Centre for Macroeconomic Studies - CFMS

&_Political_Divides

After the President's State of Nation Address (SoNA), many online analyses of his SoNA have been conducted. Moreover, there have been many policy debates online based on the state of the economy during the past 12 months. The political divides are interpreting the numbers differently. Sometimes you are tempted to write to address some wrong interpretations of these macroeconomic variables, but your job restricts you, but I will not let this one slide.

I am not here to convince or side with you (I am not that type of writer). I am here to share some toolkits with you on how to evaluate these macroeconomic numbers.

Based on my own online reading, the three most misunderstood macroeconomic variables in The Gambia within the past twelve months are:

1. Economic Growth
2. Inflation
3. Public Debt/Budget Deficit

I am not surprised that there has been a lot of debate around these macroeconomic variables. If a country's political market is matured, politicians engage each other based on these macroeconomic variables, and electorates vote based on these variables. So the debate around these three variables in The Gambia shows that even though there is little to be desirable in our political market, we are getting there: from politics of identity (tribe, religion, region, age, profiling etc.) to politics of ideas (growth, inflation, public debt, unemployment etc.).

Economic growth means the country's pie/ food basket is bigger. Economic growth is "always" good even though is not the perfect measure of well-being, and sometimes can lead to inequality if it is not managed by policy tools. When you are confronted with an economic growth number, ask the following questions?

Q1: is the growth inclusive? how does it affect the vulnerable groups in the society? so the national pie/ food basket is bigger, but does this mean a bigger pie for everyone?

Q2: is the growth green? is it damaging to the environment?

Q3: is the growth sustainable? how does the growth affect future production and consumption?

The best economic growth is the growth that achieves these three dimensions. However, I never come across a country where these three dimensions are met (please let me know if you know one).
Economic growth should be Sustainable, Inclusive, and Green ( ). Therefore, the fundamental question is: the 5.3 percent growth in 2023 is it SIG?

Everyone has their own biases and personal leanings, but using SIG criteria as a method of evaluating public policies or economic performance can aid in reducing these biases and personal leanings.

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When time permits me, I will do similar write up for inflation and public debt/ budget deficit.

Countries that have successfully lifted millions of people out of poverty in the last 50 years began their transformation with reforms in PUBLIC FINANCIAL MANAGEMENT (PFM). The frequent reports of mismanagement of public funds in the news highlight a need for reform in the PFM environment. If you do a root cause analysis on any problem a nation is facing, you will trace it back to how it manages its resources (PFM). I have previously mentioned that The Gambia will never bridge the divide between our current state and its full potential without robust public financial management. Currently, there is no priority more important that reforms in the PFM.

There are two categories of writers when it comes to examining the socioeconomic situation of The Gambia:

Writer 1: Authors who aim to persuade you to adopt a specific belief system. They are of the opinion that you are taking the wrong stance in the discussion, hence, they strive to persuade you.

Writer 2: Writers who do not seek to persuade you, but rather to assist you in questioning everything you have learned from the beginning until now regarding the socioeconomic situation of The Gambia. Their goal is not to impose what is "right or wrong" on you, but to equip you with the necessary tools to pose the correct questions in order to obtain the correct answers.



Author: Alfusainey Touray

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Throughout the past 8 years, my focus has been on enhancing the operational efficiency of various companies with the primary objective of maximizing profits or improving service delivery. When tasked with streamlining a company's processes, the initial step involves analyzing the financial statements, including the balance sheet, income statement, and cash flow. A strong financial acumen enables one to pinpoint the root causes of underperformance. However, financial statements alone do not provide insights into the workforce's skill set, workplace environment, management practices, reward systems, employee motivation, and other non-financial factors that influence productivity. As a productivity specialist, it is imperative to delve deeper beyond the financial figures. In cases where profit margins are low, understanding both financial and non-financial factors contributing to the issue is crucial.

From my experience, I have come to realize that the Human Resources Department (HRD) plays a pivotal role in determining a company's success in the market. The performance of a company or institution hinges on three key elements:
1. Human Resources Department (HRD) - "The farm managers"
2. The Workers - "The Seeds"
3. The Working Environment - "The farmland"
A misstep in the HRD can lead to subpar seeds and an inadequate farmland, ultimately affecting the quality of the product or service offered. Therefore, when optimizing or restructuring a company or institution, the first area of focus is always the HRD. You must get HRD right!

To boost productivity, all three elements - HRD (farm managers), workers (seeds), and the working environment (farmland) - must operate at their peak efficiency. Hiring skilled workers (seeds) is not sufficient if the working environment is not conducive, as it will impact the output of each worker. Just as a Ferrari cannot achieve its optimal speed on a poor road, a company's performance is heavily reliant on the interplay between these three critical components.

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1. The Gambian economy growth is driven mainly by service sector (tourism sector, distributive trade, financial services etc.) then followed by agricultural sector. An adverse shock to these sectors affect productivity and ultimately economic growth of the country. This in turn affect the level of poverty in the country.

2. The adverse productivity shock (bad weather and climate) in the agricultural sector in 2011 caused low agricultural yield ( see year 2011 in the figure below) and this in turn led to lower economic growth in 2011.

3. Climate change combined with low public and private investments in the productive sectors of the economy are the main cause of low productivity in these sectors.

4. Agricultural sector employs the largest share of the labor force and the most vulnerable people in the society. Thus, to alleviate poverty, there must be direct policy intervention in agricultural sectors more than any other sector. To eradicate poverty, agricultural productivity should be in the forefront in the national development.

Data Source: Gambia Bureau of Statistics
Data Analysis: By Centre for Macroeconomic Studies - CFMS

_the Value_of_your_Currency.

:_The Gambia

If your productive sectors (agriculture, industry, and service) are not efficient and productive, you will resort to importing, which ultimately devalues your currency. This has been the case with the dalasi since the inception of the first regime. The primary concern lies in understanding why the productivity of the real sector (agriculture, industry, and service sector) is exceptionally low.

In order to boost the productivity of the real sectors, it is imperative to ensure macro-fiscal stability (strengthen public financial management). Failure to do so will result in a lack of necessary funds for private investment, ultimately hindering their growth and development. An obstructed real sector leads to an increase in imports of goods and services, ultimately weakening the national currency.

The resolution for this matter can be found in the recently released National Development Plan (NDP 2023-2027). I hope that by 2027, we will witness significant advancements in the real economy sector that will bolster the dalasi.






Author: Alfusainey Touray

The progress of your nation is directly linked to the decision you make at the ballot box. Effective leadership plays a crucial role in mobilizing resources and determining the efficiency of political and economic institutions, which ultimately affects your standard of living. The people of Senegal understand this concept and demonstrated it on Sunday.

During the election, they did not prioritize factors such as tribe, religion, age, or region. Instead, they focused on selecting a leader who could unite them by bridging the divides and improve their quality of life, regardless of their individual identities. Politics is a noble profession if it revolves around the exchange of ideas rather than the division caused by identities such as tribe, religion, region, or age. Voters should be interested in candidates who can bridge divides and elevate living standards.

The people of Senegal have completed the initial phase of the "social contract" by choosing a leadership they trust to bring the nation together and enhance their quality of life. The upcoming phase will determine if the selected leadership fulfills their responsibilities. Only time will reveal the outcome.

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Whenever you face a ballot box, ask yourself this question: which candidate can unite the country and bring about a better development agenda? Look for someone who can provide answers to the "how" questions. Anyone can make promises about what they will do once in office or if they stay in office, but not everyone possesses the knowledge of how to effectively implement those plans.
We have witnessed a surge in calls for Gambian youths to actively participate in politics, which is commendable. However, it is important to consider whether Gambian youths will be able to withstand the political pressures, similar to what happened to Sonko and co when faced with adversity. Will they remain committed when the journey becomes challenging or jump ship? Becoming the president is never an easy ride.





Author: Alfusainey Touray

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The economy of The Gambia will continue to grow if there are no major shocks (bad weather, pandemic, crisis) in the future. However, this growth will not have much impact on poverty alleviation in the country because most of the benefits of these growths will leave the shores of The Gambia. This is because the sector (service sector) that drives growth is dominated by non-Gambian (nothing wrong with this). We need a "just policy" within this sector to ensure that a fair share of the benefit stays in the country.

We need to connect the sectors that drive growth to sectors where most of the underprivileged people are working. The majority of The Gambian labour force works in agriculture. Hence, we need to make sure that the service sector (financial services and tourism) is connected to the agricultural sector.

The financial sector is not willing to extend credit to the agricultural sector or does it at a high interest rate because of asset and liability mismatch. The hotel industry hardly buys products from the agricultural sector due to the issues of quality and standards. The question now is how do we solve this through policy instruments?

If economic growth is not inclusive by reducing poverty and inequality, those who are enjoying the benefits of this growth will always be in danger even in their own house. Thus, economic growth should be , , and ( ). If it is not, policy instruments should be used to correct it.

ECONOMIC PROSPERITY AND INSTITUTIONS IN SUB-SAHARAN AFRICA

QUESTION: What is THE MAIN reason why Sub-Saharan Africa (SSA) even after receiving a lot of grants and being blessed with natural resources has not registered economic prosperity since independence? I was asked this question by a policy analyst. We had an interesting discussion around the topic "ECONOMIC PROSPERITY, RESOURCES, AND GRANTS IN SSA'. I thought it was worth sharing.

My Response: I told him that at the end of the day is not about the number of grants a nation receives from development partners or how blessed they are in terms of natural resources but is about the quality of the economic and political institutions in that country. These institutions determine the multiplier effect of these resources and grants. Grants can only bring economic prosperity and poverty alleviation if only that country's institutional processes are up to standard. If the economic and political institutions are up to standard (correct checks and balances), domestic resources can even engineer the growth process and sustain it. However, if these processes are broken down as they are in SSA, then any effort in terms of resource mobilization for development plans will never bring economic prosperity. This is the reality of SSA.

I have seen many countries within SSA where new governments are eager to call for foreign direct investment and look for loans and development assistance forgetting that the marginal productivity of these financial inflows depends on the economic and political institutions they have. Calling for these financial inflows without getting domestic conditions right, is like putting quality petrol in a fully depreciated car.

If we get our institutions right, even a high school graduate can run them. SSA must build effective and efficient economic and political institutions that ensure accountability if we want financial inflows such as foreign direct investment, loans, and grants to not only generate growth but also alleviate poverty. Hence, the first task of any new government is to measure the effectiveness and efficiency of the domestic institutions in delivering economic growth for poverty alleviation. This is where work should start.

Alfusainey Touray

The Gambia We Want in 2024: The Political Landscape and Political Maturity

We have to accept that within our circles and even within our families there will be people who will have different political ideologies from us. Hence, it should not be about you are either with me or against me, you ride with me or I ride on you. There is a strength in diversity if its handle with maturity and respect for all views. If you believe that your ideas are the best, but more importantly best for the country, then engage the opposite side in a dialogue, convince them why you think they should listen to you, this is how great nations were built. If you don’t believe in the political ideologies of a person just disassociate yourself from his or her views but not from him or her as a person, this is called political maturity. Our love for a Gambian brother or sister should not be based on his/her political ideologies, but should be based on humanity.

In 2024 we must introduce hygiene into our politics. To do this, we have to operate on the following mantras:

1. I WILL LOVE YOU BUT I WILL DISASSCOAITE MY SELF FROM YOUR POLITICAL VIEWS: Our love for a Gambian should be based on humanity, not which political spectrum s/he operates.

2. BE MEASURED IN YOUR WORDS: Be moderate in your condemnation of the opposite views. Our stance on things change for many reasons. Their is so much emphasize in doing things in moderation in our religious books.

3. POLITIC IS ABOUT IDEAS NOT IDENTITY (MARKET FOR IDEAS): Who I support should not be based on "IDENTITY" (s*x, religion, region, tribe, age etc.), but on his or her ability to improve the socio-economic conditions of the people. When a politician hits the stage or speaks, ask yourself the following questions:

Question 1: does s/he talk about policies and programs or attack people's identity (s*x, religion, region, tribe, age etc.)? does his/her words unite or divide?

Question 2: does s/he really understand the socio-economic conditions (poverty, unemployment, inflation, growth, etc.) of the country?

Question 3: What programs does the party have to solve the socio-economic challenges the country faces? how realistic these programs are relative to the resources constraints the country faces?

Ladies and Gentleman, this is how how you choose a leader that can improve your standard of living. This is how we can sanitize our political arena. This in turn will help us to strengthen our social cohesion which has been eroding for longest time.
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Happy 2024

Today's Mantra For You:

Cherish the good moments, because nothing is guaranteed whether is wealth, friendship or whatever kind of -ship it is. A change will knock all of us down, but is not about the change hitting us, but more about how we embrace it, learn a lesson from it, and regroup to continue pursuing your TRUE CALLING in life. Things, situations or people around us will change and this is as certain as death.

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Part 1: Macroeconomic Analysis: The Real Sector of The Gambia

The Gambian economy has been steadily growing since the change of regime in 2016. This has been made possible, among other things, by good macroeconomic policies (fiscal and monetary policies), and the inflow of Official Development Assistance (ODA) from development partners. The economy has grown at an average rate of 4 to 5 percent per year since 2017 [see the figure below], which is good by international standards. However, looking at economic growth since independence, the growth of the economy has not only been low but it has also been volatile. The legacy of low and volatile growth has hindered inclusive and sustainable growth and this in turn affected the poverty alleviation in the country. The fundamental policy question that is occupying the mind of the policymakers is what factors are responsible for the low and volatile growth?

The low and volatile growth is caused by low productivity in the productive sectors of the economy (service and the agricultural sector). The Gambia has one of the lowest productivity levels in ECOWAS region. The low productivity level is a concern because sustainable per capita income depends on the level of productivity of a country which in turn affects the level of poverty in a country. Most research has shown that the difference in the level of income or even poverty level among countries can be attributed to differences in the level of productivity.

Now that we know the cause of low and volatile economic growth in The Gambia is low productivity, the natural question is what causes low productivity? This question will be examined in Part 2 of this series (Macroeconomic Analysis: The Real Sector of The Gambia).

What do you think is the cause of low productivity in The Gambia?

Macroeonomic_Analysis: Sub-Saharan Africa:

In the next decade if not already, policymakers in Sub-Saharan Africa (SSA) will be confronted with three macroeconomic issues:

1 - Sovereign Debt - The public debt level is already historically high, driven by the COVID-19 pandemic and consistent fiscal slippages over the years.

Policy Question: What is the "best" financing strategy? How are we going to finance these debts and still provide basic social services to the people? are we going to finance the debt through a higher tax rate, expanding the tax base, or through incurring more debt?

3 - Energy Poverty - Approximately 700 million people in SSA don't have access to electricity; this has both socio-economic and health implications. Bringing these people to the grid requires a significant amount of public investment. The region's fiscal space cannot afford this kind of investment, and the current market model won't likely step up due to the "perceived risk" by investors.

Policy Question: What financial innovation is needed for investment in renewable and efficient energy systems in the region? A financing strategy that will not make the public debt unsustainable?

2 - Climate Change - Climate change is creating havoc in the agricultural sector of the region. Agriculture continues to be the main employer in the region and is also the sector where you can find the most vulnerable people in society. The sector is suffering from something caused by the industrialized nations. The region is the smallest emitter in the world.

Policy Question: How does the region especially in the agricultural sector mitigate and adapt to climate change? should this mitigation and adaptation be financed by global emitters (climate justice)?

The Gambian Economy- The Real Sector Analysis:

The Gambian economy has been steadily growing since the change of regime in 2016 except in 2020 due to the impacts of COVID-19. This has been made possible, among other things, by good macroeconomic policies (fiscal, monetary, and exchange rate policies) and the inflow of development assistance from development partners. The economy has grown at an average rate of five (5) percent per year since 2017 [see the figure below], which is very high by international standards.

Questions:

1- What factors are responsible for volatility in the growth of the Gambian economy, particular in 2011 in the figure below?

2- What does this volatility in growth means for poverty reduction?

3- What macroeconomic policies [programs and strategies] can be adopted and implemented to reduce volatility in growth?

For more visit: https://alfusainey.wordpress.com/category/the-gambia/

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