How Deficits and Debt Impoverishing Our Nation
In Part 1, I have demonstrated from Appropriation Bills from 1990 to 2018 that
1. Revenues: Our nation never generated GMD10 billions (about US $200 million) in domestic revenue (taxes & non-taxes). That means as a nation we do not make enough in a year to construct a double lane Highway between Banjul and Serekunda that can endure 5% motor vehicle traffic increase from current levels for 20 years. In the period under review our lowest projected domestic revenue was GMD670 million (in 1995) and highest GMD9.3 billion (in 2016). The actuals are not provided and we don’t know.
2. Grosss Domestic Product (GDP): Our GDP reported to have grown at an average rate of 5.92% for the period under review. If this is true – very impressive! There are evidences that our GDP has grown but at what rate. Since GDP is the annual output of the nation of which government is a fraction – growth in GDP is not necessarily synonymous to government fulfilling her roles/responsibilities to the governed. According to IFAD Gambian migrants contributed 22% to our GDP in 2016. The agricultural sector which is reported to employ anywhere 70-80% of our population accounts for an estimated quarter/25%.
3. Cost of Government/Over heads: Revenues (small/big) are one thing and the others COSTS. Under Jawara and PPP for our review period the government costs Gambian people 124.32% on average of domestic revenue. Under Yahya and his A(F)PRC it cost us 91% before tapering down to 75%. Barrow and The Coalition 2016 maintained it at that 75% during their 1st year in office. We do not have all the numbers of the 2018 Appropriation Bill but personnel emoluments and recurring costs at GMD 11.55 billion will likely be more than 100% domestic revenues (taxes & non-taxes).
The above graph shows how our domestic revenue compared to costs of government (CURRENT EXPENDITURES) and DEBT SERVICING (repayment on our debt – interest and/or principal).
The graph below is exactly the same except adding our bills (costs of government) and debt servicing together to be directly compared to domestic revenue.
Notice that almost every year of the period under review our bills to pay (THE ORANGE BARS) are higher than our domestic revenue (THE BLUE BARS).
That simply means we ordinarily have LESS MONEY than what we NEEDED to pay for government’s existence and repay our creditors.
THAT IS A FUNDAMENTAL PROBLEM. THAT IS WHY WE CANNOT HAVE NEEDED/WANTED SOCIAL SERVICES SUCH AS ROADS, SCHOOLS, WATER, ELECTRICITY, ETC.
Now let’s look at subjects of Part II of this analysis:
Deficit and Debt
What’re Deficit and Debt? National deficit is the difference between what our government takes in from taxes, non-taxes (receipts) and the amount of money it spends (outlays). Yahya’s last Appropriation Bill (2017) has it at GMD4.7b and Mr. Amadou Sanneh/Barrow administration’s Revised 2017 Appropriation Bill lower the projected deficit to GMD940 million.
This is 80% reduction of the budgeted deficit. The deficit figures in the budget is NOT AN ECONOMIC NUMBER. It is a management decision, in the case of Gambia a political decision. Decision makers in government at planning determines projected revenues and as well what will be done or not. They make decisions knowing the difference of those two.
This is not an 80% reduction of THE NATIONAL (PUBLIC) DEBT as reported by Mr. Sanneh or reporters or both. National debt will be reduced by either paying it off (in total and/or certain fraction or some write-off/debt forgiveness by creditors). The deficit is a political decision made by those in office and can be change as they see fit with or without material economic effect.
As illustrated in the above graph any money spent over the height of the blue bar (revenue bar) will be money we don’t have. That represents the portion of the orange bar above the blue bar in height. That will be deficit spending. For that calendar/budget year. Any such spending outstanding past that budget period is/are aggregated to the national (public) debt.
NATIONAL (PUBLIC) DEBT is the total amount of money our government owes. Simply is the aggregate outstanding yearly deficits on record. Our national debt is 120% of GDP (about GMD54 billions). The structure of our debt is 60% domestic and 40% international. This structure is important for 2 essential reasons. The 1st is that because lower proportion of our debt is international we can only hope so much in write-offs should those opportunities come along. Second, because larger portion of our debt are from within Gambia any default will likely trigger economic tsunami.
The tabular presentation illustrates domestic revenue (taxes and non-taxes). Gambia accounts grants and ‘Budget Support’(also grants only to offset overhead costs) from usually IMF/World Bank and/or EU countries as revenue. Those adds up to give us Total Revenue.
Budget deficits are the difference between Total Revenue and Total Expenditure and Net Lending. God knows what is Net Lending in our books. Maybe because am not an Accountant. Ought to be the difference of lending-out and lending-in. But what are we lending?
The graphic representation here is not really a good illustration. It’s only showing deficit by the orange bars higher than the blues. In the computer, I could tell the difference both in numbers and percentages, which is really cool, but once copied and pasted into word – that capability is lost. Nonetheless so long the orange bar is higher than blue – deficit spending.
Deficits Under Jawara
Of the 5 years reviewed during his reign, numbers are available for the last 3. Of the available 3 years 2 are positive (call it surplus). That means PPP administration estimated to spend less than the projected revenues – bravo DK Jawara. That’s good. Of the last year which was shared with AFPRC junta the deficit was GMD800 million.
Deficits Under Yahya
Of his 22-year rule we are able to have complete deficit information for 19 of those years. On average Yahya ran GMD732 million/annum deficit spending. That’s about GMD14 billions added to the National Debt.
Deficits Under Barrow
The Barrow administration revised the inherited 2017 Appropriation Bill in June 2017. This is after almost 6 months in office. They have kept the projected revenue levels and overhead charges as estimated by their predecessor. That is GMD8 billion in domestic revenue and government overheads of GMD6 billion. That is 75% – UNSUSTAINABLE and one would think chopping down this area would be an immediate action and/or plans laid for next budget. No! The domestic revenue numbers for 2018 are not yet known but we already know about GMD12 billions of overheads are planned. That’s more than any annual national TOTAL REVENUE since our founding.
The problem at all 3 governments regarding the management of our meager resources is the same – they see public resources as their personal property. Hence government apparatus is used to reward/payback families, friends, mediocre, sycophancy, etc. Barrow government hasn’t change the fundamental approach to governing even after the bitter 22-year struggle to dislodge Yahya Jammeh.
They’re winning though because many are contended and relaxed with the fact that you are no longer watching over your shoulders for the next arrests, detentions, firings, etc. Those are good but shouldn’t be the measure of a democratic government in an Independent Republic. Those should be a GIVEN regardless who is GOVERNOR OR THE GOVERNED.
The size of our debt is usually announced relation to our GDP. And the ratio is currently about 110%. That means our debt in size/volume is more than our GDP by 10% of the GDP. So even if we STOP right here and hang over our GDP to our creditors we will still be on the for 10% above GDP.
Unfortunately, that cannot be done even if we wanted to because GDP is not a measure of government/Public Output. GDP measures every person (citizens and non-citizens alike) that operates within the limits of Gambia. Direct governmental actions/operations account for a fraction of GDP – Agriculture accounts for about quarter/25%, Gambian migrants/diasporas about 22% and our government fall somewhere down that line.
Suffice to submit that nothing wrong to size our debt to the size of our GDP but it will be appropriate for management (in this case political) decision-making purposes to relate DEBT TO DOMESTIC REVENUE. The latter is what government takes in from the actions of people in the Gambia and from that pool public debt will be service based on agreed term.
Sadly, many of our citizens don’t know what is GDP. Even more troubling, larger fraction of lawmakers who to preside over Appropriation Bills also don’t know GDP and/or other components of the bill. Who knows what the Executive Office (The President and His Minister of Finance and Economic Affairs). Because NO ACCOUNTANT and/or FINANCIAL ANALYST should celebrate or present these numbers are a path to some solution.
We are simply ON THE SAME RIDE – there will be no calamity (or I/we will be long gone by the time calamity hit our shores). Both are truly bad psychological position for a public servant. The fundamental view of a true public servant is to hang it over better than s/he received it.
We still surviving as a nation and paying wages because of IMF/World Bank and other interest nation. We called those our ‘Development-Partners’. What a self-serving term! Do we think China or UK or Belgium or Germany or France is a partner in developing Gambia. They’re throwing crumbs at us as I threw such at ducks at the Millpond Park not because we are partnering but because they have to have us at the other end in certain order for them to remain/continue the way they are. IMF/World banks are instead partners in the impoverishing of our people – maybe PART III will cover this area in detail.
The graph above is a stupid one but it very obvious our National (public) Debt in orange is far higher than domestic revenues and/or GDP? The 120% to GDP is a measure at 2016. The highest ratio was in 2002 when the debt to GDP was 156%.
The question we should be asking is how do we payback such an astronomical amount of debt? If we default on either interest or principal or both – what happens. Certainly, our people will not be rounded up and put in jail in some foreign land but the consequences default on debt liabilities in the global credit market are dare. That will further throw our people at the bottom of this pity of grinding poverty.
The Bad News
Those in power from Jawara to Yahya to Barrow either don’t know what they are doing, supposed to do or simply out to fix their personal poverty. So far the actions and postures of Barrow administration are no indications he recognizes both our political and socioeconomic problems. Those 2 are not mutually exclusive and they’re the primary drivers of the bad numbers under review.
The Good News
All our problems – political, low revenues, high government costs, too much borrowing and begging can be reduced and turned around. Our politics and socioeconomic conditions are no natural variables to our living. We only need those who know, true public servant and selfless amongst us. Today hard to find one but people largely act/behave in accordance with prevailing environment – with the right government mindset there are many of our citizens who knows and are ready to fix these problems.
Look at these charts and tell us what you see.
Yahya Last Year (available numbers)
Barrow’s 1st year with available numbers
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