Importance
1. Importance of Fiscal Policy
Fiscal policy encompasses the central government's decision-making concerning resource mobilization and expenditures. It is an important driver of economic growth because government expenditures constitute a major component of the country's Gross Domestic Product (GDP). It is specifically important for stabilizing the economy, managing debt, redistributing income, and addressing market failures, among other functions.
2. Status Quo
The two main components of fiscal policy are: (i) Revenue generation; and (ii) Expenditures.
Revenue generation: The government can generate revenue through tax and non-tax sources. However, the principal source of government revenues is taxation. Over the past three years, tax as a percentage of GDP in The Gambia averaged 9.7%. This is significantly lower than the African average of 16%. The government can also generate revenue through non-tax means including royalty payments, dividends, and concessional fees, among other sources.
Expenditures: The main components of government expenditures are (i) capital (development) expenditures and (ii) recurrent expenditures. Capital expenditures are investments in long-term structures such as infrastructure and equipment. Recurrent expenditures are the day-to-day expenses required for the government to maintain status quo operations.
The fiscal balance in The Gambia has traditionally been negative, meaning expenditures exceed revenues. The fiscal balance, as a percentage of GDP, averaged about 4%. This reflects poor resource mobilization and excessive, unprioritized expenditures. For example, The Gambia has a bloated Ministry of Foreign Affairs, which accounts for an increasing share of the annual budget. At the same time, revenue generation is inefficient. For instance, one area where the government should be able to generate significant revenues is through the numerous state-owned enterprises (SOEs). In reality, Gambian SOEs are a net drain on the fiscal position through annual losses of millions of dalasi due to corruption and mismanagement.
current state
Intervention
3. Fiscal Policy Under the Adama Barrow Government
Fiscal policy has been poorly handled by the current Adama Barrow government. The underlying reason for this is the atrocious public finance management system of the country. This is evident in poor budget planning, revenue management, and inadequate audit systems, among many other shortcomings. As a result, public resources are not used efficiently, the budget is frequently off-target, and established processes are ignored.
a. Poor budget planning: In 2024, the government missed the statutory deadline for presenting the annual budget to the National Assembly. Even for a government that exhibits an incredible amount of incompetence on a daily basis, this was an especially embarrassing lapse. It was symbolic of the perpetual lack of planning in budget preparation and lack of observance of legal guidelines. As a result, the country's budget is not well planned.
b. Poor budget execution: There is a weak relationship between planned budget and actual expenditures. There are frequent cases of government expenditures that were not part of the budget. Furthermore, these extra-budgetary expenditures are not well-documented and reported by the government. This problem persists despite assistance from development partners in implementing a medium-term expenditure framework. There is a general prevalence of non-observance of clearly defined laws and regulations.
c. Poor revenue collection: There have not been any significant tax reforms since the current government came to power. The existing legislation governing tax administration is the GRA Act 2004, enacted over two decades ago under the Yahya Jammeh regime. This legislation focuses more on maximizing short-term revenue at the expense of expanding the tax base.
d. Excessive debt accumulation: By all indications, The Gambia has now reached the point where the debt is not sustainable. As of the end of 2024, the total budget of the country stood at D 120 billion, with an annual debt service of D 11 billion. This debt service accounted for a third of our annual budget in 2025. Borrowing—both foreign and domestic—increased under this government, while expenditures exploded without any prioritization.
e. High recurrent expenditures over low development expenditures: Since Adama Barrow came to power, the government's budget has been almost exclusively recurrent expenditures rather than development expenditures. This has been a recipe for maintaining the status quo rather than investing for future development.
4. PPA's Solutions
Fiscal policy is too important for its current mismanagement to continue. The needed reforms in our public finance management will be undertaken to ensure that fiscal affairs are put on a sound footing. The PPA-led government will address the current crisis in our fiscal affairs through the following measures:
a. Tax reforms: Tax reform is long overdue in The Gambia. The PPA-led government will immediately launch a reform targeted toward expanding the tax base of the country. There is far too much focus on short-term revenue generation at the expense of broadening the tax base. For example, the current law allows the government to tax newly formed companies even if their cash flow is negative. Such short-term practices are detrimental to private sector development as they can force companies to cease operations even when they are fundamentally sound. Our government will remove such clauses from our tax legislation.
b. State-owned enterprise (SOE) reforms: The Gambia has twelve (12) state-owned enterprises as of mid-2025, operating in sectors such as transportation, telecommunications, energy, water, financial services, and agriculture. These SOEs employ about 6,800 full-time employees. Combined, they experienced a net loss of D 1.5 billion in 2024. This is a massive drain on the country's resources. The PPA-leadership understands that these SOEs are long overdue for real reforms. The problems afflicting these SOEs - such as political interference, poor governance, lack of accountability, and poor management, among others—are well known. The needed reforms are also well known. What has been missing is the will and capacity to act from the very top. At the top of the list of SOEs where reforms are needed is NAWEC.
c. Prioritized expenditures: The problems with our fiscal policy do not only concern having sufficient revenue but also have more to do with bloated and unprioritized expenditures. In other words, the existing government spends far more than is needed and most of what it chooses to spend money on is ineffective. For example, we have outsized budget items for the Ministry of Foreign Affairs even though the country does not need all those embassies. We spend a lot of money on the security sector when the sector's needs would be far less when right-sized. We spend an inordinate amount of money on recurrent expenditures at the State House for undefined activities and personnel. The PPA-led government will ensure that expenditures are properly prioritized so that wasteful expenses are avoided. This will be reflected in an immediate reduction in the budget allocation to the Ministry of Foreign Affairs by reducing the number of embassies, as well as a significant reduction in the budget allocation to State House.
solutions
d. Renegotiation of unfair agreements: A significant source of revenue for many countries from non-tax sources includes fees and other forms of payments from concession agreements. Unfortunately for us, the current government has entered into numerous commercial agreements with the private sector and other countries that have cost us billions of dalasi. Examples include the Africa50 asset recycling deal and the Securiport agreement. Such unfair and financially disastrous agreements are unacceptable. The PPA-led government will renegotiate these agreements to ensure that the country gets its fair share of resource rents.
e. Improvements in revenue generation: The PPA-led government will implement reforms to improve domestic resource mobilization and reduce dependence on foreign aid. This will include improved tax collection for property tax in a way that not only generates revenue but also properly guides urban planning and development.
e. Fiscal discipline: The current government’s track record in fiscal affairs is characterized by indiscipline. For instance, there is a huge gap between budget planning and execution. The PPA-led reforms in public finance management will include efficient management of revenues, expenditures, and debt. The country will be put on a sustainable debt path through prioritized expenditures, long-term budgeting horizons, and the adoption of transparent and predictable fiscal rules.
f. Accessing diaspora financing: The diaspora is an important source of financing. The PPA leadership understands that this will be achieved not through taxation or dependence on remittances but by creating the right environment for voluntary financing of capital development through the issuance of bonds. The successful issuance of sovereign bonds depends on macroeconomic stability, sound legal framework, positive economic growth outlook, transparency and credibility in the government, among other factors. With the right reforms and change in leadership, we are confident that our government will create the right atmosphere to have the trust and confidence of our diaspora to ensure that any issued sovereign bonds will be oversubscribed.
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