developments

The monetary authorities have continued to pursue a tight monetary stance during the past few years. This has largely helped to keep the growth of money supply under control, an aspect that has helped to control inflation and maintain relative exchange rate stability. However, it appears that this stance was somewhat relaxed during the second half of 1999 and into the first quarter of 2000.

Money supply, narrowly defined as M1, that is currency in circulation (outside banks) and demand deposits increased from D755.19 million at the end of the first quarter of 1999 to D902.26 million at the end of the corresponding period in 2000. This translates into an increase of 19.5 percent. Currency outside banks increased by 15.4 percent, while demand deposits increased by 24.6 percent.

Quasi money defined as savings and time deposits also registered an increase of 29.2 percent from D670.77 million in the first quarter of 1999 to D866.76 million at the end of the corresponding period in 2000. Savings and time deposits increased by 23.2 percent and 44.3 percent respectively.

Consequently broad money increased from D1,425.96 million in the first quarter of 1999 to D1,769.02 million in the corresponding period in 2000, representing an increase of 24.1 percent.

Table 3 indicates that all the components of money increased during the last quarter of 1999 and the 1^st quarter of 2000. Domestic credit has also been rising during the period under review, largely to meet private sector credit needs, including requirements to finance the large groundnuts harvest.

It is rather interesting to note that despite the low rates of inflation and relatively stable exchange rate, lending rates are high, ranging from 19.0 to 24.0 per cent. One key reason for this is that the Treasury Bill discount rate is quite high, largely for purposes of monetary policy operations. While this strategy is quite successful in keeping inflation low, by mopping up any excess liquidity in the economy, it also has the effect of starving the business community of credit, which in turn affects growth. This is an aspect that needs to be looked at.

The interest rates on Central Bank bills and treasury bills continue to be determined by market forces through open market operations. The Central Bank gives an indicative rate for every float. Bidders, which include commercial banks, public enterprises and a few individuals, compete and the Central Bank settles for the most competitive discount rate. This discount rate in turn determines the lending rate, the rate charged by commercial banks on loans. The discount rate on Treasury and Central Bank bills at end-March 2000 was 12 percent compared to 14 percent for the corresponding period in 1999. The bank rate, that is, the rate charged by the Central Bank on loans to commercial banks was 12 percent as at March 1999 compared to 10 per cent for the corresponding period in 2000. The rediscount rate as at March 1999 was 17 percent; this dropped to 16.5 and 15.5 percent in September and December, respectively. As at end March 2000, the rediscount rate stood at 15 percent.

The rationale behind fixing the rediscount rate above the discount on treasury bills is that the Central Bank discourages rediscounting before maturity. The commercial banks’ lending rates to all the sectors except manufacturing ranged from 19.0 to 24.0 percent. This rate has remained unchanged from December 1998 to September 1999, when it changed to the current rate of 18 to 24 percent. Credit to the manufacturing sector attracted interest rates ranging from 18 to 22.5 percent as at end-March 2000 compared to a range of 19.22 to 24 per cent at end-March 1999.

The interest rate on short-term deposits and savings deposits stood at 9 percent and 9.5 – 11.5 percent respectively as at end-March 1999 compared to 7 and 9.0-10.0 per cent, respectively, at end-March 2000.

These developments are encouraging and it is hoped that the interest rate levels will reflect the economic fundamentals and that the credit squeeze on the economy will be relieved through lower lending rates and thereby stimulate growth, since the economy needs to grow at rates above 7 per cent per annun if considerable progress is to be achieved on the poverty reduction strategy.

Exchange Rate

The Gambia has operated a liberal exchange rate system since 1986, with the Dalasi floating within a context of an interbank market. There are no exchange controls or restrictions on current or capital accounts. The nominal exchange rate of the Dalasi has remained fairly stable. However, figure 3 indicates that the Dalasi has been depreciating against both the pound and the dollar since the beginning of the quarter under review. At the same time time, the spread between the interbank mid-market and parallel mid-market exchange rates has been widening. The pressure on the Dalasi became particularly pronounced during the begining of the first quarter 2000, to the extent that the central bank had to intervene to defend it. We hope this time is an action that will be frequentlly resorted to as it can have a detrimental impact on reserves.

Inflation is generally low in the Gambia

In line with the government commitment to private sector-led growth, prices continue to be determined by market of forces. The Central Bank continues to pursue a conservative monetary policy to achieve multiple objectives, prime among them is price stability, which is attained by mopping up excess liquidity from the economy through open market operations. Monetary policy is also being used to finance the budget deficit, which currently stands at about 3 to 5 percent of GDP. In addition, this conservative monetary policy ensures exchange rate stability.

Inflation as measured by the Consumer Price Index remains low. For the first quarter of 2000, the average is 2.8 percent compared with 2.7 percent for the corresponding period in 1999. It is worth mentioning that the inflation figures need to be treated with caution as the CPI only covers the low income group and as such may not provide an accurate picture of price developments in the economy. For example, petroleum prices were increased in January 2000, and since the introduction of the PSI, prices of many imported commodities have gone up, as can be easily verified by checking prices in the super markets and other retail outlets. Yet both of these developments do not seem to be reflected in the CPI. Such a situation is bound to distort macroeconomic management. It is for this reason that the UNDP is assisting the Government, through the Central Statistics Department to expand the coverage of the CPI in terms of having a national coverage as well as covering both the high income and the low-income groups

The performance of the external sector seems to have been adversely affected by recent developments. While imports increased from D538.5 million in the first quarter of 1999 to D645.5 for the corresponding period in 2000 representing an increase of 19.9 per cent, total exports, on the other hand, declined from D21.3 million in the first quarter of 1999 to D10.5 million for the corresponding period in 2000. This translates into a phenomenal decline of 50.6 percent. This decline in exports can be attributed to two main factors. First is the decline in groundnuts exports largely due to the attendant difficulty in the marketing of groundnuts during the 1999/200 season. Secondly, there was a sharp drop in tourism activity in the first quarter of 2000, attributable to the Y2K phenomenon which hit at the pick of the tourism season in the country, resulting in a sharp drop in the number of tourist arrivals in the country during the period January-March 2000. Thus the trade balance deteriorated from -D517.2 million in the first quarter of 1999 to -D635.0 for the same period in 2000. This will have a significant impact on the overall balance of payments.

The Secretary of State for Finance and Economic Affairs, Mr. Famara L. Jatta, presented the Budget for the year 2000 on 24 December 1999. The theme of the budget was "Poverty Reduction". In his presentation, the SOS stressed that Budget 2000 aimed at building the foundation set on growth and equity, particularly focusing on the equity aspect. To this effect, the strategy for poverty eradication will embrace such aspects as elimination of hunger and malnutrition, the provision of food security, education, employment and livelihood, primary-health care services, safe drinking water and sanitation, adequate shelter and participation in social and cultural life, while at the same time according special priority to the needs and rights of women and children. Human resources development remains a key component of this poverty eradication strategy.

In his presentation, the SOS reviewed economic performance in 1999, and outlined the policies for the year 2000.

In the estimates for 2000, total expenditure is programmed at D1572.42 million, that is some 21.1per cent above that projected for 1999. Of this projected total expenditure, some D1001 million will be spent on the recurrent budget (4.8 percent rise), while capital expenditure is programmed at D571.4 million, up by 66.5 per cent from the previous year. It is interesting to note that the programmed total expenditure for year 2000 represents 22.7 percent of GDP. This clearly represents Governments resolve to reduce the fiscal deficit through a combination of tight expenditure controls and enhanced revenue collection and cost recovery.

Among the highlights of the budget are the following revenue and expenditure measures:

Revenue

Non Tax

 

• Increasing fees on personal number plates to private vehicle owners

 

• Upward revisions in survey fees of various categories

 

• Upward revisions in agricultural land rates

 

• Increase in fees for development permits on commercial billboards

 

• Increases in lease fees on state land

 

• Increases in rates for business applications

 

• Increase in inspection fees for hotels and restaurants

Tax

 

• Expanding the base for the national education levy payable by companies, Partnerships and Sole Proprietorships from the current annual turnover of D1.5 million to D3.5 miillion. And to D0.5mn –D3.5 million, with D10,000 being paid by those within this bracket.

 

• Introduction of a monthly environmental tax of D1 per employee earning D950 per month or more and deducted and payable by employer.

 

• Reform of the withholding tax system with effect from 1 January 2000, to make it more efficient.

 

• A ten fold increase in casino fees to D250,000 per premise and an increase in the gaming and amusement fee from D250 to D125,000 per premise

 

• Increases in pump prices for fuel as follows:

 

• Petrol from D7.75 to D8.95/litre

 

• Gas oil from D5.50 to D6.25/litre

 

• Kerosene from D2.30 to D4.25/litre

 

• Reduction of maximum tariff rate (customs duty) from 20-18 percent (from July 2000) Reduction in electricity tariffs by 10 percent.

 

• Reduction of duty on computers and computer accessories to 5 percent

Generally, the 2000 Budget is in the right direction in as far as moving towards the objective of poverty eradication is concerned. However, the sustainability of the strategy remains to be seen given the over reliance of the budget on trade taxes. At the same time, the shift of resources towards the social sectors (education, health) is commendable.

In November 1999, the Government initiated a pre-shipment inspection programme (PSI) to address classification and valuation issues at the port of entry. Although the main objective of this move was to boost revenue collection, by reducing under-declaration, the full implications of the introduction of the pre-shipment inspection will have to be seen, particularly in the area of re-exports, where the introduction of the same seems to have eroded the comparative advantage of The Gambia in this respect. Preliminary evidence seems to indicate that PSI may be having some adverse effects on the economy. This is due to a number of reasons. First of all, the PSIP has introduced some administrative bottlenecks that result in delays in clearing goods, thereby adding costs to importers, which are eventually passed on to consumers, thus raising domestic prices of imported goods. Secondly, at the initiation of the programme BIVAC Gambia LTD, the institution providing the pre-inspection services, insisted on payments in hard currencies. Although now up to $250 can be paid in the local currency, the payment in hard currency has resulted in increased demand for hard currencies at a time when foreign exchange inflows were down, which added pressure on the Dalasi, as evidenced by its depreciation vis-a-vis the major currencies (see graph). Finally, PSIP has had a negative impact on the re-export trade. While Banjul Port was seen as a low cost entry point for imports (particularly textiles), the introduction of PSIP has eroded some of the natural advantages, and this is likely to reduce the re-export trade and thereby loosing revenues from the same source.

UNDP continues to assist the Government of The Gambia in engaging in policy dialogue and consensus building and mobilizing resources for its development programmes.

In November 1999, UNDP in collaboration with UNCTAD assisted the Government of The Gambia in holding Sectoral Consultations on Trade, Investment and Private Sector Development. Her Excellency, Mrs. Isatou Njie-Saidy, Vice President and Secretary of State for Health, Social Welfare and Women's Affairs led the delegation of The Gambia. The UNDP delegation was led by Mr. Jean Nicolas-Marchal, Deputy Director a.i., UNDP Africa. Delegations of the following countries and multilateral institutions participated in the conference: Denmark, France, Italy, Japan, the Netherlands, United Kingdom, United States of America, IMF, IDB, UNCTAD, World Bank and WTO.

The major objective of the conference held in the context of the Integrated Framework was to seek the endorsement and support of the development partners of the Technical Co-operation Programme for trade, investment and private sector development tabled at the conference.

The government presented an overview of its macroeconomic framework and technical assistance requirements for trade, investment and private sector development. The total estimated costs of the projects presented in the TCP is US$13.2 million, of which the Gambia Government contribution is estimated at US$1.5 million. The external financial requirements for the implementation of the proposed projects are US$11.7 million. It is envisaged that the implementation of these projects will address the major constraints and challenges militating against trade and investment.

In response to the presentation of the macroeconomic framework and six modules by the Government, the development partners congratulated the Government of The Gambia on the quality of the documentation for the conference, its pursuit of sound macroeconomic policies and remarkable economic performance.

The development partners pledged support for the medium and long term macroeconomic policies and programmes, the energy sector, and poverty alleviation.

UNDP also assisted the government in organizing Sectoral Consultations on governance in Banjul on 15 and 16 March 2000. Mrs. Isatou Njie-Saidy led the Gambian delegation. Mrs. Malika Akrouf, Resident Representative and Resident Co-ordinator of the UN System in The Gambia led the UNDP delegation. Delegations of the following countries and multilateral institutions participated in the conference: Japan, Italy, Algeria, United Kingdom, France, United States of America, World Bank, UNICEF, UNDP, ILO, Department of Foreign International Development (DFID/UK), and Association of Non-governmental Organizations.

The major objective of the consultations was to seek the endorsement and support of the development partners of the Technical Co-operation Programme covering Electoral Process, Parliamentary Structures and Process, Civic Education, Legal and Judicial Process, Public Sector Management, and Decentralization and Local Government Reforms.

The government presented an overview of the governance programme, policy and technical assistance requirements covering the six sub programmes. The total estimated cost of the projects presented in the TCP was US$66,234,410 of which the Gambia Government contribution is estimated at US$23,427,834.

In response, the development partners indicated their willingness to continue the process of dialogue and to lend support to the programmes in the TCP, namely consolidation of the Gambia’s democratic process, public sector reform programme, establishment of the office of Ombudsman, institutional and capacity building of the Auditor General’s Department and relevant in-country training programmes for institutions, local government reform and institutional strengthening of the National Assembly.

Groundnuts is the main export crop of The Gambia, In 1994/95, groundnuts exports amounted to D107.4 million, representing 9.2 percent of total export earnings. However, over the past few years, the groundnuts industry has been beset by a number of problems, particularly those related to marketing, and this has resulted in a drastic drop in the export value of the crop. In 1995/96, groundnut exports fell to D97.4 million from D104 million in 1994/95 and declined further to D57.5 million in 1996/97. Although there was a bumper crop of groundnuts in 1999/2000, the crop was still faced with marketing problems. This is particularly so following the suspension of GGC operations in February 1999, when GGC was alleged to have perpetrated some irregularities and Government repressed the plant, thereby reversing the privatization trend in the subsector. It is pleasing to note that the matter has since been referred to arbitration through the International Center for the Settlement of Investment Disputes (ICSID) while at the same time bilateral negotiations for a mutually agreed solution are underway.

It should be mentioned that efforts to address the marketing problems of groundnuts have been going on since the inception of the privatization strategy in 1993/94, which unfortunately did not bring in the desired results, largely due to the fact that a public monopoly was turned into a private monopoly with devastating consequences. A new strategy has now been launched, based on an EU-supported study, which was conducted in 1997. A key aspect of this study is to fully involve the various operators in the sub-sector to promote the exports of groundnuts. A number of operators have, therefore, engaged in purchasing and trading of groundnuts, with financing provided by a number of financial institutions. Despite initial cash flow problems, the situation seems to have improved. By the end of February 2000, some 14 thousand metric tones of the groundnut crop out of an estimated total production of 127 thousand metric tons had been purchased at a total cost of D41 million. A further D24 million had also been secured to purchase an additional thousand metric tons. The strategy being to clear the estimated 60 thousand metric tons of commercial crop by the end of the season.

The goal of ‘education for all’ is based on the principle of inclusive education, where every person, child, youth and adult – shall be able to benefit from educational opportunities designed to meet their basic learning needs. These needs comprise both essential learning tools (literacy, oral expression, numeracy and problem solving) and the basic learning content (knowledge, skills, values and attitudes) required by human beings to be able to survive, to develop their full capacities, to live and work in dignity, to participate fully in development, to improve the quality of their lives, to make informed decisions, and to continue learning (World Declaration on Education for All – World Conference on Education for all; Jomtien, Thailand, 5-9 March 1990).

In The Gambia, the present Policy Plan (1988-2003) puts emphasis on the provision of basic education for the school aged population (7-14 years) in the formal sector, and for out-of-school Children and Adult in the non-formal sector, particularly for girls and women. Some attention is also given to Secondary, Vocational and Technical, Tertiary education (Dept. of State for Education: Education Sector Programme; March 1998).

With assistance from UNDP, a partnership strategy with the NGOs, Private and Informal Sectors was piloted, to establish local ownership of educational activities for sustainable development. Community Based Organizations and NGOs participated in the management and co-ordination of Functional Literacy activities, by developing strategies for the delivery of literacy programmes, using grassroots experiences. The strategic and practical needs of women is identified and relevant skills training conducted, which enabled women to put pressure for structural change in the societies in which they are located. For example, in the Western Division, in Brikama, women’s strategic needs have been addressed in identifying their training needs. It is interesting to note that, the women are not only involved in the traditional income generating activities. For example, the women of Brikama are producing mesh wire, and supplying it on a commercial basis for fencing, especially gardens and orchards.

The establishment of a national university will also contribute towards the renewal of the education system and enable the people, especially the youths, to improve their knowledge and skills throughout their active lives. The University also ensures the relevance of education to the national needs of the country, and higher education of the people.

In this regard, the challenges of the education sector are to improve efficiency, mobilize resources and establish partnerships with the parents, NGOs and Community Based Organizations.

UNDP is in collaboration with the Government of The Gambia, is finalizing the second phase of the poverty alleviation programme. This second phase has drawn heavily from the lessons and experiences of the first phase, which was evaluated by a team of national and international consultants in December 1999.

The IMF undertook a mission to The Gambia last February as a prelude to the Article IV Consultations. Currently, it is in the country to monitor macroeconomic performance and the ESAF programme agreed with the government.

Election Dates

The Independent Electoral Commission (IEC) has since announced that the long-awaited local government elections will now be held on Thursday, November 16, 2000. The IEC also announced that the Presidential election has been slated for Thursday, October 18, 2001 while the National Assembly election will be held on Thursday, January 17, 2002. The announcements were made by the chairman of the IEC, S Tilewa Johnson, at a press conference in which the final demarcation of constituency boundaries report was unveiled. The IEC presented the report to the National Assembly on Monday for approval The IEC chairman indicated that even though the constituencies and wards per administrative area have not changed much from the earlier draft, a number of amendments have been made in the definition of boundaries. The aim of the changes was to enable the IEC to obtain the number of inhabitants that are closer to the national and regional average figures. During the forthcoming elections, the IEC chairman disclosed that the changes in the constituency boundaries would not mean re-registering the entire voter population. Instead, an expanded voter replacement exercise was being proposed, whereby people would only have to surrender their old voter cards to be issued with the appropriate one. A number of donors have been approached to assist with the financing of the elections.

Regional Developments

The Gambia has been taking a very active role in brokering peace in the sub-region, an initiative which has been highly commended by the international community, including the UN Secretary General, Kofi Annan , during his visit to the Gambia on 28 April 2000. First, Gambia played a very key role in the peace negotiations in Guinea-Bissau. Of late, the Gambia has also offered to mediate in the civil war between Senegal’s Government and the Rebels of the "Movement for a Democratic Cassamance (MFDC.

Peace Brokering in Cassamance

On 26 December 1999, The Gambia opened a meeting between the Government of Senegal and the MFDC, the first direct talks, for a lasting solution for the restoration of peace in Cassamance. The two-day meeting ended with both parties signing an agreement, in the presence of The Gambia and Guinea-Bissau, for the cessation of hostilities in Cassamance.

Another meeting that was held from 24 to 26 January, 2000 which was co-chaired by The Gambia and Guinea-Bissau followed this. This meeting discussed and agreed on the operational mechanisms for the consolidation of the cease-fire agreement of 8 July 1999, and the Resolution for the cessation of hostilities of 27 December 1999. The following agreements were reached. A number of important agreements were reached at this meeting, including the establishment of a mechanism to control the cease-fire agreements by forming joint monitoring teams comprising the MFDC, Senegalese security forces, members of the Civil Society and representatives of The Gambia and Guinea-Bissau.