GAMBIA Financing solutions for Gambia
Gambia is a small country surrounded by Senegal and covering an area close to 11,285 square kilometers. The country has about 2 million people with a per capita GDP of 435 US dollars (2016) and GDP of close to 0.89 US dollars (2016). It is located in the coastal area of the northern part of Africa; there are no significant natural resources but the main economic activities are Agriculture (%), Tourism (20%) and the Services sector (%). Due to the limited economic base, the Gambian people have fled the country mostly to European countries to find better opportunities. Remittances therefore account for one fifth of the GDP (23%) and remain the single most factor contributing to reducing poverty levels for the country. The Gambia is also plagued by poor governance and corruption which exacerbates its economic condition. A few months ago the country celebrated its successful transfer of power, after a dramatic resistance by its former ruler Yahya Jammeh (right) to Adam Barrow; Jammeh (left) gave up power and fled the country after emptying state funds and was alleged to have looted about $11 million in state money. More people fled the country during this constitutional crisis and migrants and refugees flocked the European countries such as Italy, Germany etc‌in addition to these challenges, there is a serious shortage of skills to effectively build and run state institutions due to high outmigration. There is also lack of private sector job creation initiatives to build the economy of the country that was unable to meet most of the MDG goals. With the evident political risk, the macroeconomic situation is such that there is inefficient public spending with a persistent budget deficit of 8.3% of the GDP, public debt accounts for 90% of the GDP. Consequently, the European Union removed all Official Development Assistance from the region pushing for an urgent need to source other alternative sources of funding. Financing solutions to recover the economy Improving the investment climate In an attempt to recover the economy, firstly, Gambia will need to repair the investment climate to make it easier to attract Foreign Direct Investment (FDI), ODA and other private players in the economy. This entails, reforming the judiciary to ensure that the legal and regulatory
frameworks are in place and that the rule of law is respected. The World Bank through the IDA component is able to assist fragile countries by offering concessional loans to improve the investment climate and to increase their chances to access finance from the international community. Secondly, the country will have to look into the bureaucratic hurdles of doing business so as to attract private investment into the country. Currently, Gambia is ranked number 145 by the World Bank in how easy it is for entrepreneurs for the ease of doing business in the country. A slight improvement from the previous year by 5. Public sector reform The public sector will need to do an introspection of the finances and engage in a domestic resource mobilization (DRM) exercise; this entails looking at issues such as tax policy and administration, financial management, and capacity constraints. The benefit of the exercise to the country is that they will be able to raise more financial resources domestically and increase compliance from tax payers. It is also important to improve on the role of the auditing agencies so as to hold public servants accountable for public finances. Recover the private sector Establish partnerships that mobilize private finance for the revival of small businesses in the Agricultural sector. Gambia can be able to approach the IFC component of the World Bank to provide access to financing for small businesses in the Agricultural sector, coupled guarantee or insurance packages for losses incurred as a result of climate fluctuations e.g. unpredictable high temperatures in the region. Investment in infrastructure is crucial for building the economy and the government of Gambia will have to pull both resources from the public and private sector for building new infrastructure as well as maintaining the current infrastructure. There are various vehicles that can be adopted however what is important is the law and regulations for private investment into the sector. One option for financing could be through the public private partnerships (PPP’s) or pure project financing; whichever route the government of Gambia chooses, proper legislation and regulation would need to be put in place. Transfer of remittances from abroad Due to high outmigration from the country, there is a great opportunity for authorities to improve on the transfer of remittances from abroad. With the advice from Multilateral development Banks and Government regulation, the telecommunications authority can development a mobile transfer payment system to ensure that money is transferred from abroad to the country at a lower cost. This initiative is able to encourage the transfer of funds form migrants to their family as a result increase payments to more than 20% of the GDP.