Identifier
Created
Classification
Origin
06BANJUL763
2006-12-20 17:55:00
UNCLASSIFIED
Embassy Banjul
Cable title:  

THE GAMBIA: THE BUDGET, BACKLOG, AND BANK LOANS

Tags:  ECON EAID EFIN ETRD PGOV KMCA IMF GA 
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VZCZCXRO0769
PP RUEHMA RUEHPA
DE RUEHJL #0763/01 3541755
ZNR UUUUU ZZH
P 201755Z DEC 06
FM AMEMBASSY BANJUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7191
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP PRIORITY
UNCLAS SECTION 01 OF 03 BANJUL 000763 

SIPDIS

SIPDIS

STATE PASS TO EXIMBANK, OPIC, USTDA

E.O. 12958: N/A
TAGS: ECON EAID EFIN ETRD PGOV KMCA IMF GA
SUBJECT: THE GAMBIA: THE BUDGET, BACKLOG, AND BANK LOANS

REF: A. BANJUL 722 AND PREVIOUS


B. BANJUL 744

BANJUL 00000763 001.2 OF 003


-------
SUMMARY
-------

UNCLAS SECTION 01 OF 03 BANJUL 000763

SIPDIS

SIPDIS

STATE PASS TO EXIMBANK, OPIC, USTDA

E.O. 12958: N/A
TAGS: ECON EAID EFIN ETRD PGOV KMCA IMF GA
SUBJECT: THE GAMBIA: THE BUDGET, BACKLOG, AND BANK LOANS

REF: A. BANJUL 722 AND PREVIOUS


B. BANJUL 744

BANJUL 00000763 001.2 OF 003


--------------
SUMMARY
--------------


1. The Department of Finance disclosed budget figures for
2006 and estimates for 2007 before the National Assembly on
December 6, with poverty reduction and consolidation of
fiscal policy as the key highlights for the coming fiscal
year. Secretary of State for Finance, Musa Bala Gaye,
admitted that there were slippages related to the GOTG's
hosting of the African Union Summit in July, but attested
that the budget had remained largely on track despite those
expenditures. And in a December 4 meeting of the National
Assembly's Public Accounts Committee (PAC),members of the
legislature discussed the backlogged auditing process for the
GOTG's accounts. While accounting procedures appear to be
improving, auditing is still a challenge due to the amount of
documents that are apparently missing from the GOTG's files.
However, GOTG representatives insist that the backlog will be
cleared in line with the IMF's proposed PRGF timeline. A
loan from the Islamic Development Bank to enhance food
security is another encouraging sign for The Gambia's
economic and development prospects. END SUMMARY.

--------------
2006 BUDGET ROUNDUP
--------------


2. The December 6 announcement of the 2007 budget estimates
to the National Assembly (NA) reflected optimism from
Secretary of State (SoS) for Finance and Economic Affairs,

SIPDIS
Musa Bala Gaye. He stated that The Gambia has recorded a
real GDP growth rate of 7.7 percent for 2006, attributing
this to growth in the construction and tourism sectors, a
rebound in telecommunications, and equal output growth in
crop and non-crop agricultural products. Encouraging factors
heralded by the SoS also include the low inflation rate,
currently at an annualized rate of 1.52 percent, and, as
previously reported (ref A),the Central Bank's lowered

re-discount rate and statutory reserve requirement. The
Central Bank's gross official reserve rose to 2.4 billion
dalasi (approx. 89 million USD) and, as of September 2006,
the net domestic assets of the banking system also rose to
D3.4 billion (121 million USD),an increase of 27.3 percent,
due largely to growth in domestic credit from the private
sector and government. The money supply grew by 20.7 percent
in 2006, a slight increase over 20.1 percent in 2005.


3. Bala Gaye informed NA members that the capital and
financial account balance is estimated to shrink from D3.0
billion (107 million USD) in 2005 to D1.7 billion (61 million
USD) in 2006, resulting in an overall balance of payment
surplus of D804 million (30 million USD) in 2006, compared to
D1.7 billion (61 million USD) in 2005. The total revenue and
grants for 2006 are estimated at D3.08 billion (110 million
USD),18.3 percent more than in the previous year, including
total receipts of D2.6 billion (929 million USD),tax on
international trade, estimated at D1.4 billion (500 million
USD),direct tax, estimated at D813 million (29 million USD),
and non-tax revenue of approximately D400 million (14 million
USD). The budget deficit, including grants, is projected to
improve from 8.6 percent of GDP in 2005 to 4.7 percent in
2006 due to purported improvements in revenue collection
efforts. The basic balance is expected to register a surplus
of D262.7 million (9.4 million USD) during 2006, a "pointer
to sustained fiscal consolidation." Bala Gaye touted
structural reforms by the GOTG, including the inception of
the Gambia Revenue Authority, the Gambia Bureau of
Statistics, and the Roads Authority.

--------------
AU SUMMIT SLIPPAGES
--------------


4. According to Bala Gaye, fiscal performance improved
during 2006 despite the African Union Summit hosted in Banjul
in July and the September presidential elections. Total
expenditure and net lending is projected at D3.86 billion by
year end. Current expenditure will increase to D2.69 billion
(96 million USD) from D2.42 billion (86 million USD) in 2005.
Though other charges are projected to increase from D736
million (26.3 million USD) to D1.1 billion (38 million USD)
largely due to the hosting of the AU Summit, interest
payments have dropped to D934 million (33 million USD) from
D1.1 billion (40 million USD) in 2005 due to low domestic

BANJUL 00000763 002.2 OF 003


interest rates. Capital expenditure, much of which was for
the AU Summit preparations, rose 46 percent over the 2006
budget estimate of D979 million (35 million USD),totaling
D1.4 billion (51 million USD).

--------------
2007 BUDGET PREVIEW
--------------


5. Bala Gaye underscored the emphasis that the GOTG would
place on poverty reduction in the next fiscal year, with
increases in spending for social services. He hinted that
the GOTG was expecting the IMF's proposed PRGF to go ahead
early next year (ref A). He announced some projections for
the 2007 budget, but the official 2007 budget was not
presented to the National Assembly for debate until Monday,
December 18. Septel to follow.

--------------
FORWARD WITH THE BACKLOG
--------------


6. On December 4, the Public Accounts Committee (PAC),
composed of 10 National Assembly (NA) members, convened to
hear testimonies from the Auditor General, the Acting
Director of the Treasury, and the Permanent Secretary from
the Department of State for Finance and Economic Affairs
(DOSFEA) regarding the GOTG's accounts for the period of July
1992 to December 1999 in order to submit a report of its
findings, opinions, and recommendations to the entire NA
body. The backlog of account audits, highlighted by the IMF
in its assessment of The Gambia's economy as a target area
for improvement (ref A),was of key concern for the PAC as
its members sought clarification from GOTG officials on the
report presented by the Auditor General.


7. Led by Speaker of the National Assembly, Belinda Bidwell,
the PAC asked the Auditor General, Baboucarr Sankareh, why he
had failed to express an opinion on the audited accounts.
Sankareh maintained that there was insufficient evidence to
enable him to form an opinion or create a complete picture of
GOTG revenue and expenditure during the period in question
due to the large number of missing vouchers and records at
the Department of the Treasury (DOT). Gabu Mendy, Acting
Director of the Treasury, claimed the missing records had
been removed from the DOT by various Commissions of Inquiry
set up after the 1994 coup which brought the current regime
to power.


8. Abdou Touray, Permanent Secretary from the Department of
State for Finance and Economic Affairs, informed the PAC that
the GOTG accounts for 2000-2003 had already been submitted
for auditing, while the 2004 and 2005 accounts were being
prepared for submission. Sankareh admitted his office had
received them, but the still-missing documents moot attempts
to perform audits. Touray, undeterred, underscored the
clearing of the backlog as one of the benchmarks for a new
Poverty Reduction and Growth Facility to be put in place by
the IMF, and stated that future accounts would be submitted
on a quarterly basis upon the introduction of the much-lauded
Integrated Financial Management Information System (IFMIS).
IFMIS is due to launch in January 2007 (ref A). His optimism
was countered, however, by the insistence of several PAC
members that the issue of the missing financial records be
addressed so that future fiscal years may commence with an
accurate opening balance.

--------------
LOANS FOR LADEP
--------------


9. The National Assembly on December 6 ratified a loan
agreement between the GOTG and the Islamic Development Bank
(IDB) for the Lowlands Development Project (LADEP),which
aims to strengthen food security and self-sufficiency. The
agreement covers an ordinary loan equivalent to $8.9 million
with a 25-year repayment plan, including a seven-year grace
period, and a Least Developed Countries loan worth $1.8
million, to be paid back in 30 years, including a ten-year
grace period. Combined, the IDB loans are set to cover 84
percent of the cost of LADEP over its five-year duration from
2007 to 2012. The announcement of the loan agreement
followed closely on the heels of President Jammeh's
highly-publicized visit to Tehran and the bilateral
agreements allegedly made between the GOTG and the GOI (ref
B).

--------------

BANJUL 00000763 003.2 OF 003


COMMENT
--------------


10. The 2006 budget assessment and projections for 2007 are
largely as anticipated, given the recent comments from the
IMF during their November visit regarding slippages related
to the AU Summit and the need for increased spending for
social services (ref A). And while troubles still exist in
the form of missing GOTG account documents, the open
recognition of this and the earnest, if flawed, effort to
remedy the backlog of audits show positive steps in the area
of economic reform. As for loans from the IDB and the
potential of lines of credit with Iran, Jammeh's
strengthening of ties to the Islamic world appears to be
largely due to economic motivations. Post will report on SOS
Bala Gaye's 2007 budget speech and the National Assembly's
reaction septel. END COMMENT
STAFFORD