Mousa Gibril Bala Gaye, Secretary of State for Finance and Economic Affairs yesterday, presented the 2007 budget estimates to the National Assembly.

In his presentation, SoS Gaye inform the Members of the National Assembly that the Gambian economy has been expanding both in size and in structure and has recorded an impressive real GDP growth rate of 7.7 percent in 2006.

According to him, the estimates of the revenues, recurrent and development expenditures for the fiscal year 2007 was prepared against the backdrop of a very bright outlook. He said the rapid growth has been achieved due to the boom in construction, a strong rebound in telecommunications, a significant growth in the tourism sector and an equal output growth in both crop and non-crop agricultural products.

He added that inflationary pressure have largely subdued, and as at the end of September 2006, inflation has been contained at 1.52 percent and the international reserve of the Central Bank is also at 4.0 months of import cover. The re-discount rate he said, as at the end of October 2006 stood at 14 percent, thus gaining a significant improvement from 33 percent as recorded by the end of 2004. He said the Central Bank of The Gambia has also lowered its statutory reserve requirement in October from 18 percent to 16 percent.

SoS Gaye added that the money supply grew by 20.7 percent in 2006 which according to him is a slight increase over the 20.1 percent in the previous year and broad money also rose by 14.1 percent above its 2005 level. "The Net Foreign Asset of the banking system rose to 3.5 billion, reflecting the combined effects of the increase in the Net Foreign Assets of both the Central Bank and the commercial banks. The Central Bank's gross official reserve rose to 2.4 billion, while its foreign liabilities declined by 27 percent. During the last nine months, which ended in September of this year, the Net Domestic Assets of the banking system also rose to D3.4 billion or 27.3 percent, owing largely to a significant growth in domestic credit from both the private sector and government", he said.

"The capital and financial account balance is expected to deteriorate from a surplus of 3.0 billion in 2005 to 1.7 billion. Consequently, the overall balance of payment is estimated at a surplus of D804.46 million or $29.97 million in 2006, compared to a surplus of D1,7 billion in 2005. The drop in the balance of payment surplus is due entirely to the decline in the capital and financial account surplus", he added.

On fiscal performance, SoS Gaye said it is expected to be improved during 2006 despite the fact that two major events, namely: the African Union Summit and the Presidential Elections, were successfully held, adding that the total expenditure and net lending is projected at D3.86 billion by the end of December, 2006.He added that current expenditure will increase to 2,691 million from D2420 million in 2005. He stated that while other charges are projected to increase from D736 million to D1056 million, owing largely to the hosting of the AU Summit, there has been a drop in interest payments to D934 million in 2006 from D1,131 million at the end of 2005, due to a lower-than anticipated domestic interest rate and capital expenditure is projected at D1.42 billion and this represents a 46 percent rise over the 2006 budget figure of D978.6 million. He said total revenue and grants for 2006 is projected at D3080 million which represents an 18.3 percent growth over the 2005. Total receipts of D2,603 million and tax on international trade, which makes up for the bulk of the 2006 projected receipts, contributed D1406 million, direct tax at D813 million and a non tax revenue at D400 million.

According to SoS Gaye, the overall budget deficit (including grants) is projected to improve significantly from 8.6 percent of GDP in 2005 to 4.7 percent in 2006. This, he said is largely possible because of the stepping up to revenue collection efforts and the basic balance is expected to register a surplus of D262.7 million during 2006, and this is a pointer to sustained fiscal consolidation.Other complementary structural reforms have already been undertaken by the Government in a number of areas, including the setting up of The Gambia Revenue Authority (GRA), The Gambia Bureau of Statistics (GBOS), and The Roads Authority.

On revenue, SoS Bala Gaye added that the 2007 budget estimates total domestic revenue at D3342.6 million which represents an increase of 5.6% over the 2006 budget figure of D3164.3 million noting that out of this total, direct tax constitutes about 25.7 percent,or D861 million, and indirect tax accounts for about 61 percent, or D2044 million and the remaining D416 million or 12 percent is from non-tax revenues and grants. He noted that the growth in domestic revenues in the recent past is expected to be improved on by strengthening revenue administration.

During 2007,he pointed out that, total grants are expected to increase substantially owing to the fact that there are new inflow for the construction of roads and The Gambia is also expected to reach HIPC completion point after the first six months successful review of the new PRGF programme with the IMF, to start possibly in January, 2007.

On expenditures, he noted that total expenditure and net lending for the 2007 budget has been projected to D4406 million, which is a 17.9 percent increase from D3,740 million in 2006, revealing that the increase is mainly due to the fact that externally funded capital expenditure is expected to significantly increase by 45% from the previous years' level of D978.9 million to D1427 million in 2006.He stated that recurrent expenditure is also estimated to rise from D2779.6 million in 2006 to D2909 million in 2007.

Out of the total estimates of D2786 million for 2007, the Finance SoS said personnel emolument accounts for about D785.3 million or 27 percent of the recurrent budget. Purchases of goods and services constitutes D850.7 million or 29 percent.Interest payments on the external and domestic debt accounts for D846.3 million or 29 percent, and the balance is accounted by current transfers." Personal emolument are relatively high due to the fact that the personnel emolument of the subvented institutions from the department of state for health have been ring fenced to prevent them from budgetary cuts execution.Purchases of goods and services have been projected to increase from D769.5 million in 2006 to D850.7 during the fiscal year, representing a 10.5 percent increase. The major items in this category are project related expenditures, administrative consulting services, utilities and rentals of property and specialised materials and services. Estimates for current transfers and subsides for the fiscal year 2007 are at D420.9 million, compared to D380.7 million in 2006, representing an increase of 10.5 percent. The projections for interest payments on the domestic debt and external debt amounts are at D846.3 million in 2007, which is a reduction of 13.5 percent over the 2006 figure of D955.9 million"he mentioned.

He observed that the 2007 budget has re-iterated Government's commitment to reduce poverty by allocating a significant amount of expenditure to the social sectors noting that from the total expenditure (both recurrent and development), government has raised its allocation of spending in the social sectors from 49.6% in 2006 to 54.9 percent of the total budget, excluding debt service, but including donor funds, in the departments of State for Health, Education, Works and Infrastructure and Agriculture."The importance that this government attaches to poverty reduction is not mere rhetoric, but this has been amply demonstrated in the allocations of budget resources, albeit the problem associated with debt service. It is for this reason that the government has increased the share of Local Funds allocated to poverty reduction programmes to 45.3 percent from 36.3 percent in 2006" he said.

SoS Gaye added that the expected basic primary surplus for the 2007 budget is D1482 million or 3.1 percent of GDP pointing out that the budget deficit for 2007 is projected to be close to balance of 0.2 percent of GDP, and this will be financed by external borrowing of D541 million, a capital revenue of D20 million, a repayment of domestic debt of D93 million, a repayment in the form of arrears of D326 million, and domestic bank and non-bank borrowing of D210 million and 105 million respectively, noting that this consolidation in fiscal policy is required if the economy is to sustain all the gains achieved. Fabakary Tombong Jatta, the National Assembly member for Serrekunda East seconded the motion.