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‘Tough’ financial reforms in 2017

Dec 23, 2016, 11:39 AM | Article By: Lamin Jahateh and Kaddijatou Jawo

The Gambia government is to undergo reforms in 2017 to restore economic stability by making sure government expenditure is not erratic and is as budgeted, to ensure that the perennial financial indiscipline is halted.

The Ministry of Finance and Economic Affairs is to undertake the reforms by taking measures such as restricting the national budget, reducing the stock of national public debt, and reform the state-owned enterprises.

“While some of the reforms may be tough, they are nonetheless needed if we are to restore macroeconomic stability,” the Finance and Economic Affairs Minister said yesterday at the National Assembly in Banjul, as he presented the estimates of the Gambia government budget for 2017.

Abdou Kolley said while the challenges leading to the reforms are significant, “they are not insurmountable, with adequate communication, coordination and most importantly, commitment”.

Budget for 2017

The finance minister said the total revenue and grants in 2017 is estimated at D14.34 billion from 12.99 billion budgeted in 2016, representing a growth of 10.4 per cent.

On the other hand, total expenditure and net lending is projected at 19.1 billion in 2017, from D16.9 billion budgeted in 2016, representing an increase of 13.0 per cent. 

The minister said the bulk of the projected expenditure is directed at current spending.

Due to the mismatch between the protected total income and expenditure, the fiscal deficit for 2017 is anticipated to increase to D4.7 billion from 3.9 billion budgeted in 2016. 

This represents a growth of deficit of 20.5 per cent and is equivalent to 10 per cent of the national Gross Domestic Product (GDP).

“Due to increasing fiscal imbalances, government must adhere strictly to budget ceilings to register gains associated with fiscal consolidation and increase efforts towards more resource mobilization,” Minister Kolley said.

He explained that based on the composition of the 2017 national budget, greater priority would be given to capital expenditure in preparing monthly cash allocations.  This would be combined with efforts to gradually reduce the share of recurrent spending in favour of capital spending. 

“This will create more infrastructural development initiatives that will create jobs for the citizenry and enhance the investment environment of the country, thus placing the Gambia back on the list of business friendly nations,” he said.

Tax adjustments

Starting January 2017, the government will introduce D1 per litre fuel levy in the fuel pump price to replace the annual payment of vehicle license and road tax.

According to the finance minister, this is prompted by the fact that transport owners delay or avoid paying their vehicle licenses and road tax on time.  Besides, the government not only spends huge sums printing license and road tax discs, but also loses significant amounts of money due to the counterfeiting of discs.

Therefore, the fuel levy would now replace the licensing fee and road tax.

“However, vehicles will still be subjected to testing to ascertain their road worthiness with the provision of a disc to serve as proof of compliance,” Kolley said.

In January, the government would also increase the threshold of the National Education and Technical Training Levy, from a minimum turnover of D500,000 to D1,000,000. 

Also, the specific tax on cigarettes will increase from D15 per pack to D20 per pack; excise tax on other tobacco products from D300 per pack to D330 per pack in 2017, and environmental tax on other tobacco products from D150 per kg in 2016 to D165 per kg in 2017.

Furthermore, effective January, The Gambia would start the implementation of the Common External Tariff (CET), an Ecowas-wide tariff on international trade, in line with other Ecowas countries.

Heads of state of Ecowas approved CET for implementation from 1 January 2015 but The Gambia could not start it then due to system issues, which the Ecowas Commission helped to resolve. 

The Ecowas Commission and the government have also trained key stakeholders on the CET as well as sensitised stakeholders in the supply chain.   

Similarly, the government would start to levy a 0.2 per cent levy on the CIF (cost insurance and freight) value of eligible imported goods emanating outside Africa with effect from January 2017.

This was a decision of the African Union Finance Ministers at a meeting in Addis Ababa in September this year, following an agreement on modalities for the implementation by the heads of state of African Union at the Kigali Summit in July 2016.

Minister Kolley said the revenue derived from the 0.2 per cent levy will be used to fund the activities of the AU just as it is with the Ecowas Levy, and will go a long way in ensuring stability and predictability in the Union’s resources and financing of its programmes. 

He further stated that the budget for 2017 will centrally focus on ensuring macroeconomic stability through increased and enhanced private sector participation in economic activities to spur economic prosperity.