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UNCLAS SECTION 01 OF 03 BANJUL 000763 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS TO EXIMBANK, OPIC, USTDA 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN ETRD PGOV KMCA IMF GA
SUBJECT: THE GAMBIA: THE BUDGET, BACKLOG, AND BANK LOANS 
 
REF: A. BANJUL 722 AND PREVIOUS 
 
     ¶B. BANJUL 744 
 
BANJUL 00000763  001.2 OF 003 
 
 
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SUMMARY 
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¶1.  The Department of Finance disclosed budget figures for 
2006 and estimates for 2007 before the National Assembly on 
December 6, with poverty reduction and consolidation of 
fiscal policy as the key highlights for the coming fiscal 
year.  Secretary of State for Finance, Musa Bala Gaye, 
admitted that there were slippages related to the GOTG's 
hosting of the African Union Summit in July, but attested 
that the budget had remained largely on track despite those 
expenditures.  And in a December 4 meeting of the National 
Assembly's Public Accounts Committee (PAC), members of the 
legislature discussed the backlogged auditing process for the 
GOTG's accounts.  While accounting procedures appear to be 
improving, auditing is still a challenge due to the amount of 
documents that are apparently missing from the GOTG's files. 
However, GOTG representatives insist that the backlog will be 
cleared in line with the IMF's proposed PRGF timeline.  A 
loan from the Islamic Development Bank to enhance food 
security is another encouraging sign for The Gambia's 
economic and development prospects.  END SUMMARY. 
 
------------------- 
2006 BUDGET ROUNDUP 
------------------- 
 
¶2.  The December 6 announcement of the 2007 budget estimates 
to the National Assembly (NA) reflected optimism from 
Secretary of State (SoS) for Finance and Economic Affairs, 
 
SIPDIS 
Musa Bala Gaye.  He stated that The Gambia has recorded a 
real GDP growth rate of 7.7 percent for 2006, attributing 
this to growth in the construction and tourism sectors, a 
rebound in telecommunications, and equal output growth in 
crop and non-crop agricultural products.  Encouraging factors 
heralded by the SoS also include the low inflation rate, 
currently at an annualized rate of 1.52 percent, and, as 
previously reported (ref A), the Central Bank's lowered 
re-discount rate and statutory reserve requirement.  The 
Central Bank's gross official reserve rose to 2.4 billion 
dalasi (approx. 89 million USD) and, as of September 2006, 
the net domestic assets of the banking system also rose to 
D3.4 billion (121 million USD), an increase of 27.3 percent, 
due largely to growth in domestic credit from the private 
sector and government.  The money supply grew by 20.7 percent 
in 2006, a slight increase over 20.1 percent in 2005. 
 
¶3.  Bala Gaye informed NA members that the capital and 
financial account balance is estimated to shrink from D3.0 
billion (107 million USD) in 2005 to D1.7 billion (61 million 
USD) in 2006, resulting in an overall balance of payment 
surplus of D804 million (30 million USD) in 2006, compared to 
D1.7 billion (61 million USD) in 2005.  The total revenue and 
grants for 2006 are estimated at D3.08 billion (110 million 
USD), 18.3 percent more than in the previous year, including 
total receipts of D2.6 billion (929 million USD), tax on 
international trade, estimated at D1.4 billion (500 million 
USD), direct tax, estimated at D813 million (29 million USD), 
and non-tax revenue of approximately D400 million (14 million 
USD).  The budget deficit, including grants, is projected to 
improve from 8.6 percent of GDP in 2005 to 4.7 percent in 
2006 due to purported improvements in revenue collection 
efforts.  The basic balance is expected to register a surplus 
of D262.7 million (9.4 million USD) during 2006, a "pointer 
to sustained fiscal consolidation."  Bala Gaye touted 
structural reforms by the GOTG, including the inception of 
the Gambia Revenue Authority, the Gambia Bureau of 
Statistics, and the Roads Authority. 
 
------------------- 
AU SUMMIT SLIPPAGES 
------------------- 
 
¶4.  According to Bala Gaye, fiscal performance improved 
during 2006 despite the African Union Summit hosted in Banjul 
in July and the September presidential elections.  Total 
expenditure and net lending is projected at D3.86 billion by 
year end.  Current expenditure will increase to D2.69 billion 
(96 million USD) from D2.42 billion (86 million USD) in 2005. 
 Though other charges are projected to increase from D736 
million (26.3 million USD) to D1.1 billion (38 million USD) 
largely due to the hosting of the AU Summit, interest 
payments have dropped to D934 million (33 million USD) from 
D1.1 billion (40 million USD) in 2005 due to low domestic 
 
BANJUL 00000763  002.2 OF 003 
 
 
interest rates.  Capital expenditure, much of which was for 
the AU Summit preparations, rose 46 percent over the 2006 
budget estimate of D979 million (35 million USD), totaling 
D1.4 billion (51 million USD). 
 
------------------- 
2007 BUDGET PREVIEW 
------------------- 
 
¶5.  Bala Gaye underscored the emphasis that the GOTG would 
place on poverty reduction in the next fiscal year, with 
increases in spending for social services.  He hinted that 
the GOTG was expecting the IMF's proposed PRGF to go ahead 
early next year (ref A).  He announced some projections for 
the 2007 budget, but the official 2007 budget was not 
presented to the National Assembly for debate until Monday, 
December 18.  Septel to follow. 
 
------------------------ 
FORWARD WITH THE BACKLOG 
------------------------ 
 
¶6.  On December 4, the Public Accounts Committee (PAC), 
composed of 10 National Assembly (NA) members, convened to 
hear testimonies from the Auditor General, the Acting 
Director of the Treasury, and the Permanent Secretary from 
the Department of State for Finance and Economic Affairs 
(DOSFEA) regarding the GOTG's accounts for the period of July 
1992 to December 1999 in order to submit a report of its 
findings, opinions, and recommendations to the entire NA 
body.  The backlog of account audits, highlighted by the IMF 
in its assessment of The Gambia's economy as a target area 
for improvement (ref A), was of key concern for the PAC as 
its members sought clarification from GOTG officials on the 
report presented by the Auditor General. 
 
¶7.  Led by Speaker of the National Assembly, Belinda Bidwell, 
the PAC asked the Auditor General, Baboucarr Sankareh, why he 
had failed to express an opinion on the audited accounts. 
Sankareh maintained that there was insufficient evidence to 
enable him to form an opinion or create a complete picture of 
GOTG revenue and expenditure during the period in question 
due to the large number of missing vouchers and records at 
the Department of the Treasury (DOT).  Gabu Mendy, Acting 
Director of the Treasury, claimed the missing records had 
been removed from the DOT by various Commissions of Inquiry 
set up after the 1994 coup which brought the current regime 
to power. 
 
¶8.  Abdou Touray, Permanent Secretary from the Department of 
State for Finance and Economic Affairs, informed the PAC that 
the GOTG accounts for 2000-2003 had already been submitted 
for auditing, while the 2004 and 2005 accounts were being 
prepared for submission.  Sankareh admitted his office had 
received them, but the still-missing documents moot attempts 
to perform audits.  Touray, undeterred, underscored the 
clearing of the backlog as one of the benchmarks for a new 
Poverty Reduction and Growth Facility to be put in place by 
the IMF, and stated that future accounts would be submitted 
on a quarterly basis upon the introduction of the much-lauded 
Integrated Financial Management Information System (IFMIS). 
IFMIS is due to launch in January 2007 (ref A).  His optimism 
was countered, however, by the insistence of several PAC 
members that the issue of the missing financial records be 
addressed so that future fiscal years may commence with an 
accurate opening balance. 
 
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LOANS FOR LADEP 
--------------- 
 
¶9.  The National Assembly on December 6 ratified a loan 
agreement between the GOTG and the Islamic Development Bank 
(IDB) for the Lowlands Development Project (LADEP), which 
aims to strengthen food security and self-sufficiency.  The 
agreement covers an ordinary loan equivalent to $8.9 million 
with a 25-year repayment plan, including a seven-year grace 
period, and a Least Developed Countries loan worth $1.8 
million, to be paid back in 30 years, including a ten-year 
grace period.  Combined, the IDB loans are set to cover 84 
percent of the cost of LADEP over its five-year duration from 
2007 to 2012.  The announcement of the loan agreement 
followed closely on the heels of President Jammeh's 
highly-publicized visit to Tehran and the bilateral 
agreements allegedly made between the GOTG and the GOI (ref 
B). 
 
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BANJUL 00000763  003.2 OF 003 
 
 
COMMENT 
------- 
 
¶10.  The 2006 budget assessment and projections for 2007 are 
largely as anticipated, given the recent comments from the 
IMF during their November visit regarding slippages related 
to the AU Summit and the need for increased spending for 
social services (ref A).  And while troubles still exist in 
the form of missing GOTG account documents, the open 
recognition of this and the earnest, if flawed, effort to 
remedy the backlog of audits show positive steps in the area 
of economic reform.  As for loans from the IDB and the 
potential of lines of credit with Iran, Jammeh's 
strengthening of ties to the Islamic world appears to be 
largely due to economic motivations.  Post will report on SOS 
Bala Gaye's 2007 budget speech and the National Assembly's 
reaction septel.  END COMMENT 
STAFFORD