VZCZCXRO1083
RR RUEHMA RUEHPA
DE RUEHJL #0614/01 3471604
ZNR UUUUU ZZH
R 131604Z DEC 07
FM AMEMBASSY BANJUL
TO RUEHC/SECSTATE WASHDC 7940
INFO RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 BANJUL 000614 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO EXIMBANK, OPIC, USTDA 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN ETRD PGOV KMCA IMF GA
SUBJECT: GOTG ANNOUNCES 2008 DRAFT BUDGET 
 
BANJUL 00000614  001.2 OF 003 
 
 
REFTEL(S): BANJUL 26 
BANJUL 457 (NOTAL) 
BANJUL 574 
 
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SUMMARY 
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¶1.  (SBU)  The budget figures for the 2008 fiscal year and 2007 
year-end estimates released on December 3 indicate that the GOTG's 
new revenue collection systems are working.  The budget numbers 
reflect, at least on paper, the government's focus of the current 
IMF Poverty Reduction and Strategy Paper (PRSP) and Poverty 
Reduction and Growth Facility (PRGF).  The budget assumes that The 
Gambia will achieve debt relief under the Heavily Indebted Poor 
Countries (HIPC) initiative and Multilateral Debt Relief Initiative 
(MDRI), a decision expected by year's end.  Post is dubious that the 
budget announced and presented will have much relation to the way 
the Gambian government really spends its money, as there is little 
to no accountability, and very little spending on non-security 
projects is visible, apart from that financed by donors.  END 
SUMMARY 
 
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FOCAL STRATEGY 
-------------- 
 
¶2.  (U)  On December 3, Secretary of State (Minister) for Finance 
and Economic Affairs Musa Bala Gaye, announced draft figures for The 
Gambia's 2008 budget.  Bala Gaye said the aim of the budget is to 
foster growth and development by focusing on GOTG efforts to 
alleviate poverty in line with the PRSP, and reflects a 
consolidation of The Gambia's recent macro-economic achievements. 
He projected that growth will remain between six and seven percent, 
inflation will stay below five percent, and international reserves 
will be maintained at a level equal to about four months worth of 
imports.  He noted that the domestic debt to GDP ratio and the 
current account deficit, including official transfers, will be 
reduced.  Already incorporated in the figures are anticipated 
complementary resources of D502 million (23.9 million USD) from HIPC 
and MDRI debt relief. 
 
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REVENUE COLLECTION PAYING OFF 
----------------------------- 
 
¶3.  (U)  The Finance Minister announced a 416 million dalasi (19.8 
million USD) basic balance surplus at year's end, equivalent to 2.6 
percent of GDP, up from a projection of 0.2 percent in the 2007 
budget (ref A).  This represents 22.1 percent of GDP, among the 
highest revenue-to-GDP ratios in Sub-Saharan Africa, according to 
Bala Gaye.  He cited the "outstanding fiscal performance" of 2007 as 
a "landmark" in The Gambia's history, noting that revenue reforms 
implemented earlier this year, including creation of the Gambia 
Revenue Authority (GRA), were successful. He explained that GOTG 
accounts at the Central Bank have increased through improved revenue 
collection and expenditure controls, thanks largely in part to the 
advent of the GRA.  The minister noted that tax administration will 
be strengthened and revenue collection will be stepped-up again in 
¶2008. 
 
¶4.  (U)  Total revenues and grants are expected to reach nearly D4.5 
billion (216 million USD), 3 percent more than predicted in the 2007 
budget.  Domestic revenue collection is anticipated to rise by six 
percent to D3.5 billion (168.3 million USD) from D3.3 billion (158.2 
million USD) by the end of 2007.  Of the D4.5 billion total, almost 
D3.8 billion (179.6 million USD) comes from domestic revenues, up 14 
percent from the 2007 budget figure of 3.3 billion (158.2 million 
USD).  Out of total domestic revenues, direct tax constitutes just 
over one billion dalasi (48.4 million USD), about 27 percent, 
indirect tax makes up D2.3 billion (111.7 million USD), about 62 
percent, while the remaining D408 million (19.4 million USD), or 11 
percent, comes from non-tax revenues and grants. 
 
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EXPENDITURE AND LENDING 
----------------------- 
 
¶5.  (U)  Expenditures and net lending for 2007 are now projected at 
D4.1 billion (195.3 million USD), ten percent less than the 2007 
budget figure of D4.5 billion (214.9 million USD).  The drop stems 
mainly from capital expenditures, which are forecast at D1.4 billion 
(67.2 million USD).  This is 27 percent lower than the 2007 budget 
figure of D1.9 billion (92.2 million USD), owing to lower than 
expected disbursements on externally-funded projects.  The current 
expenditure for 2007 is estimated to increase from the previous 
budget figure by five percent to D2.6 billion (126.3 million USD). 
 
BANJUL 00000614  002.2 OF 003 
 
 
Personnel emoluments are slated to be D734 million (35 million USD), 
five percent lower than the 2007 budget figure of D765 million (36.4 
million USD).  Other charges are estimated at D1.1 billion (54.4 
million USD), 25 percent higher than the budget figure of D920 
million (43.8 million USD).  The Finance Minister said that interest 
payments will be D782 million (37.2 million USD), 15 percent lower 
than the 2007 budget figure of D846 million (40.3 million USD). 
 
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ADDITIONAL RESOURCES 
-------------------- 
 
¶6.  (U)  Expenditures and net lending for 2008 are projected at D5.2 
billion (247.8 million USD), 15 percent higher than the 2007 budget 
figure.  This increase, according to the Finance Minister, is due to 
the use of HIPC and MDRI debt relief resources to finance increased 
investment expenditures in 2008.  An additional D390 million (18.6 
million USD) was funded by privatization proceeds from the August 
sale of 50 percent of the shares in the state-owned Gambia 
Telecommunications Company (GAMTEL) and its mobile subsidiary GAMCEL 
(ref B). (COMMENT:  To Post's knowledge, this is the first 
disclosure of any proceeds from the sale, though this does not 
reflect the full amount.  END COMMENT) 
 
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OTHER CHANGES 
------------- 
 
¶7.  (U)  The 2008 budget also shows an upsurge of 11 percent in 
current expenditures and 21 percent in capital expenditures. 
Recurrent expenditures have increased from D2.5 billion (120.5 
million USD) in 2007 to D2.8 billion in 2008 (133.9 million USD). 
Out of this, personnel compensation amounts to D918 million (43.7 
million USD), or 32 percent, interest payments on external and 
domestic debt account for D622 million (29.6 million USD), or 22 
percent, and other charges equal D1.1 billion (54.4 million USD), or 
46 percent.  Purchases of goods and services will increase from D523 
million (24.9 million USD) to D725 million (34.5 million USD), or 39 
percent, from 2007 to 2008. 
 
¶8.  (U)  Current transfers and subsidies are also projected to 
increase from D397 million (18.9 million USD) to D418 million (19.9 
million USD).  The expected basic balance surplus will contract to 
D259 million (12.3 million USD), or 1.2 percent of GDP, as a result 
of the impact of the appreciation of the dalasi on revenues, and the 
expansion in both recurrent and Government Local Funds (GLF) capital 
expenditures.  The budget deficit of D730 million (34.8 million 
USD), or about three percent of GDP, will be financed by external 
borrowing of over one billion dalasi (48.8 million USD), capital 
revenue of D15 million (0.7 million USD), repayment of domestic debt 
of D57 million (2.7 million USD), repayment of arrears of D179 
million (8.5 million USD), payment to bank and non-bank sectors of 
D266 million (12.7 million USD), and privatization proceeds from the 
GAMTEL/GAMCEL deal. 
 
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POVERTY REDUCTION 
----------------- 
 
¶9.  (U)  Bala Gaye stated that the GOTG's goals are to reduce 
poverty and meet the economic Millennium Development Goals on the 
basis of sustained growth and macro-economic stability underpinned 
by disciplined, effective, and efficient fiscal and monetary 
policies.  He noted that the GOTG has increased expenditures on 
poverty programs to about 46 percent of the new budget, from around 
40 percent in the 2007 budget. 
 
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STRONG DALASI HERE TO STAY 
-------------------------- 
 
¶10.  (U)  Bala Gaye echoed the same projections and reasoning in a 
meeting with CDA on December 12.  He firmly declared that the rising 
dalasi would stabilize between D18 and D22 to the dollar, stressing 
that it would not go above D22, implying that the government would 
intervene to prevent it.  The minister insisted that the proper 
calculations regarding the effects of the strong dalasi on the 
economy had been carried out.  (NOTE:  The exchange rate was steady 
for over a year at D28 to the USD until July.  END NOTE)  The final 
budget will be read before the National Assembly on December 14, and 
post will report on any reactions septel. 
 
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COMMENT 
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¶11.  (SBU)  We remain skeptical of the GOTG's adherence to the 
 
BANJUL 00000614  003.2 OF 003 
 
 
coming budget, as the IMF recently found that a large amount of 
security-related spending was unreported (ref C).  The announcement 
of part of the proceeds from the sale of GAMTEL/GAMCEL, and the 
incorporation of debt relief measures into the 2008 budget are 
noteworthy.  Our question remains -- what is the government doing 
with these record revenues?  Despite the claim that more than 40 
percent is going to poverty reduction programs, we frankly see 
little sign of investments on that scale in such programs.  In 
contrast, virtually all investment we see being made in development 
in The Gambia can be traced to donor contributions.  We will pay 
close attention to the final written budget when it is presented to 
see if it offers any more clues, but for now the question remains 
unanswered.  END COMMENT 
BACHMAN