The note views the problem of poverty in The Gambia. The largest group of cash crop producers have the highest poverty rate in the country. The design of public policies in the area of education and health has a large impact on the living standards of the poor. Therefore, these social policies have to be supported by policies that enhance the poor households' access and use of formal financial services. The note discusses the Gambian government's attempts to address the growing incidence of poverty.

Abstract

The note views the problem of poverty in The Gambia. The largest group of cash crop producers have the highest poverty rate in the country. The design of public policies in the area of education and health has a large impact on the living standards of the poor. Therefore, these social policies have to be supported by policies that enhance the poor households' access and use of formal financial services. The note discusses the Gambian government's attempts to address the growing incidence of poverty.

I. Overview of Recent Economic Developments

A. Background

1. The Gambia is a small, open economy, located on the west coast of Africa; it extends inland for 320 kilometers along both banks of the River Gambia, at widths varying from 24 to 48 kilometers. The only land borders of the country are with Senegal. With a population of 1.3 million (1999) and population growth of 4.2 percent per annum, the population density is one of the world’s highest at about 124 persons per square kilometer. Almost 40 percent of the population is concentrated in the urban areas around Banjul, and about 60 percent is less than 25 years old.

2. In the decade following independence in 1965, The Gambia maintained broadly stable macroeconomic conditions and experienced modest economic growth. However, after 1983, economic performance deteriorated significantly as a result of adverse terms of trade shocks and significant domestic borrowing to finance the budget deficit. The increased reliance on government intervention in allocating credit and promoting economic development, primarily in the agricultural sector, and the lack of competition in the economy created an unsustainable economic environment. To address the situation, the authorities embarked in 1985 on an ambitious Economic Reform Program (ERP), succeeded in 1990 by the Program for Sustained Development (PSD). The military coup of July 1994 interrupted^ nearly three decades of multiparty democracy and adversely affected the ongoing economic reforms. In the aftermath of the coup, donors cut assistance to The Gambia, while the negative travel advisories by key tourist countries resulted in a significant drop in tourism receipts, which led to a further deterioration of economic performance. In addition, the reexport trade was hurt by the devaluation of the CFA franc in 1994.

3. The presidential and parliamentary elections, which were held in 1996 and 1997, respectively, marked the end of the transition from military to civilian government and helped to establish the conditions for resuming donor support and economic reforms. In June 1998, the government entered into a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF), subsequently the Poverty Reduction and Growth Facility (PRGF), with the objective of achieving macroeconomic stability and establishing the conditions for sustained economic growth. The Fund Board approved the second annual arrangement under this facility in November 1999.

B. Real Sector Performance

Developments in output, savings, and investment

4. Real output growth, which had slowed substantially during 1993-96, mainly because of a 60 percent downturn in tourist activity, rebounded significantly during 1997-99, led by the recovery in the tourism and agricultural sectors, which averaged 34¼ percent and 8¾ percent, respectively, per annum.

5. In 1999, groundnut production increased by 63 percent to 123,000 tons, following very good rains and building on the recovery begun after 1996/97, when production had bottomed out at 46,000 tons (Statistical Appendix Table 14). Compared with 1998, the area cultivated increased by 50 percent, while the yield increased by 20 percent. However, despite the record harvest, farmers’ earnings remained depressed owing to institutional problems, particularly the breakdown of groundnut marketing arrangements.1 Groundnut marketing suffered because of an insufficient number of mainly small-scale buyers and stagnating prices (Statistical Appendix Tables 14 and 15). The 2000 interim marketing arrangement is relying on new, inexperienced buyers who cannot provide financing. In response, the European Union has provided assistance with price supports for farmers and credit guarantees to the buyers. In the meantime, the government continues to engage in bilateral discussions with Alimenta aimed at strengthening the marketing system by restoring order to the marketing of groundnuts.

6. In 1999, the production of food crops (millet, sorghum and maize) increased by 32 percent, while rice production continued the recent years’ upward trend, reaching about 32,000 tons. Fisheries’ production rebounded after a poor catch in 1998, mainly owing to favorable weather conditions. Artisanal fishery production returned to the 1996-97 level of about 31,000 metric tons, while industrial production grew by 17 percent to a record high of some 8,200 metric tons.

7. The performance of the services sector was mixed in 1999: while the tourism and communication sectors performed well, the reexport trade fell significantly. Overall growth in the services sector remained unchanged from the previous year at 4.3 percent. Tourism witnessed a record year as the number of charter tourist arrivals increased by 34 percent to 122,000 (Statistical Appendix Table 17), which, in turn, benefited the hotel and restaurant business and the communications sector. Activity in the reexport sector was adversely affected by the introduction of the preshipment inspection (PSI) scheme in the fourth quarter of 1999, traditionally a high-activity period (see Box 1); consequently, real value-added in the sector was limited, compared with the robust average growth of 7 percent during 1997-98.

Problems in Implementing the Preshipment Inspection (PSI) Scheme

The government introduced the preshipment inspection (PSI) scheme on imports destined to The Gambia effective October 1999 by awarding an uncompetitive bid to BIVAC. Although at the time PSI was expected to improve customs revenue collection, there were inadequate preparations and lack of consultations with key institutions like the Customs Department and the Port Authority. Thus, a number of problems, including those listed below, led to the conclusion that the scheme is not suited to The Gambia.

  • Administrative problems with PSI included the lack of coordination with the Port Authority and the Customs Department, and significant delays—of up to eight weeks—occurred in clearing goods and in the collection of customs revenue. In February 2000, the local manager of BIVAC had to be removed.

  • PSI valuation was lower than that of the Customs Department for a number of items, leading to some loss of revenue.

  • PSI fees were quite high at 1.4 percent of the c.i.f. value with no exemptions. Fees were payable in U.S. dollars with a minimum fee of US$250.

  • The Gambian economy is highly dependent on trade (25 percent of GDP) and over 50 percent of imports are reexported to the region. Reexports account for 87 percent of total exports of goods and nonfactor services. Employment in the sector including at the port, warehouses and even at the retail level is significant. The higher financial costs and delays caused by PSI led to a substantial trade diversion to the region.

  • Port Authority data indicate that port traffic declined by 22.5 percent during December 1999 to January 2000 compared with a similar period in the previous year. For 1999, imports declined by 8 percent, while reexports fell by 15 percent compared with 1998.

  • During the fourth quarter of 1999, customs receipts and sales tax on imports had a shortfall of D 58 million (1.2 percent of GDP). In December 1999, customs revenue was only 62 percent of comparable collections in December 1998, and even 4 percent below similar collections in December 1994.

8. Gross domestic savings amounted to 8.9 percent of GDP in 1999, compared with 7.5 percent in the previous year (Statistical Appendix Table 13). Gross national savings remained unchanged from the previous year at 14.4 percent of GDP. Gross domestic investment declined from 1998 by 0.5 percent to 17.8 percent of GDP in 1999, on account of a decline in government investment, while private investment remained constant (Figure 1).2

Figure 1.
Figure 1.
Figure 1.
Figure 1.
Figure 1.

The Gambia: Developments in Output and Prices, 1991/92-1999 1/

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Sources: The Gambian authorities; and staff estimates.1/ Until 1996/97, fiscal years (July-June); from 1997, calendar years.

Developments in prices, employment, and wages

9. Price increases, as measured by the consumer price index (CPI), remained modest in 1999 as food prices, which account for about 60 percent of the CPI basket, moderated owing to the good rains (Figure 1). The average inflation rate accelerated to 3.8 percent in 1999 compared with 1.1 percent in 1998, largely because firewood prices rose on average by 12 percent (Statistical Appendix Table 21). This rise reflected the wide spread use of generators by private operators, as the power cuts became more frequent owing to operational problems experienced by the National Water and Electricity Company (NAWEC). However, the end-period inflation rate was contained at below 2 percent in 1999. Public sector nominal wages increased by less than 1 percent in 1999, while average minimum wages in the private sector remained unchanged.

10. Employment statistics are incomplete. However, on the basis of the most recent employment data, formal sector employment rose by 3.2 percent per annum to about 37,500 in 1998 from about 32,280 in 1993 (Statistical Appendix Tables 23 and 24). However, the share of private sector employment fell to 58 percent of total formal sector employment in 1998 from 62 percent in 1993. The sector with the largest employment—agriculture, fishing, and forestry—accounted for 25 percent of total private formal employment, followed by hotels and restaurants, and transport, storage, and communication, comprising 20 percent and 12 percent of total private sector employment, respectively (Statistical Appendix Table 24). Public sector employment increased only by a modest 1 percent in 1999 compared with a growth rate of 4 percent in 1998 (Statistical Appendix Table 25).

C. Fiscal Policy

11. During 1993/94-1996/97, The Gambian economy suffered from a series of adverse shocks, an unduly expansionary fiscal stance, increasing structural weaknesses, and diminished private sector confidence. Moreover, the military coup in July 1994 resulted in the suspension of new project aid and budgetary assistance by most of The Gambia’s traditional donors and creditors. Thus, external budgetary assistance, which contributed about 14 percent of total government revenue in 1993/94, declined to only 7 percent of total government revenue in 1999 (Figure 2). The combined effects of rising expenditures and falling domestic tax revenues (the latter associated with declining economic activity) led to a widening of fiscal deficits (excluding grants) during 1993/94-1996/97, which peaked at 12 percent in 1995/96 (Statistical Appendix Table 25)3. The fiscal deficits were largely financed domestically, leading to an almost doubling of domestic debt to about 27 percent of GDP in 1999 from 13.4 percent in 1994/95.

Figure 2.
Figure 2.

Gambia: Fiscal Developments, 1989/90-1999 1/

Budget balance

(In percent of GDP)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig02a

Government revenue and its composition

(In percent of GDP)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig02b

Government expenditure and its composition

(In percent of GDP)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: The Gambian authorities; and Fund staff estimates.1/ Until 1996/97, fiscal years (July-June); from 1997, calendar years.

12. Starting in 1998, under the Fund-supported program, the Gambian authorities controlled expenditure and mobilized revenue better, leading to a significant improvement in The Gambia’s fiscal accounts. On the revenue side, despite sizable reductions in external tariffs in 1998, domestic revenues increased to 18½ percent of GDP that year from 17¾ percent in 1995/96 (Statistical Appendix Table 26). However, the adverse impact of the introduction of preshipment inspection in October 1999 reversed this trend (as the external tariffs continued to fall), and the share of domestic revenues dropped to 17¾ percent of GDP in 1999. On the expenditure side, total outlays, including net lending, dropped from about 30 percent of GDP in 1995/96 to 22¾ percent in 1999 (Statistical Appendix Table 27). Reflecting these developments, the overall budget deficit declined from 7.8 percent of GDP in 1997 to 4.4 percent and 4.8 percent in 1998 and 1999, respectively; however, in neither 1998 (4 percent) nor 1999 was the target deficit attained (Statistical Appendix Table 25).

Revenue

13. The improvement in the fiscal accounts in the last two years has to a large extent been driven by a recovery in direct tax revenues and nontax revenues (see Statistical Appendix Table 26). In 1999, direct tax revenue contributed about 21½ percent of total government revenue (4.1 percent of GDP), compared with 17⅓ percent (3.4 percent of GDP) in 1995/96, while the share of nontax revenue also increased by nearly 4 percentage points over the corresponding period to 11 percent (2.1 percent of GDP) in 1999. However, revenue generation was hampered by weak tax administration and the provision of customs duty exemptions. Problems in tax administration include the underreporting of profits, reflecting the lack of resources to rigorously conduct tax inspections, and antiquated manual accounting systems. The Gambia traditionally relied more on indirect taxes (particularly taxes on international trade), which contributed about 56 percent of total government revenues (about 13⅓ percent of GDP) in 1996/97 (Figure 2). The authorities have been carrying out external tariff reforms since the mid-1980s. The maximum external tariff was reduced from 90 percent to 18 percent in July 2000. Also, the bands were simplified and their number gradually reduced from 30 in July 1998 to 10 in January 1999 and three in July 2000. Despite the major reductions in external tariffs, customs duties and sales taxes on imported items still accounted for about 19½ percent and 22½ percent, respectively, of total government revenue in 1998, compared with 17 percent and 23½ percent in 1994/95. In 1999, taxes on international trade declined by about 1¼ percent of GDP as imports4 fell substantially and large deficits in the oil stabilization fund accumulated owing to delays in adjusting domestic pump prices to reflect the increases in world oil prices. Duties and sales taxes on oil declined by 1½ percent of GDP in 1999 from the previous year. Effective January 2000, petroleum prices were increased on average by 20 percent, which more than offset the deficits accumulated on the oil stabilization fund.

14. Against this background, The Gambia’s overall policy has aimed at reducing the reliance on international trade taxes while bolstering both direct tax and nontax revenues. The decline in personal tax and capital gains, amounting to 0.2 percent of GDP, was fully offset by the increase in payroll tax, leaving direct tax unchanged in 1999, at 4.1 percent of GDP, from the previous year. Nontax revenue increased slightly in 1999, boosted by a hike in fees on government services in line with increases in inflation. However, there was a decline in dividends, interest, and property, reflecting the difficulties experienced by some of the major public enterprises. Also, the Central Bank of The Gambia’s (CBG) profits transfer was smaller than expected owing to the increased interest cost of issuing CBG bills for liquidity management purposes.

Expenditure

15. Recurrent expenditure overruns (about 1.1 percent of GDP) substantially offset the decline in capital expenditure, contributing to a higher-than-expected overall budget deficit (excluding grants) in 1999 (see Statistical Appendix Table 27). Expenditure overruns largely occurred in the categories of “other charges” (0.7 percent of GDP), “interest,” and “wages and salaries.” The composition of current spending changed markedly in the last two years, as higher outlays of domestic interest and unclassified expenditures (originating from “below-the-line” accounts)5 partly offset the substantial reductions in outlays for wages and salaries and other charges, monitored by Department of State for Finance and Economic Affairs (DOSFEA). Meanwhile, capital expenditure showed a decline in 1999 reflecting a shortfall in externally funded project revenues of about 0.2 percent of GDP. Thus, the larger domestic interest bill resulted mainly from the larger-than-targeted deficit and, therefore, the increased net government domestic borrowing requirements.

Developments in the public enterprise sector

16. In the context of the memoranda of understanding (MOU) agreed between individual public enterprises and the government in 1998, the two parties also agreed to offset their mutual financial obligations as of end-July 1997.6 The stock of arrears was converted into loans of the public enterprises, and a schedule for principal and interest repayments was also agreed upon. According to the recent data provided by the authorities, a number of public enterprises have serviced their debt owed to government. However, at end-1999, a number of enterprises, notably The Gambia Telecommunications (GAMTEL) and NAWEC, had accumulated arrears amounting to D 21 million. The government had also accumulated significant financial obligations to the public enterprises amounting to D 26 million at the end of 1999.

17. In accordance with the divestiture strategy, the government sold the Atlantic Hotel for US$9.5 million at end-1999 and the Trust Bank headquarters building for D 9.5 million in February 2000. The cabinet also reached agreement in April 2000 on separating the radio and television operations from GAMTEL as a first step toward preparing the parastatal for privatization.

D. Developments in the Monetary Sector

18. Achieving and maintaining price stability has been the key objective of monetary policy under the Central Bank of The Gambia Act of 1992. In conducting monetary policy, the CBG relies on indirect instruments through the auctioning and discounting of treasury bills and, to some extent, CBG bills. Even with the expansionary fiscal policy stance implemented during 1993/94-1996/97, the relatively tight monetary policy pursued by the CBG helped to keep inflation low, although the resulting high real interest rates had an adverse effect on credit growth, mainly to the private sector. With the improvement in the fiscal accounts in the last two years, broad money growth moderated to 10 percent in 1998 from 22 percent in 1997 (Statistical Appendix Table 32); meanwhile, the treasury bill rate declined in stages from 16 percent in August 1998 to 12 percent in March 2000 (Figure 3).

Figure 3.
Figure 3.

The Gambia: Monetary Developments, 1991/92-1999 1/

Growth in monetary aggregates

(In percent; end of period)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig03a

Yields on treasury bills

(In percent; annual basis)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Sources: The Gambian authorities; and staff estimates.1/ Until 1996/97, fiscal years (July-June); from 1997, calendar years.

Monetary developments in 1999

19. Monetary policy during 1999 was aimed at keeping inflation low while providing sufficient credit to the private sector to be consistent with the expected pickup in economic activity. Accordingly, broad money grew by 12 percent in 1999, slightly higher than in 1998, primarily owing to a large growth in net domestic assets (Figure 3). Private sector credit increased by 21 percent. Reflecting the large government budget deficit in 1999, the government became a net debtor to the banking system, as its position moved from a net credit of D 32.8 million at end-1998 to a net debt of D 38.4 million at end-1999. Total deposit liabilities of commercial banks increased by 13 percent in 1999, slightly lower than the 16.2 percent increase in 1998.

20. The health of the banking system appears generally sound. Nonperforming loans, which accounted for 26 percent of total bank loans at end-March 1998, declined significantly to 16 percent by end-December 1999 and eased further to 15 percent at end-March 2000; meanwhile, required provisioning remained above 100 percent. All banks met the required capital adequacy ratio of 8 percent and the liquid asset ratio of 30 percent. In addition, the banks face a working balance limit that specifies the required day’s end amount of foreign currency that they can hold. On-site inspections were conducted in 1999 for Continent Bank Limited and First International Bank. In 1999, the unit also inspected all banks for year 2000 (Y2K) problems. Moreover, the government continued to honor its agreement with a major commercial bank on the repayments of the debt owed by the defunct Gambia Cooperative Union (GCU).

E. External Sector

21. The Gambia’s foreign exchange earnings rely for a significant part on reexport trade and travel income. During the 1990s, the reexport trade (accounting for about 85 percent of total exports) financed on average 56 percent of total imports, while travel income accounted for the balance. In 1994/95, both reexports and travel income witnessed a significant decline, owing to the effect of the coup. However, while travel income quickly recovered the following year, the recovery in reexport trade was more gradual, reaching its pre-1994/95 level in 1998 but declining again in 1999 after the introduction of the preshipment inspection scheme. Travel income continued to increase in 1999, but average expenditure per traveler was estimated to have fallen because a growing number of visitors to The Gambia were traveling on small budgets. Generally, during 1994/95-1998, the overall balance of payments has been in surplus, as net capital inflows have been sufficient to cover the current account deficit after official transfers, and official reserves have been maintained at more than the equivalent of five months of imports (Statistical Appendix Table 41 and Figure 4).

Figure 4.
Figure 4.

Gambia: External Sector Developments, 1989/90-99 1/

Number of tourists arrivals and travel income receipts

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig04a

Current account deficit and external assistance

(In percent of GDP)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig04b

Overall balance of payments and official reserves

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig04c

Debt service payments

(In percent of exports and travel income)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: The Gambian authorities; and Fund staff estimates.1/ Until 1996/97, fiscal years (July-June); from 1997, calendar years.

22. The external trade sector, especially the reexport trade component, contracted in 1999. However, as both imports and exports declined, the trade deficit narrowed slightly to SDR 53.3 million in 1999 from SDR 56.9 million in 1998. Total imports fell by about 8 percent, with imports for reexport and for domestic use declining by 15 percent and 3½ percent, respectively; however, the import value of oil and oil products increased by 27 percent in 1999, reflecting the higher world price of crude oil. The value of total exports declined by 9 percent in 1999; reexport earnings fell by 6 percent while groundnut exports declined substantially by 24 percent, owing to lower production in 1998 (which was exported in 1999) and the depressed world market prices. Other domestic exports, such as cotton, fruits, and vegetables, also dropped because of the deteriorating world prices. However, exports of fish and fish products witnessed a significant increase of 10 percent in 1999, following a significant decline in 1998.

23. The current account deficit (excluding official transfers) narrowed to 10½ percent of GDP from 11½ percent in 1998. However, reflecting the smaller inflow of official transfers, the current account deficit (including official transfers) widened slightly to 3½ percent of GDP from 3 percent in 1998. In 1999, the deficit of factor services remained almost unchanged, compared with 1998, at SDR 5.4 million. The nonfactor services surplus, on the other hand, rose to SDR 10.1 million, owing especially to an increase in travel income. Both private transfers and official transfers declined. Although the European Union maintained the same level of support to The Gambia in 1999, official transfers were lower than in 1998, as development grants fell by SDR 2.6 million.

24. Net official capital inflows remained almost unchanged in 1999 at a surplus of SDR 3.0 million, while private capital inflows were smaller by SDR 2.4 million, yielding an overall surplus of SDR 2.4 million. With a net purchase from the Fund, gross official reserves increased to SDR 78.1 million (equivalent to 5.7 months of imports) in 1999.

25. Debt outstanding at end-1999 stood at US$425.4 million, equivalent to about 98 percent of GDP (Statistical Appendix Table 46). Of the total, 82 percent was owed to multilateral creditors and the rest to bilateral creditors. Reflecting the concessional terms of debts, the ratio of debt-service to exports of goods and nonfactor services (travel income) remained low at 10.9 percent. During 1999, the nominal exchange rate of the dalasi depreciated against the U.S. dollar by about 7 percent, while the real effective exchange rate depreciated only by about 2 percent (Statistical Appendix Table 47 and Figure 5). The spread between the interbank market rate and the parallel market rate, however, widened significantly from an average of 2.9 percent in 1998 to 5.5 percent in 1999 (Statistical Appendix Table 48). This occurred primarily because the interbank market rate did not adjust quickly enough to the appreciating U.S. dollar, while the parallel market rate depreciated in line with developments in the international foreign exchange market.

Figure 5.
Figure 5.

The Gambia: Exchange Rate Developments, January 1989-December 1999

Bilateral real exchange rate developments

(Index, January 1990=100)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig05a

Nominal exchange rate developments

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig05b

Effective exchange rate developments

(January 1990=100)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: IMF, Information Notice System.

II. The poverty profile of The Gambia7

A. Introduction

26. The Gambia is one of the poorest countries in the world, ranking 161st (out of 174 countries) in terms of United Nations Development Program (UNDP)’s 2000 human development indicators. The most recent household survey, dated 1998, reveals that 79 percent of the Gambian population (estimated at 1.3 million) live in poverty and 51 percent in extreme poverty.8

27. Economic activity in The Gambia witnessed significant variations in real growth rates during the 1970s and 1980s, caused by a series of exogenous shocks (e.g., deteriorating terms of trade, especially the oil shocks) and inappropriate policies, such as expansionary fiscal policies, an overvalued exchange rate, and excessive government intervention in economic activities, particularly in extending credit to the groundnut sector. As a result, real GDP growth declined from an average of 7¼ percent during 1971-85 to 3¼ percent during 1986-90. To stem the economic decline, The Gambia embarked on a series of structural adjustment programs starting in 1985 with the Economic Recovery Program (ERP); this was followed by the Program for Sustained Development (PSD) in 1990, supported by the World Bank and other donors. Although significant progress was achieved in stabilizing the economy, these programs failed to achieve sustainable real growth, which declined further to an average of 2¾ percent during 1991-96. Moreover, redundancies in the public sector and cuts in social spending in the 1990s as part of the efforts to reduce the budget deficit, as well as rapid population growth, and rising urbanization and structural problems (including the narrow industrial base and declining groundnut production) continued to undermine efforts to reduce poverty. However, the trend in real growth rates (although on a per capita basis, the gains have been small due to the high rate of population growth) has been upward sloping in the latter half of the 1990s.

28. The economy is dominated by three key sectors (Figure 6, top panel): (1) agriculture, which employs 70 percent of the population and contributes about 22 percent to GDP (the most important cash crop is groundnuts, constituting 8 percents of total exports in 1999); (2) the tourism sector, centered near the capital, Banjul, which has risen in importance, especially in the latter part of the 1990s with an increase in the yearly number of tourist arrivals by more than 100 percent from 1990 to a total of 122,000 in 1999; and (3) the reexport trade sector, operating mainly from Banjul port, which serves as an entry port for a large part of West Africa, and generates more than 85 percent of The Gambia’s export receipts.

Figure 6.
Figure 6.

The Gambia: Selected Indicators, 1999

Figure 6a. Sectoral composition of GDP 1999.

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig06a

Figure 6b. The Gambia: Age Distribution of The Population

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: Staff Estimates and Central Statistics Department (The Gambia)

29. The population is growing at a rate of 4.2 percent. The dependency ratio is significant, with nearly two-thirds of the population either younger than 20 years of age or older than 55 (Figure 6, bottom panel). The country struggles with relatively poor living conditions (Table 1): only half of the population has access to safe water, life expectancy at birth is 53 years, child mortality rate is nearly 8 percent, and the literacy rate is only 30 percent despite high primary enrollment. The proportion of children showing signs of stunting was 27 percent in 1998, and 28 percent suffered from infant malnutrition. The Gambia performs better than average for countries in sub-Saharan Africa (SSA) in terms of health indicators, but the Gambian education indicators are worse than the SSA average.

Table 1.

Social Indicators in The Gambia and Sub-Saharan Africa, 1998

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The only data available for The Gambia are from 1995 and, for sub-Saharan Africa, from 1994.

Data from 1993.

30. The rest of this chapter is organized as follows: Section B describes the definitions and geographical categorization used in the 1992 and 1998 household surveys; Section C draws a poverty profile of the Gambian population and compares wage data for different socioeconomic groups and regions; and Section D discusses the impact poverty has on these households in terms of human and physical capital accumulation.

B. Definitions Used in the Household Surveys

31. The existing household and sectoral studies form a comprehensive database, that can be useful in drawing a detailed picture and determining the nature of the poverty problems in The Gambia. Two comprehensive household studies were conducted in 1992 and 1998. The 1998 households survey studied about 2,000 households (some 15,600 people) and categorized them by poverty status and geographical location (Table 2). The survey used three poverty groupings: (a) “extremely poor” (food poor)—having insufficient income to purchase the basic components of the food basket (annual per capita income of less than D 2,700 or US$254); (b) “poor”—having income above the food poverty line (annual per capita income of less than D 4,174 or US$392) but still falling below the overall poverty line; and (c) “nonpoor”—being above the overall poverty line. To assess the size of the overall problem, the sum of the categories (a) and (b) are constructed into an “overall poor” category. The survey also grouped the population into three geographic areas; (a) “greater Banjul”—consisting of the capital, Banjul, plus two suburban areas, which together contain the major industrial entities and tourist facilities; (b) “other urban areas”—cities with more than 1,000 inhabitants in the 1993 census and hosting divisional commissioners and regional administrators of line ministries; and (c) “rural”—consisting of all the remaining small villages. To analyze developments in the trend in poverty, the basic framework of the 1998 survey was kept similar to the 1992 survey.

Table 2.

Definitions and Categorizations Used in the 1998 Household Survey

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C. Who Are the Poor in The Gambia?

32. The challenge in designing effective poverty alleviation policies is to determine the nature of poverty and identify the poor so that measures can be effectively targeted at them. This section utilizes the comprehensive poverty database of the 1998 household survey presented in the previous section to analyze which groups are worst affected by poverty and what impact poverty has on household’s human and physical capital accumulation in The Gambia.

33. Table 3 shows that poverty in The Gambia is most prevalent in rural areas, especially among groundnut farmers—the largest group of cash crop farmers. More than 80 percent of all groundnut farmers were identified as poor, with 70 percent living in extreme poverty. Poverty affects 70 percent of all nongroundnut farmers, with 60 percent categorized as extremely poor.

Table 3.

The Gambia: Poverty and Socioeconomic Groups and Regions, 1992 and 1998

article image
Source: 1998 Household Survey {Central Statistics Department).

34. In comparison with rural areas, poverty is less widespread in urban areas (Figure 7). Among informal workers—a group with the highest incidence of poverty in urban areas—merely 25 percent of the households were categorized as extremely poor. Households headed by workers employed in the formal sector were the least affected by poverty. Among households headed by a public sector employee, 42 percent were categorized as overall poor, and only 13 percent as extremely poor. The same proportion of formal private and public sector workers were extremely poor, but a slightly larger number of private workers were categorized as poor. In other urban areas, formal workers and informal workers were equally affected by poverty, but overall poverty was slightly higher in the latter group.

Figure 7.
Figure 7.

The Gambia: Degree of Poverty Among Regions, 1998

Household distribution

(in percent)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig07a

Mean Income

(In dalasis per annum per AEU)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: The Gambian authorities.

35. The prevalence of poverty in different rural-based occupational groups underpins the problem of rural poverty (Table 4). Households headed by either crop producers or fishery workers had the largest proportion of poor people, closely followed by the mostly urban category of “plant and machine operators and assemblers.” Even the unemployed seemed better off than these groups, as 14 percent and 43 percent were categorized as being extremely poor and poor, respectively. This outcome may relate to the fact that rural workers had larger family units than the more mobile unemployed in urban areas, who are typically single or had smaller households. The group of legislators, senior officials, and managers was least affected by poverty with an overall rate of 14 percent, followed by the group of “armed forces” and “professionals” with overall poverty rates of 20 percent and 22 percent, respectively.

Table 4.

The Gambia: Poverty and Average Earning by Occupation, 1998

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Source: 1998 Household Survey (Central Statistics Department).

36. Although poverty rates and wage data provide similar information about welfare, wage data permit a comparison of absolute welfare differences among socioeconomic groups, Gambian wage data reveal significant earning disparities between genders and between rural and urban areas, as well as among sectors. The reported annual per capita earnings in the formal sector were D 6,741 and D 2,288 for males and females, respectively. Hence, females earned on average only one-third as much as males and were even below the extreme poverty line of D 2,700. The average urban income is twice the rural one (see Figure 7). Even the poorest urban group, “extremely poor informal workers,” earned nearly the same as the average worker in rural areas. The stark differences between rural and urban areas may explain the recent years’ accelerating urbanization, which in turn, has placed an increasing burden on already inadequate urban sanitation and health facilities. Wages in the public sector were on average higher than in the private sector: the mean annual average wage in the public sector was D 14,167, while a private sector employee and employer earned D 10,050 and D 17,786, respectively. At the bottom of the income scale, groups mainly employed in the informal sector, such as “own account workers,” “family helpers,” and “other” received average annual incomes of D 3,300, D 1,653, and D 2,984, respectively. Comparing these salaries to the respective overall and extreme poverty lines of D 4,175 and D 2,717, it is evident that these groups endure constant hardships.

37. Gambian wage data also underscore the importance of acquiring skills in order to escape poverty. According to an employment survey conducted by the Central Statistics Department in 1998, the average monthly wage rate for unskilled workers was D 459, below the overall poverty line of D 461, but above the food poverty line of D 237. In comparison, the average monthly wage of skilled workers was D 1,142, and professionals, comprising managerial, professional, and clerical workers, earned on average D 3,066 per month.

38. A comparison of the two household surveys from 1992 and 1998 shows a significant increase in the magnitude of the Gambian poverty problem (Table 3).9 In 1992, merely 15 percent of the population was extremely poor, compared with 51 percent in 1998. Between 1992 and 1998, the nonpoor’s share of the population was halved to 31 percent. The increase in rural poverty is most significant as the proportion of extremely poor groundnut farmers increased from 26 percent to 74 percent during the same period. The worsening of living standards in the rural areas reflects problems in the sector. Yearly groundnut production averaged 81,200 tons in 1996-1999, only 75 percent of the average production in the 1980s. Earnings in the sector declined during 1997-1999 with the decline in production and stagnating producer prices (while CPI inflation averaged more than 2 percent). Formal employment in agricultural processing and marketing fell by nearly 90 percent from 1993 to 1998, mainly because of the closure of a major processing plant and the lower production. Export earnings also declined from 4.5 percent of GDP in 1991/92 to 2.3 percent in 1999. Urban areas, however, also experienced an increase in extreme poverty, with the proportion of extremely poor increasing from near zero to 13 percent and 24 percent for formal and informal workers, respectively, over the six-year period.

D. The Impact of Poverty on Households

39. Poverty, especially in its extreme form, implies a constant struggle to meet basic needs. As poor households spend a very large proportion of their income on food, even a small decline in household income can have a large, adverse impact on the member’s nutritional status. Longer-term, costly investments in education are less important when the household needs food. For these reasons, poor educational and nutritional standards are often observed concomitantly among poor. This is also true for The Gambia, where enrollment rates fall as poverty increases. Figure 8 shows that, among children aged 7-12 years, only 40 percent from extremely poor households were enrolled in school in 1998, while enrollment rates increased to 54 percent and 61 percent for children from poor and nonpoor households. One reason for the lower enrollment rate among children from poor households is the need for them to work in order to augment the low household income; children from poor households account for 80 percent of all child labor in The Gambia.

Figure 8.
Figure 8.

Education Enrollment by Poverty Groups, 1998.

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

40. Children from extremely poor families suffer more from malnutrition than those from better-off households. Among large groundnut farmers, the poorest group in the country, one-third of all children suffer from some degree of malnutrition, larger than the country average of 28 percent. In addition, poor households tend to be bigger than nonpoor, implying a larger dependency ratio in poor households: 0.96 for extremely poor, 0.51 for poor, and 0.75 for nonpoor. Poor nutritional status affects the general health standard and therefore raises demand for health services. Figure 9 shows that, despite a significantly smaller budget, health spending by extremely poor households accounts for roughly the same proportion of total countrywide health spending as the group of nonpoor. Furthermore, poor people mainly access public health units, while nonpoor choose the better private health facilities. Three-fourths of all spending on public doctors in The Gambia is for services rendered to the overall poor population. Hence, the design of a public health policy, in terms of the access to, and cost of, using these services, has large implications for the poor—an issue that will be discussed more extensively in Chapter IV.

Figure 9.
Figure 9.

Health Spending By Poverty Groups, 1998

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: 1998 Household Survey (Central Statistics Department)

41. Further evidence shows that poor households have fewer accumulated assets to liquidate in the event of an unforeseen drop in income. The mean value of assets of nonfarm enterprises_ was D 1,639 and D 2,602 for extremely poor and poor, respectively, while the nonpoor asset value amounted to an average of D 16,662. As an alternative to liquidating assets in case of a fall in income, easier access to financial services enables households to smooth consumption. The 1998 survey, however, shows that the formal financial sector serves only a small part of the population, and an even smaller share of the poorer groups. Improving the access to financial services will be greatly welfare improving, in terms of both increasing growth prospects for “own account” workers and alleviating the negative effects on children’s educational and nutritional standards of a sudden fall in household income.

42. A main part of consumption financing in The Gambia is from cash earnings (53 percent) and remittances (28 percent), while especially poor households rely on informal credit (14 percent). Expenditure financed from social security benefits and private pensions and other government sources is minimal and mainly limited to nonpoor households. The weakness in the provision of social security is underscored by the fact that the poverty problem is biggest among those households where the head is older than 65 or younger than 20, commonly those that are most dependent on social security. However, poverty is less prevalent in households headed by individuals between 25 and 29 years old, who are best equipped to support themselves.

E. Conclusion

43. The 1992 and 1998 household surveys together underscore the same conclusion (although the number of poor was somehow underestimated in the 1992 survey). First, the problem of poverty in The Gambia, especially in rural areas, is pervasive and has worsened in recent years. Second, the largest group of cash crop producers, groundnut farmers, has the highest poverty rate in the country. Third, urban areas are better off than rural ones. Finally, women earn only one-third as much as males.

44. The design of public policies in the area of education and health has a large impact on the living standards of the poor. Therefore, these social policies have to be supported by other policies that enhance the poor households’ access and use of formal financial services. Greater access to credit and savings facilities will help these households in smoothing consumption as income fluctuates and reduce the likelihood that child labor will have a negative impact on school enrollment.

References

  • Department of Agriculture, 2000, “1999/2000 National Agricultural Sample Survey,” Statistical Yearbook of Gambian Agriculture: 1999 (Banjul, The Gambia: Ed. National Agricultural Data Center).

    • Search Google Scholar
    • Export Citation
  • European Union, 1997,Groundnut Sub-Sector Study (Aproma, Belgium).

  • The Strategy For Poverty Alleviation Coordinating Office, 1999, The 1998 National Household Poverty Survey Report (Banjul, The Gambia: SPAGO).

    • Search Google Scholar
    • Export Citation
  • Wadda, R., and R. Craig, 1993, Report On the 1992 Priartry Survey, Central Statistics Department and The Ministry of Finance and Economic Affairs (Banjul, The Gambia: CDO and PROP).

    • Search Google Scholar
    • Export Citation

III. Strategic Framework10

A. Introduction

45. This chapter discusses the Gambian authorities’ attempts to address the growing incidence of poverty highlighted in the preceding chapter. The Gambian authorities adopted a comprehensive strategy for poverty alleviation (SPA) in 1992, with a view to making poverty reduction an important element of the outcomes of structural adjustment policies. This multi-pronged strategy in addressing structural issues and poverty reduction is in line with the redesigned Bank and Fund-supported structural adjustment programs to low income countries. In 1999 the Fund Executive Board agreed to replace the Enhanced Structural Adjustment Facility (ESAF), the concessional lending arm, with the Poverty Reduction and Growth Facility (PRGF). The main goal of this facility is to make poverty reduction efforts among low-income members a key and more explicit element of a renewed growth-oriented economic strategy. The cornerstones of the new approach, which will continue to be based on sound economic policies, would include a comprehensive, nationally owned Poverty Reduction Strategy Paper (PRSP); social and sectoral programs aimed at poverty reduction; greater emphasis on governance; and priority to key reform measures critical to achieving the member government’s social goals. The policy framework paper (PFP), in which the authorities used to outline the macroeconomic and structural policies that they intended to pursue in the medium-term, is now replaced by the PRSP. In the case of The Gambia, the authorities have taken the SPA seriously and had made attempts to link most of the pro-poverty programs to the SPA objectives. With donor assistance, the government initiated a number of studies,11 surveys (participatory survey) and public expenditure reviews in health, education, and agriculture to provide a sharper focus and realignment of sectoral policies with the strategy for poverty alleviation. In this context, the SPA has been an evolving process, as the review of sectoral policies and the availability of new data from the surveys are fed into the SPA to help sharpen its focus. Based on feedback from a number of these studies, surveys and public expenditure reviews conducted so far, the authorities are updating the SPA, with a view to launching the SPA I, which will be an important input in the preparation of the PRSP, with the Interim PRSP likely to be completed in November 2000. The chapter is organized as follows: section B describes the SPA, including its objectives and programs; section C describes pro-poverty sectoral policies, in health, education, agriculture, population, rural development, local government (decentralization), private sector development and governance policy framework, which augment the poverty alleviation strategy.

B. Strategy for Poverty Alleviation

46. During the 1990s, the Gambian government launched a major initiative to broaden its development strategy so as to ensure that the policies aimed at restoring macroeconomic stability also improved the living conditions of the poor. To this end, the government introduced the Strategy for Poverty Alleviation (SPA) in 1992, which was presented at a Donor Roundtable Conference in Geneva in 1994. The SPA identified four main areas of intervention (called pillars) to address poverty alleviation in The Gambia, Notably, the four pillars seek to (1) address structural problems in the economy; (2) broaden the access, and improve the delivery of, social services; (3) promote institution building; and (4) enhance participatory communication processes as an important instrument in combating poverty.

47. The National Poverty Alleviation Program (NPAP) was initiated to operationalize the SPA, and it consists of a number of programs and projects that seek to map the objectives of the SPA to their expected outcomes. The government used the NPAP to articulate current and planned linkages between ongoing poverty alleviation processes, in order to attract renewed donor and stakeholder interest in the program.

48. As shown in Box 2, the implementation of the NPAP follows an integrated approach, focused on poverty reduction. Foremost, the NPAP, as reflected in Pillar I, recognizes that expanding the productive capacity is sine qua non in generating employment opportunities for the large youthful population (64 percent of the population is below the age of 24). NPAP-related programs designed to meet this goal include diversifying agricultural production, which has been hitherto dominated by groundnuts; introducing supportive policies to promote micro enterprises, the eligibility of Gambian contractors for government works and procurement, women-owned businesses, and financial support for small-scale enterprises; promoting labor-intensive projects in public works; and creating and promoting infrastructure development funds.

Strategy for Poverty Alleviation

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Source: The Strategy for Poverty Alleviation, 1992.

49. Under Pillar II, the programs emphasize gaining access to social services by improving the proximity of health services to communities; strengthening the participation of women and youths in socioeconomic development through expansion of the literacy program, especially for women and girls; enhancing the quality and relevance of basic education; promoting technical and vocational training; and enhancing national capacities to implement the decentralization strategy in the social services.

50. Pillar III activities entail building capacities in project management and program implementation and establishing a social fund to support local enterprise development initiatives. All these activities are underpinned by the promotion of communication processes, highlighted in Pillar IV. These programs build on the wealth of communication skills and channels that exist in The Gambia to develop a coherent policy framework through which poverty alleviation messages can be disseminated.

51. The management and implementation of the NPAP represent a chain-like link of all players in the poverty reduction program. These include the affected population, including the community-based organizations, the local authorities, the National Steering Committee (which is the senior partner), the Strategy for Poverty Alleviation Coordination Office (SPACO), nongovernmental organizations (NGOs), the donors, and the private sector. Box 3 describes the institutional setup of the poverty program. In preparation to launch the PRSP, including the I-PRSP, the authorities decided to review and restructure the management and coordination of the SPA, especially in view of the problems encountered during its first phase.

The Institutional Setup for Poverty Alleviation in The Gambia

  • The management and implementation of the National Poverty Alleviation Poverty (NPAP) represent a chain-like link of all players in the poverty reduction program: a national taskforce (NTF), a Strategy Poverty Alleviation Coordinating Office (SPACO), NGOs, community-based organizations, the local authorities, the donors and the private sector.

  • A lesson learned from the assessment of SPA was that the National Steering Committee consisting of permanent secretaries and chaired by the Secretary General, was ineffective, due to its limited mandate. Given the high priority assigned to the implementation of the poverty agenda, including the preparation of the PRSP, it was agreed in 1999, that a national task force (NTF) with a cabinet mandate should replace the Steering Committee. The NTF, consisting of government officials, NGOs, the private sector, and donors, has met several times already and will report to the High Level Economic Committee (HILEC). The HILEC is made up of secretaries of state and their permanent secretaries chaired by the Secretary of State for Finance. SPACO will be responsible for coordinating the PRSP process and monitoring of the process during the implementation.

  • The main responsibility of SPACO is to

    • – coordinate (but not implement) the various elements of poverty reduction,

    • – collect information on poverty in the country,

    • – coordinate donor and government activities on a functional basis,

    • – reveal areas where further effort is needed; and

    • – carry out a three year Participatory Poverty Assessment (PPA) study covering the period, 1999-2001. The PPA is linked to the 1998 household survey. This process should result in community action plans (CAPs) that will be incorporated into the overall action plan at the national level.

  • Following a donor meeting on the PRSP process, donors pledged an estimated US$0.75 million in financial support in addition to the sponsorship of a number of SPACO’s activities.

C. Other Pro-Poverty Interventions

52. This section attempts to summarize a broad range of existing sectoral government policies and programs, with a view to highlighting those interventions that are directly targeted to alleviate the incidence of poverty. These include a number of programs in agriculture, education, health, governance policy framework, private sector development and others that have been developed with donor support.

Agriculture

53. Despite its diminishing contribution to the overall output,12 agriculture still plays a significant role in the Gambian economy, providing employment to a large section of the labor force, and generating about 40 percent of total exports and about two-thirds of household income. As domestic grain production meets only 50 percent of the national food grain requirement, the food deficit is met through commercial imports and food aid. As discussed in detail in paragraphs 5 and 34, the deterioration in agricultural incomes over the past three decades, largely contributed to worsening of the poverty situation, especially in the rural areas. In this context, policies to reduce poverty, should entail measures to address the problem of low productivity and production in the agricultural sector. The medium-term poverty policy objectives include, inter alia: to create employment and generate income for the majority of the rural population who are dependent on primary production, particularly women, youth, and producer associations; and to diversify the production base to facilitate the production of food and export crops in order to reduce fluctuations and uncertainties in household incomes and export earnings (see Box 4). To these ends, the government, with donor assistance, has initiated a number of programs that seek to mitigate and/or remove some of the constraints that keep agricultural incomes low, in addition to creating alternative income-generating activities to absorb part of the labor force that is dependent on subsistence agriculture.

The Medium-Term Policy Objectives of the Agricultural Sector

  • Achieve national food self-sufficiency and security through the promotion of sustainable, diversified food production programs with emphasis on cereal production to contain the growth of imported rice.

  • Increase overall agricultural output, especially of domestic food and export products, in order to ensure food security and enhance foreign exchange earning capacity to finance other aspects of the development process.

  • Create employment and generate income for the majority of the rural population who are dependent on primary production, particularly women, youth, and producer associations.

  • Diversify the production base to facilitate the production of food and export crops in order to reduce fluctuations and uncertainties in household incomes and export earnings.

  • Reduce disparities between rural and urban incomes as well as between men and women, curb rural-urban drift, and accelerate the pace of rural development.

  • Provide effective linkages between the agriculture and natural resources sector and other sectors of the economy, particularly the tourism sector, so as to enhance their mutual complementary and supplementary effects on a sustainable basis.

  • Ensure a judicious and sustainable exploitation of the country’s natural resource base so as to conserve and improve biodiversity and enhance productivity consistent with consideration of the needs and rights of future generations.

Source: The Gambia: Department of State for Agriculture, Public Expenditure Review, May 1998.

54. Important interventions so far include the groundnut subsector recovery program. The framework of agreement signed by the government and the Agri-Business Service Plan Association (ASPA)13 in 1999, funded by the European Union (EU), transferred the entire management of the subsector to ASPA, ending the government’s involvement in the marketing of groundnuts. ASPA will henceforth announce farmgate prices prior to the planting season, supported with funds from the producer price stabilization fund. This is expected to provide greater economic incentives than the current system of individual sales by farmers, which involve large price fluctuations. Guaranteeing a price prior to the planting season could also help farmers to obtain credit. These measures, together with efforts by the government to increase the supply of improved groundnut seeds,14 are expected to revive the groundnut sector and reverse the income decline in the past three decades.

Education

55. The Revised National Education Policy 1998-2003 aims to (a) prioritize investment in education subsectors with the highest social rate of return, namely, basic education; (b) use education as a tool to improve income distribution patterns and reduce poverty; (c) make education relevant to the life and work of Gambians and their cultural heritage; (d) relate education more closely to national development goals; and (e) increase individual and national self-reliance.

56. One of the key reforms of the new policy is the restructuring of the school system from 6-3-3-4 to a 9-3-4 education system.15 Under this arrangement, the new policy seeks to expand basic education to nine years of schooling. Secondary and tertiary education will each continue to take three years and four years, respectively. In terms of enrollments, the previous education system tended to produce a pyramidal structure, in which only a small proportion of pupils continued to higher levels, with more than 70 percent of pupils completing only six years of education. Because of the high cost of secondary education, the majority of those who were being left behind came from poor or extremely poor families, where the failure rates are very high. With the tight labor market conditions, the prospects of finding gainful employment for primary school graduates are almost nil, a factor that can actually act as a disincentive for the poor to send their children to school altogether.

57. Against this background, the introduction of a nine-year basic education systems, including efforts to increase enrollments, especially of girls, is expected to have a substantial long-term impact on poverty. Primarily, the education policy seeks to (a) increase basic education (7-15 year olds) enrollment ratios from 70 percent in 1996/97 to 90 percent by 2003; (b) increase girls’ enrollment rates16 at the Gambia College17 to 40 percent of total intake by 2003 (by providing scholarships to girls from the poor regions); (c) expand secondary school education through increased use of double shifts and construction of ten new government secondary schools by 2003; and (d) expand adult and nonformal education programs by training 4,000 adults per year to be literate starting in 1999 (see Box 5).

Education Policy Targets

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Source: Department of State for Education, Public Expenditure Review, March 1998.

58. These priorities will be achieved by: maximizing existing educational resources through double shifts, the growing of student-teacher ratios, the reallocation of funds in favor of basic education, and improved community participation; building capacity through more teacher training; and improving the management of the education sector through decentralization and performance monitoring. Reflecting the shift in policy, government expenditure allocations to basic education amounted to about 60 percent of total education expenditure in 1999; until 1998, such allocations averaged only 40 percent (Statistical Appendix Table 29).

Health

59. The Gambia’s current health policy was adopted in 1994 after an extensive participatory process involving rural communities, public and private health practitioners, health organizations, NGOs, and donors. The elements of the policy revolve around the principle of primary health care (PHC): safe motherhood, family planning, child survival, proper nutrition, control of common endemic diseases, health promotion/protection, and provision of essential drugs and vaccines. Specific components of the health programs that have a greater potential to benefit the poor substantially are listed in Box 6. To support the expansion in basic health care, government expenditure allocations to the subsector have risen from below 20 percent of health expenditure in 1995/96 to about 30 percent in 1999 (Statistical Appendix Table 29).

Health Policy Targets

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Population

60. The National Population Policy (NPP), adopted in 1992, revised in 1996, and updated in 1997, aims to raise living standards by realizing three goals: (a) achieving a better balance between the rates of population growth and development; (b) improving and preserving the environment; and (c) creating optimal conditions for the implementation of a sustainable NNP at national and local levels.18 With the population currently estimated to be expanding at 4.2 percent per annum, The Gambia has one of the highest population growths in the world. The natural rate of population growth is estimated at 2.8 percent, while the contribution of net immigration to population growth is about 1.4 percent per annum. Largely as a result of increased political instability in the West African subregion since the 1980s, The Gambia witnessed a substantial increase in the number of migrants from Guinea Bissau, Sierra Leone, Liberia, and the Casamance region in Senegal. Migrants are also attracted to The Gambia by the efficient port facilities and the banking system, which support a vibrant reexport trade. With its small land size19 and its poor endowments in natural resources, the rapid population growth undermines government efforts to expand social services to the population. The NPP identified 12 integrated components, including measurable targets, that relate core health and education issues to a range of broader concerns. Its core components include (a) reproductive health and family planning; (b) population and development strategies; and (c) information, education, and communications advocacy. The NPP shares a large number of programs that cut across other sectoral policies (see Box 7).

National Population Policy

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Source: Revised National Population Policy for Socio-economic Development. 1998.

Private sector

61. Vision 2020, launched in 1997, articulates the government’s long-term development goals, which ultimately will transform The Gambia into a financial center, a tourist paradise, and a trading, export-oriented agricultural and manufacturing nation, thriving on free market policies and a vibrant private sector. To these ends, the authorities seek to improve the business environment by streamlining the bureaucratic procedures and providing economic incentives through tax allowances, with a view to attracting foreign direct investment (FDI).20 Linked to these broader objectives, the authorities also intend to accelerate the privatization process to increase the competitiveness of the Gambian private sector. Most important to the poor, the government intends to support the development of micro- and small-scale businesses and institutions providing credit and savings schemes. In this context, the authorities plan to restructure the Indigenous Business Advisory Services (IBAS), established in 1976 as a government institution to implement the government’s plans to attain its microfinance and informal sector development objectives. Lacking financial backing, IBAS could not accommodate the expanding credit needs of its members, and without sufficient collateral and adequate business operations records, the informal sector’s access to the formal financial system is very limited. This development thus severely hampers the growth of this sector, which has greater potential in terms of employment generation. The IFAD project, which aims to improve access to credit in the agricultural sector, is expected to contribute significantly to the expansion of credit to the segment of the population that is currently not benefiting from the formal financial sector.

Rural development

62. Given the rapid urbanization in recent years, which has burdened social systems in the cities and deprived the rural areas of skilled labor, a high priority in government poverty policies is to provide the rural population with the incentives to remain in the rural areas. Unfortunately, the better quality of social services and better opportunities in urban areas compared with the harsh life in the rural areas tends to worsen the problem of rural-urban drift. For example, while the share of the urban population with access to safe water and health services is 97 percent and 95 percent respectively, the comparable figures for the rural areas are 85 percent and 50 percent. To reverse these trends, the government aims to enhance the pace of rural development by providing access to safe water, education, health, and communications to 50 percent of the rural population by 2000, and 75 percent by 2004. This is expected to moderate the rate of urban population growth from 6 percent to 5.4 percent by 2004. Programs that have greater potential to enhance rural incomes include the rural electrification project, covering 64 towns and villages; the rural water supply and sanitation project, constructing 45 new wells and installing 19 hand-pumps; and the construction of a number roads with the help of foreign donors. Revitalizing river transportation could also provide groundnut farmers with better opportunities to deliver their product to the markets along the coastline and thereby increase rural earnings. In addition, the opening of a referral hospital at Farafeni in the North Bank region and plans to build four regional courts represent a positive step toward reducing the rural-urban imbalances in the provision of infrastructural, social and legal services.

Local government

63. The new constitution (1997) provides a strong foundation for decentralization by proclaiming that “local government administration in The Gambia shall be based on a system of democratically elected councils with a high degree of local autonomy”21 (Chapter XV, section 193(1)). It further states that “The State shall be guided by the principles of decentralization and devolution of Government functions and powers to the people at appropriate levels of control to facilitate democratic governance” (Chapter XX, section 214(3)). Vision 2020 specifically goes a step further and promises that the government shall pursue an intensive political and institutional decentralization process, so as to contribute to poverty alleviation and diffuse the different socioeconomic tensions. To increase local participation in decision making, the Governance Policy Framework lists decentralization of local government systems as one of its six key policy objectives. The policy seeks to achieve: (i) devolution of central government functions to the divisional level; for example, establishment of divisional health teams and regional education offices; and (ii) the transfer to autonomous elected local governments of the responsibility for devolved functions and associated authority, power, and resources.22

Governance policy framework

64. The Governance Policy Framework (formulated at a series of workshops on Good Governance and Public Administration Reform held since 1997, including a July 1999 workshop assisted by the United Nations Development Program (UNDP) was adopted by the cabinet in October 1999. It provides a comprehensive national program for establishing and strengthening democratic and administrative institutions and processes in The Gambia, and enhancing the participation of the Gambian people. The program will be implemented through six strategic and integrated components (see Box 8). Civic education is specifically targeted to the poor, so that they can participate effectively in economic development and become aware of their political and legal rights protected under the constitution. Likewise, the reform of legal and judicial processes could remove impediments to access to the courts, especially by those affecting the poor.

Governance Policy Framework: Key Objectives, and Expected Outputs and Programs

Reform of Parliamentary Structures and Processes

Improve the capacity of the members of the National Assembly to effectively oversee the Executive and represent the electorate.

Provide infrastructural and logistical support to the National Assembly.

Review of Constitutional and Electoral Processes

Enhance free political activity in The Gambia and public awareness of the electoral process. Strengthen the capacity of the Law Reform Commission to implement Constitutional reform.

Civic Education

Strengthen civic education to address equal opportunity and other political rights protected under the Constitution.

Develop communications strategy aimed at reaching all Gambians including the majority of adults and women who are functionally illiterate. The civic education communications strategy will link the country’s traditional media systems with community and private radio stations, so as to assist in the development of civic education institutions, and strengthen their material and human resource capacities. The program will be decentralized from the National Council, down to Regional/Divisional Committees, District Committees and Village Committees.

Decentralization of Local Government Systems

Decentralization of the local government system is expected to increase local participation in decisionmaking. The program has adopted a two pronged approach. First is the devolution of central government functions to the divisional level, e.g., establishment of Divisional Health Teams and Regional Education Offices. Second will be the transfer to autonomous elected local governments of the responsibility for devolved functions and associated authority, power, and resources. The functions to be transferred to local government authorities are aimed at improving the quality of municipal services such as waste disposal, local tax collection, provision of secondary roads, public markets and car parks, recreation and schools.

Reform of Legal and Judicial Processes

The existing court structures and processes also need improvement to remove impediments to access; improve and simplify court procedures and processes; strengthen the institutional and human resource capacity of the Department of State for Justice; and strengthen the capacity of the Law Reform Commission to constantly review and modify legislation.

Public Management and Administrative Reform

Capacities to perform core government functions, particularly those concerned with policy formulation, enforcement of the Civil Service Code of Conduct and performance evaluation will be strengthened. Accounts and audit reports will be made available for public scrutiny. In particular, transparency will be vigorously pursued as a protection against government error, misallocation of resources, and corruption.

Source: The National Governance Policy Framework, June 1999.

References

  • Department of State for Agriculture, 1998, Public Expenditure Review, The Republic of The Gambia.

  • Department of State for Education, 1998, Public Expenditure Review, The Republic of The Gambia.

  • Department of State for Health, Social Welfare and Women Affairs, 1998, Public Expenditure Review, The Republic of The Gambia.

  • Office of the President, 1999, The National Governance Policy, The Republic of The Gambia.

  • Office of the President, 1998, Revised National Population Policy for Socioeconomic Development, The Republic of The Gambia.

  • Office of the President, 1992, The Strategy for Poverty Alleviation, The Republic of The Gambia.

IV. Public Social Policies and budgetary Spending in The Gambia: Do the poor benefit?23

A. Introduction

65. The preceding chapter described the various government policies, strategy and programs designed to alleviate poverty. The most important question is whether these programs have a significant impact on poverty reduction, or rather, whether these programs benefit the poor. According to Castro-Leal, and others (1999), public subsidies for social services (education and health) generally rest on two basic policy objectives, namely, equity and efficiency. Efficiency gains are realized when the subsidy produces external benefits or corrects market failures, whereas spending on social sectors is generally viewed as a potent tool to combat poverty alleviation. It is generally agreed that changes in human capital due to investments (both physical infrastructure and the requisite personnel) in education and health improve people as productive agents and yield a continuing stream of benefits in the future. This message has been taken to heart by many governments, as indicated by large expenditure allocations for social programs, in particular health and education.24 This section assesses the extent to which public spending on social sectors—education and health—have benefited the poor in The Gambia. This section relies to a large extent on public expenditure review (PER) reports in health and education which were conducted with the assistance of the World Bank in 1998. On the basis of the PERs, the government fine-tuned its social policies—namely the Third Education Policy and the Health Policy—so that they better target the poor through expansion of basic education and primary health care, as well as improvement of opportunities for the poor to access to these programs. The rest of the chapter is organized as follows: sections B and C cover the health care delivery system and education system, respectively; and section D discusses the social spending and the macroeconomic environment.

B. Health Care Delivery System in The Gambia

66. Formal health care in The Gambia is generally provided by the government, as well as by NGOs and private practitioners. In addition, there are a large number of private pharmacies, drug sellers, and traditional medical practitioners. The health care delivery system in The Gambia can be classified into three categories: primary, secondary and tertiary. Primary health care is the lowest level of health delivery, and it consists of village health posts and maternal and child health outreach clinics, managed and financed by the communities.25 About two-thirds of the population lives in villages serviced by a trained health worker or birth attendant. At the secondary level, dispensaries and health centers provide basic health services, and they are usually manned by enrolled nurses.26 The tertiary health care system is supported by three hospitals: (Royal Victoria Hospital, the main referral hospital for the country with specialist services based in Banjul; Basang Hospital, serving as a referral hospital for the eastern half of the country, with a catchment area of 345,000 people; Farafeni Hospital in the North Bank Division, with a catchment area of about 200,000 people. A fourth referral hospital is planned for the greater Banjul area.

Access to health facilities

67. The Gambia adopted a primary health care (PHC) program in 1978, which aimed among other things at an equitable redistribution of health services in favor of the poor. Under the PHC program, access to health care improved substantially, and it is estimated that about 90 percent of the population now live within 7.5 kilometers of a health facility, and about 80 percent of the villages have a PHC program. Despite the increased access to health care, there is a large number of persons who do not seek medical consultation at all. Among the factors contributing to nonconsultation include the long distance to health facilities, cost of consultation, and long waiting time.

68. Generally, the quality of health care services improve as one moves up the ladder from minor health care centers, to major health care centers and referral hospitals. Accordingly, resource allocations, including the number of personnel, tend to increase significantly with the progression to the referral hospitals. In 1997, of 128 doctors employed in the government health services, 77 percent worked in the tertiary subsector, and 20 percent in secondary subsector, and none worked directly with the primary level of health delivery system. The referral hospitals absorbed the larger share of personnel, with 58 of the doctors working at the Royal Victoria Hospital alone. Of the 1,757 employees at the technical level and above, 38 percent worked at the two referral hospitals (Royal Victoria and Bansang).

69. The 1998 Household Survey revealed that access to health facilities differs widely by geographical location and, to some extent, by income. In the greater Banjul area, a significant number of consultations are at the secondary and tertiary levels of the health care delivery system, with about 38 percent and 56 percent of workers consulting doctors and midwives/nurses, respectively. Even among the lowest-paid group of workers, those employed in the informal sector, a significant majority consulted a midwife/nurse (54 percent); 34 percent consulted a doctor; and only 3 percent were treated at the primary health level. This outcome suggests that the referral system was not being effectively utilized, which, in turn, is likely to exert pressure at the top end of the health delivery system, while leaving the resources at the primary health care level idle. One possible explanation for this could be the lopsided allocation of resources to the tertiary health care system, which suggests that there is a severe shortage of medical supplies at the lower levels of health care. Thus, many people are likely to view going to such facilities as a waste of time. In the rural areas, there appears to be a more widespread use of village health workers than in the urban areas.

Health care costs

70. The average annual per capita expenditures (shown in Figure 10) on various health facilities indicate that it costs about eight times more to be treated at a private hospital than at a public hospital, while a private clinic is more than three times costlier than a publicly supported health center. On a regional basis, health costs between public and private hospitals diverge significantly, especially in the urban areas; for example, in KMA27, the private hospital costs D 372 compared with D 16 for a public hospital.28 The differences in the costs between private and public health facilities seem to be less significant in the poorer regions such as the Lower River, Central River, and Upper River, where the per capita cost of private hospital is on average three times less than in public hospitals.

Figure 10.
Figure 10.

The Gambia: Health Statistics, 1998

Distribution of Persons Not Seeking Medical Consulations, by Reason and Poverty Status

(In percent)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig10a

Average expenditure on health consultations

(In dalasis)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Source: Strategy for Poverty Alleviation Coordinating Office (SPACO), 1998 National Household Poverty Survey Report.

71. The Public Expenditure Review of the Health Sector (1998) shows that total per capita health expenditure29 peaked in 1992/93 at US$ 25, and has since been on the decline, largely as a result of reduced external donor contributions from 1994/95; donor health expenditure as a share of total health expenditure fell from 35 percent in 1992/93 to 25 percent in 1998 (see Table 5). However, government’s allocations to the health sector rose from 23 percent as share of total health expenditure in 1992/93 to about 26 percent in 1998. Household health expenditures continued to contribute the bulk of the total expenditure30.

Table 5.

The Gambia: Total Health Expenditure, 1991/92-1998

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Source: Public Expenditure Review of the Health Sector, 1998; Staff Estimates.

Despite the increases in government health expenditure, per capita health expenditures have not been able to keep pace with the high rate of population growth. The per capita health expenditure in The Gambia averaging US$23 is significantly higher than the amount of US$12 that is considered necessary to sustain an efficient health delivery system that provides a minimum package of basic health services (World Development Report of 1993).31 Available data on the functional allocation of total expenditures indicate that the total expenditure (government and donor) to the primary and secondary health care delivery average about 40 percent, while the remainder is shared equally between administration and the tertiary health care delivery system.

Who benefits from health expenditure?

72. From the available data, it is quite clear that a large part of government expenditure, including personnel allocations have been directed toward the tertiary health care delivery system. More significantly, this runs contrary to the stated objectives of the government’s policy of the PHC program, including the referral system. The likely outcome of this expenditure pattern is that enormous pressure builds at the top end of the health delivery system, while leaving idle the resources at the primary health care level. However, recent efforts to redirect government expenditure to primary and secondary health care system represent a positive development, especially for the poor, who are the main users of the health services at this level.

C. The Structure of the Education System in The Gambia

Introduction

73. In order to make a better quality of life accessible to all in The Gambia, the authorities have identified a number of areas of intervention, of which the provision of education for all forms one of the most important components of the development agenda. In this context, in 1998 the government formulated a five-year Education Policy Program (1998-2003) to provide access to “education for all.”32 The main objectives under this program are to increase access to basic education (grades 1-9) for pupils aged 7-15; improve the quality and relevance of education; and increase enrollment rates for girls, in view of the small number of women represented in the employment (formal and informal), political, and other spheres of life in The Gambia, mainly owing to high illiteracy rates among women. To facilitate the transition from a six-year to a nine-year basic education, the government began phasing out the Primary School Leaving Examination Certificate (taken in grade 6) in the 1998/99 academic year in two remote regions (Central River and Upper River Divisions), where enrollment rates have lagged behind other regions (see Table 6 and Figure 11). Box 4 in Chapter III provided a summary of the details of this policy, including the inputs and targets at different levels of the education system.

Figure 11.
Figure 11.

The Gambia: Education Statistics

Percentage Distribution of School-Age Children (7-12 Years) Enrolled in Primary School by Poverty Status, 1998

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig11a

Percentage Distribution of Population, Senior Secondary Schools, and Students by Region, 1998 1/

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

A01fig11b

Expenditure on Education, 1991/92-1998/99

(In millions of dalasis)

Citation: IMF Staff Country Reports 2000, 114; 10.5089/9781451815405.002.A001

Sources: The Gambian authorities; and staff estimates.1/ Greater Banjul (GBL); Western Division (WD); North Bank Division (NBD), Lower River Division (LRD); Central River Division (CRD); and Upper River Division (URD).
Table 6.

The Gambia: Education Statistics, 1991/92-1998/99 1/

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Source: Department of Education, Education Statistics, various years.

Academic year.

Access to, and participation in, education

74. In 1998/99, a total of 197,172 pupils were in school (79 percent in grades 1-6; and 17 percent in grades 7-9; while only 6 percent attended senior secondary school). The number of schools providing instructions at the primary school level in 1998/99—331—far outnumbered those providing lower and senior secondary education (62 junior secondary schools and 23 senior secondary schools). The government owns about 90 percent of the primary schools, 60 percent of the junior secondary schools, and only 15 percent of senior secondary schools. Senior secondary education has traditionally been provided by mission schools, which owned 11 of the 20 senior secondary schools registered in 1996/97. Private schools (excluding mission schools) account for about 8 percent of total students enrollment.

75. Post-secondary education consists of teacher training, agriculture, livestock, public health, nursing, midwifery, management, accounting, construction, engineering, computing and commercial studies. It is offered at three institutions (The Gambia College, The Gambia Technical Training Institute, and the Management Development Institute). The University of The Gambia was inaugurated in 1999; currently, it does not have a separate campus, and the departments are spread across the three tertiary institutions. On average, about 10 percent of senior secondary school graduates continue on to tertiary education.33

76. Providing education for all is the cornerstone of the Third Education Program. In order to increase enrollment rates, a few policy initiatives were taken, including hiring new qualified teachers, constructing classrooms, introducing double shifts and multigrade teaching, and stepping up the training of teachers. About 72 percent of the teachers at the senior secondary level in 1998/99 were expatriates, mainly from Sierra Leone, and once political stability has been restored in that country, they are likely to leave.

77. Reflecting the above policy initiatives, including increased government expenditure allocations to the education sector in recent years (see below), enrollments increased substantially at all levels of education. Between 1996/97, the year before the policy was launched, and 1998/99, enrollment at the junior secondary level recorded an increase of about 40 percent, followed by 13 percent for primary school and 12 percent for senior secondary school. Girls’ enrollment rates, however, witnessed only a slight increase over the 2-year period, accounting for 46 percent, 41 percent, and 36 percent, respectively, of total enrollment in primary school, junior secondary school and senior secondary school. These improvements were achieved as 44 new schools and 653 new teachers were hired; while the number of unqualified teachers was reduced by 14½ percent and now accounts only for 26 percent of total teachers in 1998/99.

78. Two measures used to assess the strengths and weaknesses of the school-age system in terms of enrollment are the gross enrollment ratio (GER) and the net enrollment ratio (NER).34 The GER at the junior secondary school level increased tremendously, rising from 31 percent in 1995/96 to 40 percent in 1998/99; the GER for primary schools increased by 3 percentage points to 73 percent; and the GER for senior secondary schools remained virtually unchanged at 16 percent. The NERs in 1998/99 were 61 percent for primary school, and 22 percent and 8 percent, for junior and senior secondary school levels, respectively. There were no improvements in the efficiency ratios,35 as reflected in the lack of change in the number of pupils per teacher, which remained at 33 in primary schools, 26 in junior secondary schools, and 21 senior secondary schools. The policy aims to raise these ratios from 30:1 to 45:1 in primary schools and froml7:l to 36:1 in junior secondary schools by 2003. Double-shift and multigrade teaching also increased enormously during 1998/99: by 15 percent in primary schools, 31 percent in junior secondary schools and 12 percent in senior secondary schools. In addition, the reduction in school fees at the secondary school level, as well as the elimination of examination fees for grade 6 in two regions, had a positive impact on enrollment in 1998/99.

79. Despite the recent improvements in the overall education ratios, the authorities still face the monumental task of reversing the underinvestment in the education sector, especially at the secondary level, as well as of addressing the regional disparity problem, in order to consolidate the current gains. The enrollment patterns discussed above reflected the serious bottlenecks at the top end of the education system. Because of a high percentage of dropouts and repeaters in grade 6 (about 21 percent of total enrollment), only about 63 percent of the pupils who were enrolled in grade 6 in 1997/98 continued on to grade 7 in 1998/99. The transition rates from the junior secondary school level to the senior secondary level are even lower. This shows that despite the gains made in accommodating a large number of pupils at the lower levels, transition to higher grades has been extremely constrained by the limited number of schools offering higher education. In these circumstances, the education system produces a large number of inadequately trained graduates (from grades 6 and 9) who face stiff competition on entering the labor market, the requirements of which have risen over the years.

80. The 1998 PER report notes that secondary education in The Gambia enrolls only 16 percent of the school-aged population, compared with 25 percent for sub-Saharan Africa. Moreover, the problem is further exacerbated by the highly uneven distribution of senior secondary schools in the country, with about 70 percent located in urban areas. The remaining four regions have six schools, accommodating only 2,700 students, although these regions account for 55 percent of the total school-aged population. Therefore, 34 percent of the urban children have access to secondary education, but the school system can only accommodate 6 percent of the children from outside Banjul.

Who benefits from education expenditure?

81. Total public expenditure on education increased from 4¼ percent of GDP in 1997 to about 614 percent in 1999, reflecting an IDA-funded project, that raised over the same period, the share of externally funded development expenditure in this sector from about 0.6 percent of GDP to 3½ percent. The distribution of public expenditure on education by sector reveals that primary education absorbs about 40 percent of the expenditures, with the secondary education receiving 20.4 percent, and allocations to the tertiary level of education accounting for 18 percent of public expenditure (see Table 7 and Figure 11). However, on a per capita basis, the pupils in secondary and tertiary education receive the bulk of government expenditure, suggesting that raising enrollments in upper classes could improve equity and cost-effectiveness of expenditure on education.

Table 7.

The Gambia: Expenditure on Education, 1991/92-1998 1/

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Sources: The Gambian authorities, and staff estimates.

Until 1996/97, fiscal year (July-June); from 1997, calendar year.

82. According to the estimates provided by the Education Ministry, the costs per pupil in 1997/98 were as follows: D 125 in primary, D 1,240 in junior and D 2,550 in senior secondary schools. The 1998 Household Survey shows that school enrollments are generally biased in favor of more affluent families (as shown in Table 8 and Figure 11). Thus, enrollment rates for children from extremely poor and poor families are generally low both in rich and poor regions. The statistics suggest that government expenditures (in terms of cost per pupil) still accrue largely to the nonpoor compared with the poor, as the latter send a small proportion of their children to school36.

Table 8.

Percent Distribution of School-Age Population (7-12) Enrolled by Region and Poverty Status

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Source: 1998 Household Survey.

D. The Social Expenditure and the Macroeconomic Environment

83. The expansion in social spending called for to achieve the targets in education, health, population, and governance discussed above has far-reaching implications on recurrent expenditure. This section highlights some of the constraints on increased expenditure on social programs, including the targets (see Boxes 4-8 in Chapter III). This section reviews trends in revenues and expenditure, with a view to establishing whether more resources can still be generated to accommodate the rising expenditure demands. In addition, expenditure allocations to social sectors in The Gambia are compared with those of other developing countries.

Trends in revenues

84. As discussed in Chapter I, the Gambian authorities have achieved considerable progress in consolidating fiscal accounts since 1997. Revenue trends show a significant structural break from 1994/95, largely because The Gambia’s dependence on external fiscal budgetary assistance dwindled from about 14 percent of total government revenue in 1993/94, a year before the coup d’état, to 7 percent in 1999. Similarly, import duties also show a gradual decline from about 36 percent of total revenue in 1993/94 to 33 percent in 1999, owing to the authorities’ objective of improving the country’s external competitiveness.

85. Total tax revenue-to-GDP ratio of about 17 percent in 1998, was still lower than the average for sub-Saharan Africa (including other developing regions), suggesting that the authorities may still have some scope to mobilize revenues to meet the higher social expenditures (Table 9). However, taxes on international trade have constituted the bulk of tax revenues. As part of the strategy to improve the country’s external competitiveness, which has thus been achieved through substantial cuts in external tariffs, alternative sources need to be explored to generate additional revenue in the future. Direct taxes (income tax) currently generate an equivalent of 4.1 percent of GDP, which is lower than the average for sub-Saharan Africa. This share has remained relatively constant over the past four years. In this context, efforts need to be directed to generating more revenues from domestic taxes on income and especially consumption by broadening the tax base and improving tax administration.

Table 9a:

The Gambia: Level and Composition of Tax Revenue, Average for 1990-96 1/

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Table 9b.

The Gambia: Composition of Central Government Expenditure on Education and Health, Average for 1990-96 1/

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Source: Pierre-Richard Agenor and Peter J. Montiel, 1996, and staff calculations.

Regional averages are unweighted.