Mr. Speaker, Sir,

viii. FISCAL PROJECTECTION FOR THE YEAR 2006

121) Government's primary policy objective for 2006 is to substantially reduce poverty, and this can only be done by channelling the budgetary resources to those sectors that have a direct bearing on the poor. Consequently, the 2006 Budget has allocated 59.2 per cent of the total budget, excluding debt service, but including donor funds, on poverty reduction programs.

122) The fiscal policy stance for 2006 will be sustain and build upon the macroeconomic stability that has been attained so far, and to instil fiscal discipline through commitment controls. The 2006 budget is also largely influenced by the Staff Monitored Programme (SMP) that has been recently concluded between Government and the International Monetary Fund (IMF).

123) The macroeconomic framework that underlies the 2006 budget assumes a real GDP growth rate of 4.5 percent, which is achievable. This is complemented by a low inflation rate target of 4 percent in 2006, an overall budget deficit, including grants, of 4.6 percent of GDP, with and overall balance of payments, including official transfers, of 12 percent of GDP. The basic requirement is targeted at D200 million. Both the basic balance and the domestic borrowing requirement targets are preconditions for a successful completion of the Staff Monitored Programme with the IMF.

Mr. Speaker,Sir, 2006 Revenue Projections

a. Revenues

124) Given the assumptions made in the macroeconomic framework, and the emphasis that will be placed on collecting, on a timely basis all the revenues due to Governmet, the total consolidated revenue and grants for the 2006 fiscal year is projected at D3,353.5 million or 23.4 percent of GDP. This represents a 9.6 percent increase over the 2005 budget amount of D3022.2 million, or 23.2 per cent of GDP.

125) Tax revenue for 2006 is estimated to increase significantly from D2496.4million to D2795.9 million, representing an increase of 0.6 percent of GDP, or 11.9 per cent over and above the 2005 Budget figures.

126) The other sources of revenue for the Government are non-tax revenues and grants. Non-tax revenue will rise by about 9 percent in nominal terms to D402.2 million in 2006, from D367.7 million in 2005. Total grants are expected to decline from its 2005 level of D246 million, or 1.8 percent of GDP, to D189 million or 1.3 percent of GDP in 2006. The drop in grants is due to the fact that no provisions are made in the 2006 budget for HIPC debt relief, since the country has exhausted all the interim debt relief, and has not yet reached HIPC Completion Point order to benefit from additional debt relief.

Mr.Speaker, Sir, the 2006 Expenditure Projections

b. Expenditure

127) Total government outlay, made up of current and capital expenditure and net lending for the 2006 budget, is projected to rise slightly by 1.9 percent in nominal terms from D3687.2 million in 2005 to D3805.1 million in 2006. However, as a percentages of GDP, total expenditure will fall by 2 percentage points from 28 percent of GDP in 2005 to 26.5 percent of GDP in 2006.

128) Current expenditure, comprising personnel emoluments, purchases of Goods and Service, Current Transfers and Interest Payments, is expected to rise by 7 per cent to D2572.7 million in 2006 from D2403.4 million in 2005. Personnel emoluments accounts for D702.2 million of the 2006 current expenditure figure, while purchase of goods and services, current transfers and interest payments, will be D955.6 million and D716.9 million respectively.

129) Capital expenditure and net lending, which is financed by external loans and grants, and The Gambia Local Funds (GLF), is projected to decline by about 7 per cent from D1284 million in 2005 to D1196.4 million in 2006. This decline is mainly from the fact that no provisions are made for HIPC inflows, and also the contraction in the provision of Gambia Local Funds (GLF).

c. 2006 Fiscal Deficit

130) With a total consolidated revenue figure of D3314 million, and total expenditure and net lending of D3811.1 million, the overall fiscal deficit of Government will improve from the 2005 figure of D855.4 million, or 6.5 percent of GDP, to D662.5 million or 4.5 percent of GDP. This contraction in the level of deficit is compatible with the ultimate aim of reducing the central Government's domestic borrowing requirements, and, hence; the gradual reduction in the stock of Treasury Bills.

131) This deficit will be financed by net external borrowing of D902 million, and a net domestic borrowing of D200 million. Other items under financing also include an amortization of D646.9 million; land sales of D40 million, and an arrears payment of D113.9 million.

-end.