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Department of State for Finance and Economic Affairs
Hon. Mr. Famara Jatta,
Secretary of State for Finance and Economic Affairs
Banjul, The Gambia Tel: (220) 227636 Fax: (220) 227954
October 5th, 2000
Your Government has been in place for 4 years now. What is your evaluation of the economic situation after 4 years of democracy?
>I think the economy is now getting better thanks to the IMF and World Bank programs we are currently working on. We have a very good relationship with those 2 institutions. The program with the World Bank has been implemented on schedule. As far as the IMF is concerned, they were here in September to do a data review and the results were very positive. Within the overall macroeconomic policy that we fixed with the IMF and the World Bank, we expect a GDP growth of 5.5% per year. Actually, we have been achieving that figure for the last three years. Another objective is to contain inflation at around 2.5% of GDP per year. We also endeavour to contain the external current account deficit, excluding transfers, below 10% of GDP and maintain an external reserve of about five months and a half of import cover. Those are the main goals on which we are working with the IMF and the World Bank.
Debt servicing has been a burden on debtor nations' economies. What are the strategies adopted by the Gambia to ease the burden?
> We are currently setting up an economic policy based on the situation of the poor. We have prepared an interim document targeting poverty reduction, growth facilities, etc. which will be sent to the IMF board in December. Towards the end of October, we are having a workshop on the whole program. The IMF, the World Bank and other donors from the EU are coming. The Gambia is one of the ten countries, which should qualify for debt relief under the HIPC (Highly indebted poor countries) initiative. But, prior to that debt relief, we need to prepare the contingency budget which is poverty focused. So, by the time the financing institutions come to the Gambia for the workshop, we will have gone through the poverty reduction and growth facilities; we will also have looked at the HIPC document.
>So, the budget I am working on at the moment is mainly poverty focused. Why poverty? Because, so far, our debt servicing has been very high. But that concerns our external debt. The domestic debt has to be addressed as well. By borrowing from the banks, we drive out the private sector. We need to reduce our borrowing level and let the private sector have access to that money to invest into productive areas and trade.
> You just said that you were among the ten countries to qualify for debt relief. Does it only concern your debt with the IMF and the World Bank? What about your debt towards other donors?
> We need two documents for the debt relief. The first one is an interim poverty document. The second one is the HIPC document, which enables us to analyse the debt sustainability. And then, with those two documents, we can go to the board and present them for debt relief. The board will therefore decide in December the amount of relief we are entitled to. However, getting that relief means that you have already a budget designed for a specific plan which in our case is poverty alleviation. We should therefore get a 67% relief. But the problem is that we have others creditors such as the Arab countries who do not want to take part of HIPC agreement. So, what the poor countries are asking the IMF and the World Bank is to make an effort to convince the countries which are not members of the OECD to join the HIPC program so that the relief reaches 75 to 80%, rather than having the IMF and the World Bank giving you 67% and the other countries giving you 33%, and this cannot give a relief. If we focus on poverty, we should have access to other financings. So, the official development assistance needs to continue in order to reduce the level of poverty. I think it is unacceptable to see people living on 1$ a day.
>But in order for the IMF and the World Bank to make those programs successful they have to co-ordinate the other donors who are not part of the OECD. How do you address those loans if those countries do not give you a relief? They are part of the international financing institutions.
The country has been exempted from the US trade opportunity list. What do you think are the reasons behind that decision and what will your Department do to neutralize the effect of such a vote of no confidence?
> The US declared that the presidential elections, which took place four years ago, were not free and fair and since then their engagement has been defined on that basis. Therefore, they do not want to deal directly with the Government but they have been giving money to the NGO's because we said if you do not want to help the Gambian Government, fine! But at least do something for the Gambian people, and the NGO's are a way to achieve this. So, I am really not surprised not to be on their list and we will not be until the next elections. Of course, it is unfortunate for The Gambia that this exclusion has happened and it is not the Government which is mainly influenced by that decision, it is the private sector and we think that one should have considered that. The private sector needs access to the market facilities; the private sector really deserves to be given the chance to get access to new market opportunities. I mean, The Gambia is a less developed country, we are only 1.2 million, and so it is very unfortunate to see the US taking such a decision towards us.
The private sector seems nevertheless to benefit from some of your incentives. Can you enlighten us on your policies to attract foreign direct investment into the country?
> Our economy is private-sector lead. The Gambia is an enter port to the sub-region; it is a small country surrounded by bigger ones and we have to be very efficient to survive. Also, the troubles in neighbouring countries have an impact on whatever we do. Businessmen come all the way from Mali, Senegal, and Guinea to get their goods. So, if you look around, you will see a lot of trucks, which do not belong to The Gambia. We import a lot but we also re-export significantly because our duties are very low, our port facilities are very efficient, there is a good collaboration between the customs and the port. When your goods arrive by container, they can get it cleared in 24h. Those are some of the advantages that we have and the Government is now revising the tax policy, the tariffs in order to become more competitive.
Today, the variety of taxes and their high rates seem to worry foreign investors. Interest rates of around 20% are also seen as being high and many companies tend to tap offshore banks for better deals. Has your Ministry any plan to harmonise taxes and reduce interest rates?
> On the tax side, the company tax used to be 50% and we brought it down to 35% and this corresponds to a three-year depreciation. People never talk about the fact that we have accelerated depreciation of taxes.
Regarding the interest rates, I am sure you have some experience of what the interest rates are in Guinea or Ghana. Yes, ours are high but we have low inflation. Also, I believe the private sector is not that developed. There is a lot of money available in the banking sector. Businessmen are mainly in trade and too few of them are involved in long-term productive projects. The interest rates have been coming down but they cannot come down as quickly as the people expect. We have been discussing this issue with the IMF and the World Bank and we concluded that the banks need confidence. They need to work on a sound basis. They used to have non-performing loans. They have to make adequate provisions for those non-performing loans. So, in their appraisal, they have to be careful about whom they give their loans to. And if there is no confidence, of course they will put their money into treasury bills.
Perhaps the lack of confidence you are talking about is also linked to the fact that banks do not have enough assets to handle larger and more secure deals from offshore companies?
Yes, those are some of the reasons and this is why we asked assistance from the IMF in order to increase the liquidity capacity and also encourage foreign denominated accounts in addition to the Dalasi so that people can have access to a variety of products. The stock market issue also needs to be addressed. But our economy is small and The Gambia is not a business opportunity itself, it has to be seen within the ECOWAS. This is the market we are targeting and for that we need to be very efficient and prepared. Our taxes have to be transparent; the businessmen who have problems can go to the commercial court that we have set up. Any investor coming into the country does not pay duties on capital items. Those are some of our incentives. However, as a Government, we have to collect taxes to run public services. Education is a key priority, which takes 27% of our budget, health is also a priority. Investments need to be made for roads and those developments take time.
We believe the banks are prepared to welcome FDI. Already, businessmen from Senegal, Guinea have chosen to invest here. Yes, the Dollar is strong against the Dalasi but this is the case all over the world. The Dollar used to be 1.56 to the Pound, now it is 1.47. The Gambian Dalasi has always been compared to the Austrian Schilling. I just came back from Vienna. It is 15.3 Austrian Schillings to the Dollar. Our Dalasi is around 13 Dollars and on the parallel market it is about 15. When I used to go to Vienna, the Austrian Schilling was around 10 or 11 and now it is 15. And that comes from the fact that the Euro is having problems. I just got information from the IMF yesterday saying that 68% of world reserves are still in Dollars. It shows that unless people have confidence in the Euro, we will continue to have a strong Dollar. If the market is getting tougher because of the boom in oil prices, the Government has too loose something to sustain the living standards of its people and this is what we are doing here. I am just here for a period of time and my objective is to improve our citizens' living condition and if the Government has to loose revenues, let's do that as long as this money is transferred to the ordinary Gambian so that it can bring up their lives. At the end of the day, if they are all happy, the Government gains credibility and becomes efficient.
One of the main current concerns of your Department is the Privatisation process. How does the Government plan to build a constructive relationship between the public and the private sector?
> Yes, we have studied together with the IMF a privatisation program. We feel that some public companies can get ride of certain activities, which we believe the private sector can do better. An example is the Telecommunication sector: a different company from the private sector can run the GSM activity. Now, we are at the stage where we have drafted a divestiture bill, we have created a divestiture technical agency. The bill has been submitted to the Cabinet and it is supposed to go to the Parliament for ratification. The Department of State for Trade & Industry is preparing a competition bill, as we want to avoid monopolies. So, you have put that legal framework into place. Also we need a regulatory bill to regulate the private sector once the privatisation is completed. On some public enterprises, we have to do more detailed studies and a committee will be in charge of that. We want to involve as many Gambians as possible. Our Groundnut complex in Banjul used to employ 300 workers. We used to export the production and then it was privatised for 2 million Dollars. Afterwards, the private company said they were just interested in confectionary nuts. So, they laid off almost 300 people and therefore it did not work out with the Gambian population. In this face, we want everyone to get involved. Those assets belong to the Gambian people. So, whatever the Government wants to privatise they have to consult the views of the Gambians and how they want to do it. And this raises the poverty issue. Let's develop a program for them, train them on what has happened in Europe. So, this is the process we want to go through. We have not commenced it yet because we need the legal framework. However, we hope that by the end of 2000, everything should be in place.
To which extent do you intend to attract and involve Foreign Direct Investors into the privatisation process?
> In certain sectors you need a strategic or a specific partner such as in the telecommunication industry, which is evolving so fast. What I am saying is that any privatisation is not just about coming and buying assets, you must have an investment plan to improve on those assets. Our telecoms are one of the best in the sub-region and we do not want to come down. We want the private sector to get involved into the GSM system. Gamtel does not have to go into that activity, they may enter a partnership if they want but we see the GSM as a private sector area. The companies interested in that sector must have a long-term investment policy in order to develop sustainable projects in partnership with the Gambia.
The Gambia is a member of the ECOWAS and its citizens are already benefiting from the harmonisation of insurance services, travellers cheques, etc. As far as the Finance sector is concerned, how satisfied are you with the Economic integration of the sub-region and what are your expectations for the Monetary integration, bearing in mind that the Gambia and 5 others members of the ECOWAS have already agreed to create a single currency?
> Since the inception of the Ecowas 25 years ago, the area where we have failed is economic integration. Nigeria is a large partner and after the elections and the introduction of democracy, the English speaking countries said we need to move ahead with economic integration. The French-speaking group already has the CFA in the UEMOA. They represent one currency. So, let the Anglophones come in and have one single currency. Then, it becomes easier to match two currencies. We set a target for 2003 to reach convergence because as well as for the EU we have to comply with some convergence criteria. I believe for the moment, only the Gambia meets those criteria. In November, there will be a technical meeting in the Gambia to move the process forward. If this plan is achieved, then there can be easy trade within the sub-region. The Gambia should be able to trade without any difficulty with Nigeria, Ghana, Côte d'Ivoire, etc. and that is the integration we are looking for. The reason we failed is that we did not trade enough with our neighbours.
>We have already achieved the political liberalization, nobody needs a visa to move around the zone, there is no control but to make a difference we need an economic integration which means that, for example, a businessman from Ghana, who comes here, goes through our banking system and pays in whatever currency he has, must have its goods delivered. I believe all heads of States are committed to this single currency approach for 2003.
When do you expect the creation of a single currency for the English and French speaking countries?
> It is very difficult to answer that question right now. We have to see what is going to happen with the CFA when the Euro comes out, in everyone's pocket. The French Franc backs the CFA; the French treasury issues it. So, is the EU going to accept the CFA as a currency? What is France's position in the EU regarding that currency? Are they going to get out and let them devalue again? Or is the EU going to introduce a mechanism to support it? And that issue has not been raised yet.
>Anyway, we are moving ahead to get two single currencies, which will be far easier to deal with than 6 different currencies. And the position of the French Government and the EU has to be very clear towards the sub-region. An arrangement has to come out otherwise we will have to push further our efforts to have the single currency.
>The world globalisation is there and we have to accept it. The Gambia cannot afford not to take part of it. We are a small country of 1.2 million and without trade, we cannot survive. And our main target for now is the sub-region.
As Secretary of State for Finance, you have a large responsibility, which consists of managing the budget for your country. Can you tell us what motivated your taking up of such a responsibility and what would be your greatest personal challenge in the coming months?
> After leaving school, I started as a civil servant at the Ministry of Finance. Then, I went to the office of the President as Director of policy analysis, still under the former regime. So, I have been through all stages. I started as a small economist and grew up as a senior economist and so on. When the new Government came in, I was given the responsibility to run a World Bank program, an education project, which consisted of building up schools. I was already familiar with working with donors since 1982. I became SOS for Trade & Industry for one year and then the President thought I should move to Finance.
>It has not been easy. In a poor country, expectations and demands are high. I am the one who should say no, and to say no you must have a clear vision of what is correct and what is not. It is really not an easy task. You have problems with your colleagues because they need more money and I have the responsibility of maintaining the budget deficit to a sustainable level. You do not want to bring the country to Chaos. We have so far been able to pay our people, it is simply a problem of resources management and most of all, if the money is not there you cannot spend it. I have the toughest job in this country, apart from the President of course! I did not come here to please anybody; otherwise I would not have taken the job. I first wish to have a positive impact on our economy for the period I am here. You know, I go through a lot of pressures from the people I used to grow up with or work with and I have to deal with them.
We have been able to achieve a 5% economic growth but there is still a population growth problem. Unless we address the population issue, we need to have a 6 to 7% growth to have an impact. My greatest challenge is to have a sufficient economic growth so that it benefits to the population. My second challenge is to make sure that we go through the debt relief program and that the money gets allocated to the right projects, those for the development of the local population. Poverty is critical in rural as well as in urban areas and we need to address that issue. My objective now is to make sure that all the necessary documentation is prepared for December. I also hope that when we go to the Paris Club we will get other donors supporting us in addressing the poverty issue.
Bearing in mind that our readers are all potential investors, what would be your message to them?
> The Gambia is definitely going through the necessary reforms to attract investment from the private sector. And those reforms will be sustained until we achieve our goals. We are a small country and businessmen should not look at the Gambia as a market but rather at the Ecowas sub-region and its 250 million consumers. We want to let them know that as soon as they invest in the Gambia they are considered as Gambians. There is no discrimination. You can bring as much money as you want and withdraw it without any problem as long as you come with the purpose of adding value to the local economy. We assure that any foreign investment will be protected thanks to our commercial court. Besides, we are also member of the MIGA. The Gambia is a safe place to invest into. It is true that we are in a turbulent area and that is the reason we have been so much involved in peace keeping in countries such Guinea Bissau, Liberia, Sierra Leone. Although the Gambia is a very stable country, we are very concerned about what is happening next door because our market is West Africa. Any neighbouring conflict has an effect on our economy because investors tend to look at the political stability of the sub-region. We are therefore really concerned about the peace issue because we believe every country should participate in maintaining political stability in the sub-region, we need to help each other.