By Alasana  Njie, The Economics Guy.

I read with interest the New Year message by President Yahya Jammeh. One phrase stood out for me when he made reference to the performance of the Gambian economy in 2009. In drumming up the so called ‘resilience’ of The Gambian economy, he lamented that the country is not deeply affected by the 2007/09 global economic and financial crisis ‘since its economy was not dependent on international financing’. He further went on to say ‘I will never accept stock exchange in this country’.  What an ignorant buffoon!

Clearly this guy either has absolutely no understanding of the economics of The Gambia and indeed that of the global economy or his buffoonery is taking to news heights. To try and mislead the country that the Gambian economy is ‘resilient’ is not only an insult to the intellect of the masses but also an indictment of his level of ignorance. The Gambian economy resilient? What was the recently announced budget overspent of D61million is all about? What is the recently announced tax increases on the most important staple food (rice imports) in the country all about? Hang on a minute; if The Gambia is that detached from the global economy as president Jammeh tries to portray, why is government finances suddenly in a mess? The reason is simple, The Gambia depends on the worst kind of international financing even for her budget basics; Foreign Aid. It was always the case that once this crisis feeds from the financial sector to the real sector, the transmission mechanism and for that matter, the impact on developing countries like The Gambia will mainly come through AID. A basic econometric model of the Gambia’s main financing sources can arguably be summed up as follows:

Foreign aid, remittance from diaspora Gambians and import levies are heavily linked to the international economy. Of these, foreign aid is the biggest source. The global economic crisis, if any thing, has more exposed the financial vulnerability of the Gambia, than showing resilience. This is because all the above variables were affected, thus the D61million budget overspent, the tax increases on RICE IMPORTS amongst others. This is what Gambians depend on daily to feed their children, majority of whom are becoming increasingly malnourished. Let’s look at Gambia’s dependence on foreign aid. According to Moyo (2008), Gambia depends on aid for almost 90% of its financing needs. Total Official Development Assistance from recent data has seen it peak at $65.2 million in 2004, falling to about $56million in 2005 and this downward trend continued in the lead up to 2006/07 crisis. And for arguments sake, the recent appreciation of the Dalasi against the major currencies has nothing do with the Gambia’s resilience but more to do with the economics of these major countries. But despite the appreciation of the Dalasi in the currency market, food price inflation has seen in double digit rises and with the increases on taxes on RICE IMPORTS, Gambians are in for a very tough period ahead. Some of National Assembly members crying about sensational newspaper headlines should be worried about the hardship of the people they are meant to represent than news paper headlines. The Gambia has always been a net consumer as reflected in our time series Balance of Payment Current account.  Following Jammeh’s take over, the 1995 net current account balance according to IMF data denominated in UDS was $-8,194,990millions but by 2005, this has risen to £-50,436,300million. This was a period overseen by Jammeh’s government over a period of 15years and prior to the global economic and financial crisis. Where is the food export The Gambia is supposed to be making coming from. Gambians need to be fed first instead of trying to involve them in political buffoonery.

Coming to the issue of stock exchange. ‘I will never allow a stock exchange in this country’ said Jammeh. Clearly this guy thinks the global financial crisis is because of the existence of stock exchanges and that avoidance of having a stock exchange in The Gambia is what is needed to shield it from such global crisis. Well the D61 million budget overspent of the government proves otherwise. First of all, research upon research has shown that stock exchanges have a positive influence on economic growth. But the fundamental issue is, Collateralised Debt Obligations, that were at the centre of global financial crisis have nothing to do with stock exchanges per se. These are off balance sheet financial instruments and as such, have no direct connection with stock exchanges. It was the off balance sheet activities of the listed players around the world that exposed them to these instruments not because of their participation on stock markets or exchanges for that matter. It is perfectly possible to set up a stock exchanges to improve financing in the country without involving collateralised debt obligation instruments. Regulatory failures rather than stock exchanges contributed to this crisis. Nigeria and Ghana should be examples to President Jammeh. These countries have stock exchanges, but was there a collapse of their financial system because of the global financial crisis? The answer is NO, because there were no exposures of their listed companies to collateralised debt obligations in the international markets and these countries are perfectly benefiting from more and effective sources of financing for businesses and their governments.

For this buffoon (Yahya Jammeh) to sit in front of the Nation saying ‘I will never allow a stock exchange in this country’ shows his absolute lack of understanding of these issues. This guy will ignorantly deny The Gambia the immense benefits of stock exchanges.

I really feel sorry for my beloved country.

Alasana Njie, The Economics Guy.