Mr. Speaker Sir,

I beg to move that " The Bill entitled an Act to provide for the services of the Gambia for the period 1^st January, 2004 to 31^st December, 2004 (both dates inclusive)" be read a second time.

I. INTRODUCTION

Mr. Speaker Sir,

1. It has been barely three months since I assumed the office of Secretary of State for Finance and Economic Affairs; and a year has passed since my predecessor presented the 2003 Budget in this Chamber. During this period, The Gambian economy has witnessed a series of economic shocks -both internal and external -- that have threatened to destabilize the economy, and indeed, threatened to disrupt the social fabric of our society.
2. We, in The Gambia, are still suffering from the devastation caused by the drought of 2002. The output of rice and other foodstuffs, and groundnuts (our major export), was badly affected by adverse weather conditions. As for rice, we have had to import more to meet our domestic requirements, thereby causing a drain on our foreign exchange reserves. More serious was the fact that foreign exchange earnings from groundnuts, which was originally estimated at almost US Dollars 14 million, brought in less than half that amount when the trade season was over. While tourism, our second major foreign exchange earner, had improved somewhat from the low level of 2001, we are still to recover to the levels prevailing before the catastrophic events that summer. This was not all. The sharp rise in international fuel prices, consequent on the escalation of tensions in the Middle East, the war in Iraq, and the subsequent continuing uncertainties in the region, together with the depreciation of the exchange rate over the year, has, despite a price adjustment earlier this year, been inadequate to meet the domestic (dalasi) cost of fuel imports to the country.
3. The adverse weather conditions have affected the incomes of farmers and the rural population of the country. Moreover, the tight foreign exchange situation caused by shortfalls in domestic output and export earnings, the rising cost of fuel imports, as well as a slowing down of donor assistance, has continued to put pressure on the exchange rate, and, therefore, on the price level. The Gambian people were thus squeezed in two ways: - purchasing power had fallen, and prices had risen. In retrospect, it is a vindication of the strength of our resilience that made us survive these acute difficulties.

Mr. Speaker Sir,

4. The easy way out of this dilemma would have been by increasing spending or injecting more purchasing power into the economy. But this approach is irresponsible, and militates against the very fundamentals of prudent economic management. Mr. Speaker, it is the poor and the vulnerable groups in our community that suffer most from inflation and price rises. Macroeconomic stability is the centrepiece of government's economic policies. We have, therefore, despite rapidly rising debt service payments, maintained tight fiscal policies to support the macroeconomic objectives essential for stable growth and for poverty alleviation. Towards this end, we have introduced a series of fiscal reforms that have instilled fiscal discipline in budget execution. A critical aspect of the fiscal discipline we sought to instill were the expenditure control measures that were initiated by the National Emergency Fiscal Committee (NEFCOM) through a cash budget system, since the last quarter of 2002. While such measures were implemented to remedy the fiscal imbalances that have arisen, they also had the added benefit of introducing fiscal discipline in the sectors through the elimination of waste and unbudgeted expenditure. We have, nevertheless, continued to ensure that priority sectors get their due resources.
5. It can be seen that expenditure control has always been a critical underpinning of our efforts towards fiscal discipline. There is, however, another dimension to expenditure management. We have to ensure that public funds are not only properly spent (the traditional controls of accounting and audit), but also well spent. Honourable Members will observe that we have taken the first steps to recast the Estimates of Revenue and Expenditure for 2004 in a way that will make the budget a more meaningful tool for economic analysis and policy making. The Estimates for 2004 are presented in two parts: Part I presents a series of overviews that integrate resource inflows and their utilization. Part II presents the detailed Estimates in their traditional format. The second step is the introduction of a new coding system that is capable of providing the analysis required for the annual budget and the implementation of a Medium Term Expenditure Framework (MTEF). While these first steps are concerned with financial analysis, there is also the need to link these reforms to the Millennium Development Goals, Public Expenditure Reviews and Poverty Related Strategy documents. This will be achieved with the introduction of program based budgeting for selected departments in the next two years. In this way, both the Assembly and the country at large can see and appreciate the objectives and purposes for which resources are allocated, and how they have been utilized.
6. But this is not all. As a further step towards our efforts at improving expenditure management and control, I will table before this Assembly, legislation to modernize Budget Management and Accountability Practices. The provisions of the finance related sections of the Finance and Audit Act are almost thirty years old, and contain very limited coverage for managing the government budget. There is, therefore, the need for a new and comprehensive legislative framework for budget formulation, approval, execution and accountability. Such a framework would provide for the full integration of the recurrent and development budgets in the context of the PRSPs, and provide for closer integration between budget preparation and execution to facilitate service delivery in the line agencies. These revisions will also bring The Gambia in line with international financial architecture, consistent with global best practices.

Mr. Speaker,

7. Our efforts at macroeconomic stability through government fiscal operations have not been confined to measures of budget formulation, expenditure control and accountability alone. Sound expenditure management is but one facet of our fiscal disciplines. It would be recalled that my predecessor in his Budget Speech last year called for a concerted effort to develop a new culture of resource mobilization. Tax evasion and avoidance are pernicious developments that undermine the credibility of government. We must, therefore, ensure that every dalasi that is legitimately due to government is brought to account as quickly as possible. In this way, not only will the most deserving sectors of government get the maximum resources we can provide, but it will also ensure that there is equity in that all taxpayers will be contributing their full and fair share to government.

8. Our effort at enhancing our revenue collections has two dimensions. On the one hand, we have to modernize the revenue administration of our country. No country in the world can enhance and sustain revenue mobilization efforts without a proper underpinning of the revenue administration and legislation. Towards this end, I will bring before the National Assembly, legislation to create a Revenue Authority, which again, is in keeping with the best practices prevailing in the developed world and in Africa. The Revenue Authority contemplates a new administrative structure, which involves bringing together the Customs and Central Revenue Departments under one body, the development of a new culture of revenue administration under a Board of Directors, and performance incentives to motivate staff. With this new organizational structure, and a motivated staff, I am confident that that our revenue effort will be greatly enhanced

Mr. Speaker,

9. I will also lay before this Assembly, legislation that is intended to modernize the Income and Sales Tax Acts. It will be recalled that the last major reform to the Income Tax Act was made almost a decade ago. There is, therefore, the need to bring to this critical component of tax legislation the modern and best practices prevailing in the rest of the world. The multilateral agencies also see this as a very important part of our efforts at modernizing our fiscal administration. Considerable time and effort was therefore spent in the preparation and finalization of this legislation, after close consultation within government, and with local professional agencies. In the course of next year, and in the context of the Revenue Authority, I hope to review and revise the operations of the Customs Department, particularly in respect of the supporting legislation and the Automated System of Customs Data (ASYCUDA).

Mr. Speaker,

10. Let me now turn to two institutional arrangements that are critical to poverty alleviation, and strengthening public financial management - the Strategy for Poverty Alleviation Office (SPACO), and the Capacity Building and Economic Management Project (CBEMP). I will not dwell much on SPACO since a more detailed statement on its functions, coordination and programming, and poverty monitoring will come out in the section on Poverty Alleviation. We seem to be on track on education and health, but less successful in improving incomes and purchasing power. The CBEMP has provided considerable financial and other support towards strengthening the financial administration of The Gambia. This covers assistance not only for the proposed Revenue Authority and the Central Revenue Department, but also to modernize the Customs administration. The largest single component of CBEMP assistance is, however, for the development of an Integrated Financial Management Information System (IFMIS), which has been divided into a pilot and expansion phases. We are still in the pilot stage of its implementation, which, with the development of Local Area Networks for the Accountant General's Department, the Revenue Departments, the Central Bank of The Gambia, and DOSFEA, will ensure a flow of financial information that will be timely, accurate and comprehensive. These developments, when fully implemented, will go a long way towards improving the financial administration of our country.
    

11. The reform process and initiatives I have outlined earlier are intended to provide a lean and efficient government sector. We recognize that the private sector in The Gambia is the engine of growth, and the role of government is to provide the most conducive environment for this growth process. Let me enumerate some of the critical elements that form this environment. We will provide the social and economic infrastructure, be they educational facilities, health services, or roads, and other transport facilities. We will provide the necessary trade and marketing facilities to provide a base for diversifying our exports, and making goods and services cheaper and more affordable. Above all, we will ensure that the legal system in The Gambia upholds personal liberty and the rule of law to enhance honest entrepreneurship.
    
    Mr. Speaker

12. Let me conclude this section on an overview of the issues involved and the strategies we intend to follow in the year ahead, with some comments on an often-neglected aspect of financial management that is critical for the stability and growth of the economy. This is the productive or the supply side of economic activity. Demand management alone is not a sufficient condition for stability, and particularly for growth. We have, for too long, taken for granted the critical role that agriculture, fisheries, trade and tourism play in providing a sound and more diversified resource base. Agriculture and fisheries form the backbone of our economy. As His Excellency, The President, has often stressed, we must develop and give particular support to these sectors. We must recognize the role these sectors play in income generation and poverty alleviation through good harvests and good prices for farm products. We can also reduce the foreign exchange cost of imported rice and other foodstuffs if agricultural output is enhanced. We can also increase our foreign exchange earnings if we maximize the value added for our exports. The Gambia is blessed with a strategic location, and good facilities for the re-export and transit trade. We must maximize our tourist earnings, and ensure that the value added in this sector accrues to this country. We must develop our nascent industrial base and diversify our exports. Above all, we are grateful for the entire expatriate Gambian community who have remitted their hard earned savings back to this country. I call upon all patriotic Gambians working abroad to remit their money back to The Gambia, without holding them in offshore accounts. This patriotic gesture will help us strengthen our foreign reserves; halt, and, hopefully, reverse the depreciation of the dalasi, thereby helping us to stabilize domestic prices; provide a more conducive environment for foreign investment; and ease the fiscal pressures that now beset us.

-end.