In this edition, we hereby reproduce the full text of the Budget Speech 2015 delivered at the National Assembly on Friday, 19 December, 2014 by the Minister of Finance and Economic Affairs.
Honourable Speaker, Sir,
- I beg, to move that “The Bill entitled an Act to provide for the services of The Gambia for the period 1st January 2015 to 31st December 2015 (both dates inclusive)” be read a second time.
- The year 2014 is just ending and we are today twelve months to the end of our Medium term development plan, the Program for Accelerated Growth and Employment (PAGE). We are twelve months to the end of the MDGs. We are twenty four months to our target date for food self sufficiency (Vision 2016) and we are sixty months to our middle income status target (Vision 2020).
3As we move forward into 2015 and beyond we reflect on our achievements and challenges for the past period to better inform new Financial and Economic Management policies and strategies. The Government under the distinguished leadership of His Excellency the President Sheikh Professor Alhaji Dr. Yahya AJJ Jammeh remains committed and determined to build on its achievements and turn its challenges into opportunities.
..4. In spite of all the external shocks and a narrow revenue base, The Gambia under His stewardship has registered impressive achievements in may sectors but more importantly in reducing poverty and improving food security. The recent award in Rome by the FAO to His Excellency the President for meeting in advance the MDG targets of reducing hunger by half is a clear testimony of this assertion.
- While we were on track to achieving our growth forecast of 5.5% in 2014 as indicated by an evaluation report for the half year ended 30th June, The Gambia as part of the West Africa Region was hit by an external shock arising f rom the EBOLA epidemic in three West African Countries. Although The Gambia is EBOLA free, the negative economic impact of the epidemic has regional dimensions. The Gambian economy has not been spared with an estimated decline of 60 per cent in tourism arrivals for the 2014/2015-winter season.
Another external shock facing the economy is the effects of climate change, leading to delayed and erratic rain pattern in some parts of the country. This phenomenon has affected agriculture output and according to latest assessments, a decline of 15 per cent is expected compared to last year. Government will do everything in its power to ensure that the affected few are adequately supported and moving forward, Government policy in agriculture he will focus on investments in irrigation infrastructure and mechanization of the whole value chain.
- The external shocks outlined above, coupled with spending pressures mainly in the Energy and health sectors diluted our growth prospects for 2014. The effects of these shocks necessitated the downward revision of our growth forecast to 2 per cent from 5.5 per cent.
- Despite the challenges faced by the economy, Government is determined to fix the imbalances and restore macroeconomic stability through sound fiscal and monetary policies aimed at increasing efficiency in expenditures, revenue generation and service delivery. In this regard, Government is working to finalize a rapid credit facility (RCF) program with the IMF to succeed the Extended Credit Facility (ECF) which was due to end in May 2015.
- In 2015, Government will adopt new policy measures including Public Enterprise reform, using frameworks such Performance contract, Management Contract, Public Private Partnerships, leasing etc. Government will also continue on Procurement reforms and in this regard, the Major Tender Board shall be re established as from 1st January 2015. This policy measure aims at greater efficiency and transparency in Public procurement.
10.Private sector development remains the policy objective of Government and in this regard, I wish to renew Government’s call on the Private sector to take their critical role in economic development. One recent important policy measure adopted by Government in support of private sector development is the establishment of a Public Private Partnership Unit in the Ministry of Finance and Economic Affairs. A PPP policy has already been developed and it provides the framework for Government to partner with the Private Sector in National development. We can build on the strides made in initiatives such as the Africa Coast to Europe known as the (ACE) project.
- The 2015 budget is anchored on limiting Net Domestic Borrowing to 1% of GDP at 31st December 2015. This policy objective will generate savings, create buffers, and support macroeconomic stability and growth. In this regard, we once again call on our development partners including the private sector to support our economic development agenda. Government on its part will provide the necessary leadership to reach our desired goal. Programs in 2015 will focus on the attainment of vision 2016, whilst at the same time, ensuring fiscal discipline to narrow down the deficit and domestic borrowing.
THE WORLD ECONOMIC OUTLOOK
- The latest World Economic Outlook (WEO October 2014), by the International Monetary Fund, indicates that global economic recovery continues to be uneven, with the pace becoming more country specific. Overall global growth for 2014 is projected at 3.3 per cent and 3.8 per cent for 2015. These projections are based on the assumptions that there will be moderation of fiscal consolidation, continuation of accommodative monetary policy, and appeasing of geo political tensions.
- In the United States, conditions remain in place for continued recovery stemming from an accommodative monetary policy stance, favorable financial conditions, reduced fiscal drag, strengthened household balance sheets, and a healthier household market, resulting in a growth projection of about 3 per cent in the second half of 2014 into 2015.
- In the euro zone, a weak recovery is projected, aided by a reduction in fiscal drag, accommodative monetary policy, and improved lending conditions. Growth is projected at 0.8 percent in 2014 and 1.3 per cent in 2015.
15.Growth in emerging and developing economies is projected to increase modestly in the second half of 2014 into 2015. This is supported by stronger domestic demand as well as recovery in external demand associated with faster growth in advanced economies. Emerging and developing economies continue to account for the lion’s share of global growth. While the effects of falling fuel prices are having adverse effects on oil exporting countries, it is supporting the growth of oil importing countries.
- Economic activity in Sub-Saharan Africa has continued to grow robustly, on the back of supportive external conditions including falling fuel prices, and strong growth in public and private investment. Beyond the severe humanitarian implications, the Ebola virus is exacting a heavy economic toll on both the countries affected and the region at large. The region’s growth was projected at 5.1 per cent in 2014 before increasing to 5.8 per cent in 2015. However this growth forecast will taper down given the negative economic impact of the epidemic.
21.With regards to sector contribution to Gross Domestic Product} the Services sector continues to be the major contributor with 61 per cent followed by the Agricultural sector with 19 per cent andIndustry with 14 per cent.
Preliminary estimates of government fiscal position during the first nine months of 2014 indicate an improvement compared to the same period last year. The overall deficit has decline from 5.7 per cent of GDP for the nine months to 30th September} 2013 to 3.8 per cent for the nine months to 30th September} 2014.
23.Total revenue and grants as at end September 2014 amounted to D6.0 billion (16.1 per cent of GDP) in compared to D4.7billion (14.5 per cent of GDP) in the corresponding period of 2013. Domestic revenue as at end September 2014 amounted to D4.9billion (13.1 per cent of GDP) compared to D4.1 billion (12.6 per cent of GDP) in 2013.
24.Total expenditure and net lending for the first nine months of 2014 amounted to D7.5 billion (20.1 per cent of GDP) compared to D6.5 billion (20.2 per cent of GDP) in 2013. Recurrent expenditure in 2014 constitutes 71 per cent of total expenditure and net lending whilst capital expenditure constitutes 29 per cent.
Expenditure on interest payments for the first nine months of the fiscal year 2014 amounted to D1.4 billion compared to Dl.O billion in the corresponding period a year earlier.
26.The monetary policy stance of the Central Bank of the Gambia continues to be restrictive in 2014 to· contain the exchange rate and inflationary pressures emanating from the weak external sector and the expansionary fiscal policy. The Monetary Policy Committee increased the Policy Rate three times in 2013 from 12 to 20 per cent and once in 2014 to 22 per cent. In addition, the reserve requirement was raised from 10 per cent to 12 per cent in May 2013, and then to 15 per cent in August 2013. The foreign exchange exposure to be maintained by commercial banks was as well lowered to 15 per cent from 25 per cent. This was in a bid to stabilize supply conditions in the foreign exchange market.
27.Annual money supply growth increased to 10.9 percent in September 2014 compared to 11.3 per cent in the corresponding period a year earlier. Growth over the 12-month period was influenced largely by the expansion in the net domestic assets of the banking system mainly in the form of claim on government.
28. Narrow money (M1), which comprises currency outside banks and demand deposits, rose to 4 billion, or 15.1 percent in September2014 compared to 23.2 percent the same period a year ago. Quasi money increased to D9.3 billion, or 6.9 percent compared to 2.0 percent in September 2013.
29. The net foreign assets of the banking system rose to 04.6 billion, or 2 per cent in September 2014 compared to a contraction of 5.6 per cent in the corresponding period a year earlier. The increase in the net foreign assets of the banking system was due to the large increase in the net foreign assets of commercial banks. The net foreign assetof commercial banks rose markedly to D2.1 billion or 57.6 per cent from a marginal increase of 4.5 per cent a year earlier. In contrast, the net foreign assets of the Central Bank contracted to 02.5 billion, or 8.8 per cent compared to a decline of 9.9 per cent a year earlier.
Similarly, the net domestic assets of the banking system increased to 014.1 billion, or 10.1 per cent in September 2014 compared to 21.0 per cent in the correspopding period a year earlier. The banking system’s net lending to government rose to 010.2 billion or by 21.1 per cent, lower than 33.6 per cent in September 2013. Government’s share of overall credit in the economy is at 60.6 per cent compared to 59.9 per cent a year earlier. Reserve money the operating target of the Bank grew on an annualized basis by 27.4 per cent in September 2014 relative to 27.7 per cent in the corresponding period in 2013.
FOREIGN EXCHANGE MARKET
31.As at end-September 2014, the Dalasi, depreciated against major trading currencies in the following proportions: 23.8 per cent against the dollar, 17.8 per cent against the euro, and 22.1 per cent against the pound sterling.
FINANCIAL SECTOR DEVELOPMENTS
32.The banking sector in The Gambia continues to be safe and sound with sufficient capital and liquidity to meet their commitments. The industry consists of twelve banks including one Islamic bank. The average capital adequacy ratio was 31.1 percent in June 2014, higher than the minimum r,equirement of 10.0 percent. Two banks were recapitalized in 2014 after they were put under proper scrutiny by the Central Bank for failing to meet the minimum capital requirement of 0200 million by the end of December 2013.
33.The asset base of the industry expanded by D0.96 billion (3.8 percent) to D25.6billion in the year to end-June 2014.Gross loans and,advances amounted to D6.0 billion and accounted for 23.4 per cent of the industry’s total assets and 39.4 per cent of deposit liabilities as at end-June 2014. Non-performing loan ratio, which stood at 20 per cent in December 2013, declined to 18.1 per cent in March 2014 and to 16.1percent in June 2014.
34.The industry is generally profitable as evident by the registered increase in returns on assets and equity. The industry registered a net income of D197 million in the second quarter of 2014, an increase of D60.9 million from the previous quarter. Profitability indicators, ROA and ROE rose by 1.5 and 8.6 percentage points to stand at 3.3 percent and 21.3 percent compared to 1.8 percent and 12.7 percent in he previous quarter. .
35.The Financial Intelligence Unit (FlU) started operating as an independent entity in December 2013 with the appointment of a new Director. The Unit is temporary housed in the Central Bank of the Gambia and was proyided with adequate funding and staffing to enable it effectively carry out its mandate. The staff also took part in series of training and capacity building programs in 2014. . The national Anti-Money Laundering/Combative Financing Terrorism strategy, action and implementation planwas finalized in August 2014 in a bid to enhance efforts in combating money laundering and terrorist financin
36.In..January 2014 the establishment of Deposit Insurance Scheme (DIS) was approved. The scheme is meant to protect less financially sophisticated depositors and in a broader sense to contribute to financial stability. It will shift the burden of bank failures from Government to the private sector.
37.Furthermore, the Central Bank of The Gambia is in the process of developing a National Crisis Resolution Framework. The development of the Crisis Management and Resolution Framework (CMRF) was prompted by the decision of the Committee of Governors of the West African Monetary Zone (WAMZ) at its Convergence Meeting held on July 16, 2014 that the College of Supervisors of the Zone should develop a harmonized framework for financial resolution in the sub-region.
BALANCE OF PAYMENTS
At the end of the first Quarter of 2014, the overall Balance of payment was a surplus of US$10.12million as opposed to a deficit of 4.7million in 2013. The trade deficit is expected to decrease by US$ 3 million in 2014 to US$250.2 million from US$ 253:3 million in 2013. Transactions in the current account resulted in a deficit