Mar 22, 2013, 10:35 AM
The Minister of Finance Abdou Colley Friday presented before deputies at the National Assembly the 2011 budget statement and economic policy of the Gambia government, stressing that “although the Gambia is still classified as being at high risk of debt distress, the Government has made significant progress with its debt management capabilities”.
This “is expected to eventually improve the country’s risk rating,” Colley told deputies.
According to the Finance minister, the government will continue to seek grants and concessional loans to finance its infrastructure investment plans, and create the enabling environment to attract non-debt creating financial inflows for overall development.
Colley reiterated that the government will continue to conduct debt sustainability analysis within the Fund-Bank Framework to ensure that all debt indicators will fall and remain below their corresponding thresholds.
“In order to have continued prudent management of public debt, front, back and middle office functions of debt management will be strengthened,” he further told deputies.
Finance Minister Colley projected a growth in domestic revenues of 4.0 percent in 2011 over the 2010 budget of D4.59 billion (or 14.6 percent of GDP).
Of these, D4.07 billion would be collected from taxes and D522 million from non-tax revenue items.
“Projects grants are projected to amount to D981 million, while amortization on external debt would be D506 million,” Colley announced.
This, he added, yields a relatively tight budget constraint, where total government expenditures and net lending would be limited to D6.12 billion (or 19.5 percent of GDP) compared to 20.3 percent of GDP in 2010 budget.
He also announced that expenditures on wages and salaries are budgeted at D1.67 billion, reflecting an 11.5 percent increase over the budget estimate of D1.50 billion in 2010. “Interest payment on debt is projected to increase by 20.5 percent from D762 million in 2010 budget to D919 million in 2010 budget,” he said, adding that other current expenditures at D2.26 billion are budgeted to increase by 3.0 percent over the budget estimate of D2.19 billion in 2010.
Finance minister Colley further stated that the overall fiscal deficit for 2011 is projected at D466 million representing 1.5 percent of GDP, compared to D299 million amounting to 1.1 percent of GDP in 2010 budget.
This deficit, he added, will be fully financed through domestic and external resources, and that the net external financing is estimated at D328 million, while domestic financing is projected at D120 million.
Commenting on the budget strategy and priorities for the fiscal year 2011, Finance minister Colley said that, like the previous year’s budget, the 2011 budget places emphasis on aligning expenditures to priorities that best support the achievement of the PRSP-II and MDGs, as well as other activities that will stimulate economic growth and development.
Government, he went on, will in the 2011 budget, and also in the medium term, systematically increase investments in agriculture, education, health, infrastructure and tourism.
He noted that government will also scale up intervention in public financial management to ensure improved discipline, and improved quality of expenditure outcomes.
On a petroleum pricing mechanism, Colley stated that the current petroleum pricing formula was designed in such a way that adverse movements in the international prices of petroleum products and exchange rates are absorbed by government in the form of subsidized real prices.
“Government can no longer continue to heavily subsidize petroleum products, as these subsidies crowd-out financing for priority public expenditures,” he said, adding that Government will, commencing January 2011, introduce a new petroleum pricing formula to replace the current system based on the flumara.
In his view, the introduction of the new pricing formula will ensure a steady flow of revenues as the formula automatically adjusts itself to the movements in petroleum prices at the international market and the exchange rates.
Increases in pump prices, he further stated, will henceforth reflect fluctuations in international prices and exchange rates.
Read more about the 2011 budget in our subsequent issues.