The Gambia successfully implemented a number of bold macro-economic policies in the latter half of the 1980s that have released the productive sectors of the economy from the crippling control of the Government. The liberalization of the economy and the encouragement of private sector development constitute a necessary first step on the road to macro-economic policy reforms already undertaken with the support of the World Bank and IMF. These policies led to improvements in The Gambia’s business climate and encouraged in inflow of investments. Unfortunately, since the coup in 1994, there has been a complete reversal in prudent economic governance in The Gambia and with it, the economic fortunes of the country. UDP aims to put our economic policies/governance, among others, back on track.
Economic Policy and Management
Our economic policy shall be based on a free market principle, which will aim to secure maximum economic growth through private sector initiatives and development. The UDP Government will provide a sound economic environment using prudent fiscal, monetary and structural policies that will aim to achieve the following:
Currently, the Gambia government has three major tax brackets:
VAT- Value Added Tax which stands at 15%, this is tax incur by consumers at the point of buying goods and services. The impact this system has on Gambians is adverse. However, since the Gambian economy is mainly tax base, the introduction of VAT could have been better managed. A UDP government will set up a panel of experts to analyze the cost-benefit of VAT on the people.
Income Tax is at 25% whilst corporate tax is 31%. There are other taxes on property, stamp duty etc ranging from 2.5% to 10%. A UDP government will again, as the case of VAT, assess the impact of these taxes on businesses, on employers, employees and the economy as a whole. A more equitable and rational implementation of tax rate and payment execution will put in place to ease the negative strain on the people and the country as whole.
The tax system in the Gambia requires improvement and streamlining. The UDP will make the tax collection procedure and processes easier and flexible. Currently, taxation on rental income (0.3%) is a burdensome element to many landlords. For example enforcing the fringe benefit tax or tax on rental income will be revised to enable landlords, property owners to see clearly the benefits of paying tax and less aggressive methods of enforcement for late or tax avoidance.
ii) Taxation on Small Businesses
Some small business may not find the turnover tax as an easy option because they are required to pay tax even if they incur a loss. The UDP will introduce tax breaks for small businesses that have break-even or made losses in their initial start-up within a 4 year business cycle.
Currently small businesses pay tax on their turnover even if they make losses within a business calendar. Tax rates will be reduced whilst a UDP government secures other sources of revenue. As the population continue to increase, the demand for goods and services will also increase. Alternative revenue sources such as Funds for entrepreneurs who will be encouraged to bring private sector innovation in various industries, strengthening the public –private sector partnership.
A UDP government will setup a development funds such as agricultural development bank or an entrepreneurship fund where people across different sectors could tap into. Commercial banks would be encouraged to give equity or loan to start ups. The incentive to encourage entrepreneurship and with readily available funds, it is envisaged that unemployment will drastically reduce and hence, more revenue for the state.
iii) Monetary Policy
The UDP government will reestablish the independence of the Central Bank. The monetary policy goals shall be aimed at reducing inflationary pressures in the economy, closing the savings-investment gap and complementing fiscal policy. The monetary policy will also aim at enhancing foreign exchange earnings and bringing the balance of trade to equilibrium. The capacity of the Central Bank to manage and direct the monetary policy of the economy shall be enhanced.
The regulation and supervision of the financial services sector shall be strengthened to ensure its efficient and prudent operation and maximize protection of depositors’ funds. A full liberal exchange rate policy will be maintained.
iv) Public debt management
The current debt burden of The Gambia – both domestic and eternal, is no longer sustainable with its overbearing impact on the overall economic performance. As it is, due to rapidly increasing domestic borrowing by the government, the country’s public debt now stands at above 100 percent of GDP as at end 2014 according to the IMF. The eternal public debt as at the end of 2014, stood at about US$411.2 million. The domestic debt portfolio which is incurred through borrowing from short-term Treasury-bill market, and usually at very high interest costs, is also estimated at about GMD16.2 billion at end-2014.
A UDP government will put in place a pragmatic public debt management policy by first reducing government spending to raise the required amount of funding, support policies that will improve the competitiveness of the economy and maintain an efficient market for government securities.
Our government will developed a risk management framework to identify and manage the trade-offs between expected cost and risk in the government debt portfolio. Through this framework, government would be able to regularly conduct stress tests of the debt portfolio on the basis of the economic and financial performance.
v) Private Sector
We fully recognize the potentials of the private sector as an engine for growth. To ensure private sector led growth, the UDP government shall support and encourage private sector activities through the provision of an enabling environment for business and investments.
In view of its pivotal role in the socio-economic development of this nation, the growth and development of the private sector will be an integral component of our overall economic policy.
To ensure the growth and development of this sector as an engine of growth, the UDP administration will:
· Ensure regular consultation with the private sector through its umbrella institutions on all issues of concern to put in place policies friendly to the private sector, in a bid to facilitate the achievement of private sector growth.
· Always strive to take the views of the private sector as essential inputs in the overall economic policy formulation.
· Put in place institutional structures and mechanisms for private sector capacity building to make the sector more proactive and efficient in the execution of its functions.
· Encourage and support a healthy public-private partnership for speeding up the achievement of our micro-economic objectives.
vi) Development of Small and Medium Enterprises (SMEs)
The culture of small business development is not new to The Gambia. Our priority will be to strengthen the institutional support for this sector. In this, we will work with the relevant agencies (reintroducing and strengthening of IBAS) and other organizations in the country. We shall update current sectoral surveys and a small business award scheme will be instituted to encourage competition.
We shall place a special emphasis on the promotion of investment by providing the necessary infrastructure, and policy initiatives with tax and other incentives. Investments in the service sector as well as other sectors that are labor intensive shall be encouraged to enhance employment and the empowerment of the youth. Current bureaucratic procedures encountered by investors in the processing of claims under the development act shall be streamlined and simplified to eliminate subjectivity and uncertainty. A one-stop-shop system will be established.
A special investment promotion body shall be established for the implementation of an aggressive investment policy aimed at encouraging domestic and foreign direct foreign investment (FDI), in the framework of encouraging the local enterprise initiative, and facilitating the transfer of technology and expertise.
Power supply remains a major constraint to our development effort. We need energy to power industries, hotels and houses. The current situation of erratic and costly power supply continues to stifle our efforts towards realizing the economic development goals. In this regard, the whole management of generation, supply and distribution network should be revisited to ensure an effective and efficient management of Gambia’s energy needs.
We shall increase the generating capacity and thus the supply of electricity; improve the quality of service in distribution and management and to reduce the high cost of electricity to both industry and domestic consumers. This policy will improve the competitiveness of Gambian industries. Alternative energy sources such as Wind, Solar, and Biofuels will be evaluated and exploited to diversify our options and reduce our dependence on diesel engines, components and fossil fuels, which we imperatively have to import. The bridge barrage project will be revisited with a view to establish its feasibility for implementation. Thus The Gambia can gain the potential for becoming a net exporter of electricity.
The current policy of charging duty on generator fuel shall be reviewed with a view to exempting it from all direct taxes.
vii) Human Resources Development and Employment
Our policy will be to invest in the human resources to train and retain the necessary skilled labor force required for our economic take-off. Employers will be obliged to invest a minimum amount in training their own work force to make a contribution to the national training effort. People will be trained to acquire skills relevant to every aspect of the economy-agriculture, manufacturing and trade and service industries.
We shall give women real and equal opportunities to work and all employees will be given equal rights and status under law.