IMF World Economic Outlook: COUNTERING THE COST-OF-LIVING CRISIS - My Contribution

In times like these, I wished I had studied economics: In times of great uncertainty and misery, the most significant thinkers known to man made observations about society and how political and economic order is achieved and maintained.

During the industrial revolution, amidst child labour, disease, and extreme poverty, Adam Smith deduced his theory of Classical Economics and expounded the concept of the invisible hand: that in a free market, there is an invisible force that helps maintain equilibrium between demand and supply automatically.

After the First World War, amidst untold suffering and unemployment, John Bernard Keynes came up with his theory of "incentive to invest": that the solution to the Great Depression was to stimulate the country through the combination of two approaches: 1. Monetary policy 2. Fiscal policy. He proposed that the treasury put banknotes in bottles and bury them in mines so that people are paid to look for them just to create employment. I strongly recommend this to my brother and friend BUAH to adopt.

After the second world war, Europe was in complete Ruins; suffering and Starvation led to the creation of the Bretton Woods institutions and the UN. The organizers of this beautiful event. And thanks to them, Great achievements were made that drove millions of people out of Poverty, especially in China and Asia.

In this long introduction, I am trying to explain that people are creative when they are most uncomfortable; in other words, necessity is the mother of invention.

Yet in Africa, despite great opportunities to innovate, despite great suffering and underdevelopment. WE CONSTANTLY SEEK PROBLEMS TO EXISTING SOLUTIONS RATHER THAN SOLUTIONS TO EXISTING PROBLEMS.

The situation that we are currently faced with might be the most existential threat to our social and economic system since the attainment of INDEPENDENCE in 1965.

In the Gambia, we tend to forget the context from which we are coming after years of authoritarian rule. And whilst the gains in human and political rights since 2016 are admirable, these must be accompanied by gains in economic and social lives for our citizens for these changes to be meaningful.

The Gambia has performed better than most countries in the aftermath of Covid-19. Despite the lack of medical infrastructure (soft and hard) and the lack of social safety net, we met the Covid challenge successfully in a spirit of solidarity between the Government, Businesses, and the Community. The same principle should be used and with urgency to the impending current economic depression.

It is a truism that every society produces its own specific vulnerabilities, and our own vulnerability is the low standard of living and poverty of most of our people. The eradication of poverty, therefore, is our ADAPTIVE Challenge,” and We must confront the following immediately together like we did Covid as a community:

1.   High Inflation Rates, especially food inflation affecting the cost of living

2.   High unemployment Rates, especially youth unemployment

3.   Supply Chain constraint requiring a focus beyond Food security to food sovereignty that we produce what we consume

4.   Energy Insecurity amidst the abundance of sunshine

First INFLATION: It suffices to quote the world bank that “The Gambian’s economy is set to decelerate in 2022 due to high commodity and fertilizer prices, supply chain disruptions due to the war in Ukraine, and the annual floods. Inflation reached 12.3 per cent (year-on-year) in July 2022 – its highest level in the last three decades.” I want to contend that the true measure of inflation in the Gambia is directly linked to the depreciation of the Dalasi against the US Dollar (and other currencies).

“In 1985, The Gambia formulated and began implementing one of the most comprehensive economic adjustment programs devised by any country in Sub-Saharan Africa. By 1986, the Gambian economy had begun to turn around, and the economy has continued to expand since then.” The Jawara Government set the foundation for the dramatic recovery of the new The Gambia, which was widely seen as a “basket case". In the wors of Berkeley Rice: Enter Gambia: The Birth of an improbable Nation.  

One of the Pillars of the ERP was the exchange rate policy. That the foreign exchange rate is a MANAGED FLOAT where the exchange rate fluctuates based on supply and demand factors. While the government occasionally intervened in the foreign exchange market as the invisible hand. TODAY THE BUSINESS community is seriously worried about the change of this policy and the return to a fixed rate mechanism that brought the countries to its knees. We strongly that government maintain a floating rate mechanism and endeavour to ensure a real-time calculation of the CBG reference rate.

We propose for the purpose of innovation to look closely at the sources and disposition of foreign currency. It is observable that 40% of imports is destined towards the acquisition of fuel and minerals, mainly from the CFA zone and in this observation, there is a potential solution: Including the re-evaluation of re-export business that has been a key source of hard currency.

Lastly is the issue of FOOD INSECURITY at the household and at the national level. There are two factors affecting food insecurity: first is income which determines our ability to buy food, Second is the world marine situation that constraints seriously the transfer of food from the producing to the consuming countries.

AT the household level, income is constrained mainly by a lack of employment which increasingly creates more poverty and more inequality. Food insecurity cannot be solved by mass production alone but also and more importantly, by production by the masses, and this is our Keynesian moment.

ENERGY INSECURITY: IN AFRICA, WE DON’T HAVE ENERGY INSECURITY WHAT WE HAVE IS ENERGY IDIOCY. Due to dependence on expensive liquid fuels for more than 90% of power generation, Consumers pay a high cost for power in The Gambia – the average tariff of $0.23/kilowatt hour (kWh) is one of the highest in the world. 

We must aggressively encourage the government to adopt: 1. Off-grid and microgrid solutions for rural electrification and 2—introduction of Solar household equipment in the Urban Area.

TO CONCLUDE OUR AFRICA BHAG MOMENT to create INCLUSIVE, SUSTAINABLE, JOB CREATING GROWTH by Invest in growing what we eat and eating what we produce:

THANKS, AND ALWAYS REMEMBER THAT INFLATION, UNEMPLOYMENT, AND POVERTY ARE INTERWOVEN AND INTERDEPENDENT.