Mr. Speaker, Sir,

I beg to move that “ The Bill entitled an Act to provide for the services of The Gambia for the period 1st January, 2005 to 31st December, 2005 (both dates inclusive)” be read a second time.

I. INTRODUCTION

Mr. Speaker, Sir,

1. When the last Budget Speech was presented to the National Assembly in December 2003, the economic situation, as in most other countries in the Sub-Region, and in Sub-Saharan Africa, was extremely difficult. The Government immediately embarked on bold and strong policy reforms and measures to arrest the deterioration, and stabilise the economy. A culture of performance, discipline and probity was driven by “Operation No Compromise”, and the strong policy reforms in the fiscal, financial and economic domains are now yielding positive results.

2. Real GDP Growth is projected to reach 8 per cent by end-December, 2004, compared with 7 percent in 2003. Inflation has declined from 17.9 per cent in September 2003 to 12.3 per cent in September 2004, and it is projected to further drop to 10.5 per cent by end-December, 2004. The exchange rate has stabilized, and the Dalasi has, in fact, strengthened against the US Dollar, the Euro, and CFA Francs by 10.2 per cent, 2.9 per cent and 1.4 per cent, respectively during the twelve months to end-September, 2004. The Dalasi has, however, depreciated, in nominal terms, against the Pound Sterling and the Swedish Kroner by 2 percent and 6 per cent respectively. Growth in money supply decelerated to 16.1 per cent as of mid- September 2004, compared with 40.2 per cent a year earlier. Money supply in 2004 will grow by only 5.3 per cent, and this has positive impacts on both the exchange rate and inflation. The Central Bank’s gross official reserves have risen to D2.4 billion, or 25 per cent, while its foreign liabilities have declined by 27 per cent. The gross official reserves now amount to 5 months of import cover, although this will decline to 4.7 months of import cover by end December 2004. Also, we will now have an overall balance of payments surplus of D797.8 million, compared to a deficit of D164.6 million in 2003. On the fiscal front, the 2004 total expenditure, which was projected at D3.8 billion, will now be reduced to D3.492 million by end-December, 2004. Total Revenue and grants, which were projected at D2591.55 million for 2004, will now reach D3046.4 million by end-December, 2004. Total Domestic Revenue will now amount to D2, 503.7 million, 20 per cent of GDP, which is a record revenue performance for Government. When the 2004 Budget was presented to the National Assembly in December 2003, the budget deficit was projected at 11.6% of GDP. The budget deficit will now close at 3.75% of GDP. There has not been any extra budgetary expenditures, and the Government has not borrowed from the Central Bank. In fact, the 2004 Budget will register a basic primary surplus of D1021.8 million, or 8 per cent of GDP.

3. The Government has also undertaken structural reforms in a number of areas, including the passage by the National Assembly of the Budget Management and Accountability Act and the National Revenue Authority Act. The present sitting of the National Assembly has passed the Income and Sales Tax Act. Government will soon bring before the National Assembly a new Central Bank Bill, and an Amendment Bill to the Insurance Act for compulsory local insurance of marine cargo.

Mr. Speaker, Sir,

4. There are two areas in the operations of the financial sector – Interest Rate Spreads and Foreign Currency Trading Margins of commercial Banks - which are matters of concern to Government, especially in the context of the on-going reforms. A Monetary Policy Committee has been established in the Central Bank, and charged with the responsibility of setting interest rates. The Committee meeting in October 2004 decided to reduce the Treasury Bills rate from 31 per cent to 30 per cent, but the commercial banks did not follow by reducing interest rates. The Committee met again on the 2nd December 2004, and reduced the Treasury Bills and Discount Rates from 30 per cent to 28 percent. Government expects the commercial banks to reduce interest rates accordingly. Government is also convinced that the commercial banks should review their buying and selling rates of foreign currencies, and undertake immediately exchange rates cuts. The economic and financial situation is right and appropriate, and the Government demands it. The commercial banks have responsibilities to shareholders, but they equally have responsibilities to the country and the nation. The banks should work in partnership with Government for the development of this country.

Mr Speaker, Sir,

5. I would like to speak briefly on three important issues – the Poverty Reduction Strategy Paper/and the Strategy for Poverty Alleviation II, the Millennium Development Goals, and the Public Expenditure Review – issues on which I will elaborate in some detail later in the Speech.

6. The PRSP remains the Government’s Strategic blueprint for development, with special emphasis on poverty reduction. However, a recent progress report revealed major constraints that can hinder the achievement of the goal of poverty reduction. These constraints include the change in the macro-economic environment over the two years (2002/2003), the 2002 drought, the macro-fiscal imbalance that led to the reduction of resource allocations to poverty – reducing programmes, the non-fulfilment of pledges made by donors in the Geneva Round Table Conference on The Gambia, poor sector ownership of the PRSP process, and human resource capacity constraints.

Mr. Speaker,

7. A quick assessment of the possibility of The Gambia attaining the Millennium Development Goals has shown that, whilst there are strong indications that with a sustained level of commitment and effort, The Gambia is likely to meet both the Education and Health goals, the country is lagging behind on other targets, particularly on the poverty head count target. However, it is necessary to mention that the country will require substantial donor assistance for the social sectors, if the Millennium Development Goals are to be attained.

8. The recent Public Expenditure Review that was undertaken by the World Bank, identified the following constraints for effective implementation: capacity gaps at policy, sector and Local Government Authority levels, inadequate skills, weak systems and processes, high attrition rate in the civil service, as well as the slow implementation of the decentralisation and Local Government reforms. These pertinent issues will shape current and future Government policies.

 

-end.