Dr. Ousman Gajigo, Economist Formerly With ADB
By Dr. Ousman Gajigo
The Gambia’s total public debt is now around D120 billion. Given that our own Minister of Finance and Economic Affairshas recently admitted that the country is in danger of debt distress, the realization must now be setting in even for Adama Barrow’s ministers in how badly they have mismanaged public finances of the country. But the fact that we are close to debt distress is not news to many of us. The IMF has long labelled The Gambia as at the risk of debt distress. Indeed, the country is currently under an IMF program, which usually goes along with some loss of sovereignity.
It needs to be emphasized that there is nothing inherently bad about debt. What becomes a problem is when a country takes too much debt and the burden of the debt becomes unsustainablefor the economy. Unmanageable debt is proximately caused by mismanagement of the borrowed funds. However, the ultimate cause is a bad governance environment created by incompetent and corrupt officials who are driven by motives that are inconsistent with national interests.
In the latest budget submitted by the Minister of Finance, our debt service standards at D11 billion. This is the amount that we have to take out of our annual budget to pay our creditors. The amount going into debt service for one year is more than theamount the country spends on agriculture, health, education orenergy. As a percentage of our annual budget, it is almost 30%. Last year, debt service accounted for about 25% of our budget. At this rate of increase, it is highly possible that debt service will soon consume about 50% of our annual budget. This means that we are soon approaching a situation where we will default on our loans, which will be economically and socially catastrophic.
It is also important to scrutinize the composition of our national debt. Our total external debt is approximately D75 billion. This is the amount we owe lenders abroad such as international organizations, external companies and foreign countries. These entities are the World Bank, IMF, Islamic Development Bank and African Development Bank, as well as loans from commercial entities. Our external debt also includes loans fromforeign countries such as Libya and Venezuela.
The share of our national debt that is domestic is about D 45 billion. These are debt taken by domestic borrowers such as commercial banks and other entities through bonds and treasury bills. Treasury bills are short-term debts that the government borrows and have to repay within months. This sort of loanscome with high interest rates, and therefore very costly. Furthermore, excessive amounts of such loans are obstacles to economic development because commercial banks in The Gambia heavily lend to the government through them. This practice is detrimental to economic growth because commercial bank lending to the government comes at the expense offinancing they should provide to the private sector. Withoutloans to start and expand businesses, there will be no dynamic and job-generating private sector, which is the engine ofeconomic growth.
Unfortunately for us, the government has become increasingly reliant on this short-term borrowing. Today, monthly salary payments in many ministries come from this short-term borrowing through the Central Bank. When a government is reduced to borrowing on a monthly basis just to make salary payments, economic disaster is just around the corner.
Standard debt sustainability analysis shows that The Gambia is teetering on the edge of debt distress. The government frequently highlights that the debt-to-GDP ratio is declining as if it is the only indicator of debt sustainability. They are actively misleading people. There are several other indicators, which are all currently breached by the country. Among these is debt-to-exports ratio, which we have long breached because our economy is imports-dependent and hardly generates any exports.
To be fair, the country’s debt problem is not 100% the fault of the current government as some of the loans have been around for a while. However, the Adama Barrow regime perpetuated the same bad governance system that started the debt problem even though it had the opportunity to chart a new course in a proper transition. Instead, this government has been driven mainly by short-term political considerations rather than long-term development, which led to the aggravation of our debt problem.
In almost every single budget presented by Adama Barrow’s Ministers of Finance, we ran a significant budget deficit. The mere presence of a budget deficit is not automatically a problem. However, when this government’s expenditures are scrutinized, they are replete with lack of appropriate prioritization. Specifically, the budgets are almost exclusively recurrent, with insufficient amounts allocated to development expenditures. Furthermore, ministries that should receive relatively small allocations are given huge amounts while economically important ones remain under-funded.
To make matters worse, the Adama Barrow regime has taken loans that are unnecessary and detrimental to the national interest. These include the government guaranteeing loans to politically connected private companies – not for any strategic national interest – but for political patronage. What’s more, such loans are completely unnecessary because trade finance loans for importation of fast-moving consumer goods are among the least risky of bank assets. And banks in The Gambia have traditionally provided such financing to the private sector without any government guarantees.
Another major source of debt in The Gambia is through poorly performing loans that have been taken by state-owned enterprises (SOEs) such as NAWEC, Gamtel and Gamcel. These institutions have taken significant amounts of debt that are guaranteed by the state. And since these SOEs have beenchronically financially mismanaged, they are not able to repay these debts from their own balance sheets, and therefore became part of the national debt.
Take the case of NAWEC, for example. By 2020, NAWEC had accumulated about D 4.7 billion in debt. At the time, it had outstanding loans with about six foreign banks and one domestic bank. These are commercial loans with market interest rates, which are substantial given NAWEC’s poor financial situation and the high-risk perception of the country. The maturity of these loans ranged from ten to twenty years. In the 2025 budget, the government allocated D1.4 billion to NAWEC for pay its suppliers, which alone should be a scandal for an institution with pre-paying customers. Despite the chronic mismanagement at this SOE, no meaningful reforms have been undertaken by this government.
Getting the country out of our current predicament is not impossible. All it requires is the will and capacity to do it. Indeed, there are short and long-term measures that do not require any re-invention of the wheel. All we need are targeted reforms, including better public finance management, to allow the country to grow economically and avoid debt distress.
Among the short-term measures that can yield immediate dividends is the avoidance of waste that is all too prevalent with the current administration. This means good public finance management. Specifically, our budgets should be prioritized towards what is impactful for our development objectives. SOEsneed to be on sound financial footing by ensuring that both the boards and management teams are competent and focus on theirprimary missions. Nothing will get achieved in any endeavor if incompetent officials are hired, retained and promoted, resulting in zero accountability. Sources of leakages through corruption must be tackled with seriousness.
Over the medium to long-term, we must come back to policies that can generate strong and sustained growth because that is the only real remedy. But significant economic growth is generated through the pursuance of good economic policies. And what makes a policy suitable is a function of development objectives of the country given its current context. In the case of The Gambia, this would entail a couple of activities. The investments in infrastructure, particularly in energy and properly sequenced,is a necessity. Without it, there will be no serious foreign direct investments or key domestic sector growths. We must alsoinvest in agriculture and promote local production of food commodities that we currently import. Beyond its economic growth effects through employment generation, the reduction in imports will reduce the depreciation pressures on our currency, which will not only reduce the cost of living through lower inflation but also reduce the cost of debt servicing. After all, more than half of our public debt is external.
The reality is that the above remedies are highly feasible. But the country needs the right leadership. Unfortunately, Adama Barrow and his government have clearly demonstrated that they cannot get the job done. After all, is it reasonable to expect the same group of people that created this economic mess to solve it?