GAMBIA S EXPERIENCE WITH MACROECONOMIC MAANGEMENT AND ITS IMPLICATIONS FOR SCALING UP MDG FUNDING. Bai Ibrahim Jobe

Transcription

1 GAMBIA S EXPERIENCE WITH MACROECONOMIC MAANGEMENT AND ITS IMPLICATIONS FOR SCALING UP MDG FUNDING Bai Ibrahim Jobe

2 Introduction: Area 11,300 sq. km. Population Total (2004) 1.5 million Growth rate ( ; average) 2.9 percent GDP per capita (2004) (staff est.) 271 US$ 1998 human development (UNDP Human Development Index ranks 155 out of 177

3 Introduction: Cont d PRSP (PRSP1) Poverty Reduction Growth Facility (PRGF) HIPC completion point, macroeconomic stability poverty programs based budget support From 2001 to slippages in macroeconomic fundamentals and economic governance suspension of the PRGF adverse effect for debt servicing

4 Introduction: Cont d PRSP11 ( ) the Vision 2020 Millennium Development Goals Related, common development objectives

5 MACROECONOMIC IMPLCATIONS OF SCALING UP OF AID Real Exchange Rate Exports and Competitiveness depreciation in both the nominal and real effective exchange rates during loose fiscal and accommodative monetary policies, fueled inflation depletion of international reserves. Average annual inflation rose from less than 1 percent in 2000 to 17 percent in 2003.

6 MACROECONOMIC IMPLCATIONS OF SCALING UP OF AID Cont d Real Exchange Rate In average annual inflation rose from less than 1 percent in 2000 to 17 percent in 2003 Monetary Policy tightened from late-2003 stabilized In nominal exchange rate and reduced inflation to low single-digit levels In the last two years, the REER has remained well below pre-2001 levels

7 MACROECONOMIC IMPLCATIONS OF SCALING UP OF AID Cont d Exports and Competitiveness , external current account deficit widened declines in export earnings erosion of competitiveness regional integration implementation of the common external tariff (CET) tariff increase, of the Economic Community of West African States (ECOWAS) vibrant re-export trade

8 MACROECONOMIC IMPLCATIONS OF SCALING UP OF AID Cont d Foreign Direct Investment (FDI) increased from about 3 percent of GDP during to 11 percent during The bulk of FDI in recent years in building tourism sector infrastructure. levers driving the current account deficit external financing in the form of loans and FDI sustainability of the external position

9 Macroeconomic Management and Challenges Small economy, Small productive base Highly dependent on Agriculture as main exports Dependent on Revenue from international trade Highly dependent on external assistant

10 Macroeconomic Management and Challenges Cont d Successive macroeconomic reforms great improvements in terms of fiscal and monetary policy Macroeconomic management exchange rate stable against all the major currencies Built up international reserves to 4.5 months of import cover Gambian (Dalasi) currency appreciated

11 Macroeconomic Management and Challenges Cont d Fiscal Space GDP growth averaging 3% per annum, Low inflation, and Stable macro economic environment were maintained between1999 to 2000 Large fiscal expansion in 2001 lower domestic revenue to 3.4% of GDP very large increase in expenditures to 9.5% of GDP fiscal deficit including grants widened from 13% to 14.4% of GDP.

12 Macroeconomic Management and Challenges Cont d Tight fiscal and monetary policies Revenue as a percent of GDP dropped by 19.7% in 2005 from 20.2% in the previous year. Creation of a Monetary Policy Committee (MPC) restored tight monetary policy Helped curbed inflationary pressures of the increased public expenditure in the first half of 2005.

13 Macroeconomic Management and Challenges Cont d Creation of the Gambia Revenue Authority fiscal performance in the first half of 2007 was significantly stronger than programmed due to the high government revenue collection Introduction of the Integrated Financial Management System (IFMIS) improved public expenditure management

14 Macroeconomic Management and Challenges Cont d Major monetary policy instruments in 2006 Sustaining the disinflation pressures maintaining exchange rate stability viable external position Money supply - grew by 20.7% in 2006 compared to 20.1% in 2005 Broad money has increased by 14% in 2006 compared to end December 2005 HIPC completion point

15 Macroeconomic Management and Challenges Cont d Reaffirming macroeconomic management and commitment in economic governance Gambia Revenue Authority (GRA) the Gambia Bureau of Statistics (GBOS) National Road Authority (NRA) National Agricultural Development Agency (NADA) Central Project Management (CPM) Aid Coordinating Unit

16 Formulating Implementing MDG-based poverty reduction and development strategies Progress ) First Poverty Reduction Strategy (PRSP1) the macroeconomic indicators were projected not realized over the three years period target were not achieved due to failure to reach the HIPC completion point reduced flow of donor funds poor public capacity to implement policies unsustainable lingering public situation and fragile governance environment.

17 Formulating Implementing MDG-based poverty reduction and development strategies Cont d Creating the enabling policy environment to promote economic growth and poverty reduction through the following:. Revenue Authority Act ; Adopted Government Budget Management and Accountability Act Revised Government Financial Instructions Guideline (1978); Developed a Medium Term Expenditure Framework (MTEF) New PRSP finalized A new Public Procurement law A local Government Act of 2002 and local Government Finance and Audit Act of 2004 A Public Utility Regulatory Agency Act was established by parliament and implementation started in 2004;

18 Formulating Implementing MDG-based poverty reduction and development strategies Cont d Central Bill of 2005 The backlog of Government accounts from 1991 to 1999, Judicial reform registries restructuring strategy, implementing an alternative dispute resolution system and court case management system. New Education policy ( ) Good progress has been recorded in the health sector Agriculture reforms

19 Formulating Implementing MDG-based poverty reduction and development strategies Cont d Second MDG based PRSP ( ) focus on the Millennium Development Goals (MDGs) Second PRSP aims to be implemented through Sector Wide Approach and Medium Term Expenditure Framework (MTEF).

20 Formulating Implementing MDG-based poverty reduction and development strategies Cont d Technical Challenges MDG needs assessment methodologies localizing the MDGs study MDG Action Plan MDG-consistent Medium Term Expenditure and macro-economic Framework

21 Way Forward Implementing scale up strategies to achieve the MDGs First PRSP -25 percent of GLF resources to poverty reduction, but expenditures fell short of targets due to high cost of debt servicing. Moreover, pledges made at the Geneva 2002 Round Table did not materialize. These major constraints among other things made it extremely difficult to implement the first PRSP

22 Way Forward Implementing scale up strategies to achieve the MDGs Cont d PRSP II the strategy is aid effectiveness and development for results MDG goals and targets have been linked to the PRSP 11 pillars but there is need to link the PRSP pillars to the budget. Although all poverty related are coded in the budget, but these are not classified by pillars of the PRSP, thus making it impossible to analyze investment and resource allocation in the budget.

23 Way Forward Implementing scale up strategies to achieve the MDGs Cont d In order to determine the budget deficit and to monitor it closely there is need to concentrate more on the Gambia Government Contribution (GLF), given the unpredictable inflows of donor funds. The Government needs to urgently establish the requisite budget ceilings so as to enhance the resumption of MTEF

24 Thank you