Debt Payments Consumed Over a Quarter of 2024 National Budget

President Barrow and Finance Minister

By Edward Francis Dalliah,

As the government struggles to balance revenue collection and expenditure, a concerning trend persists with debt servicing continuing to consume a substantial portion of the national budget. According to the latest Budget Performance Report from the Ministry of Finance, between January and November 2024, debt payments accounted for 28% of total government expenditure (GLF).

To finance its budget deficit, the government relied heavily on domestic borrowing and the Extended Credit Facility (ECF) from the Central Bank of The Gambia (CBG). The report reveals that the gross fiscal deficit reached D1.293 billion by the end of November 2024, up from D1.239 billion in the same period in 2023. Additionally, the government faced D2.931 billion in principal debt repayments, further straining its financial position.

Debt Service Dominates Spending

Debt service, which includes both interest payments and principal repayments, totaled a staggering D7.38 billion. This rising debt burden has made it increasingly difficult for the government to balance its budget, with the fiscal deficit exceeding projections by over D700 million.

These growing debt obligations have diverted essential resources from critical sectors such as education and health. The persistent rise in deficit and debt payments signals an urgent need for more sustainable fiscal policies to avoid deepening the country’s financial crisis.

Heading into 2025, debt servicing continues to claim a significant share of the national budget. Delivering the 2025 Budget Speech in Parliament last December, Finance Minister Hon. Seedy Keita announced that D11 billion (23% of the total budget) will be allocated to debt servicing. He further revealed that overall, debt service, including both interest and amortisation, is projected to reach D11.01 billion in 2025, up from D7.5 billion in 2024.

Revenue Growth Overshadowed by Rising Debt Costs

Despite a positive trend in domestic revenue collection in 2024, the growing burden of debt repayments has exacerbated the fiscal deficit. According to the Ministry of Finance and Economic Affairs (MOFEA), total revenue excluding project grants stood at D21.7 billion by the end of November, representing 84% of the projected D25.9 billion for the year.

While tax and non-tax revenue collection performed well, domestic borrowing and debt servicing have remained significant drains on government finances. In particular, interest on domestic debt surged by 143% year-on-year, rising from D1.5 billion to D3.7 billion. External debt interest, though smaller, also saw a notable 17% increase, further highlighting the unsustainable trajectory of borrowing.

The 2025 Budget Speech also projected a 15% increase in debt interest payments, from D5.11 billion in 2024 to D5.88 billion in 2025. This rise is attributed to a projected 63% increase in external debt interest payments and additional costs from a newly issued 30-year bond.

Fiscal Sustainability Under Threat

With debt interest payments consuming a large chunk of the national budget, the government is left with limited resources to fund essential sectors like health, education, and infrastructure. Despite some gains in revenue collection, the rising cost of debt is putting the government’s development agenda under serious strain.

Looking ahead, the government faces a critical challenge: balancing fiscal sustainability with development priorities. The continued reliance on borrowing to bridge fiscal gaps poses a risk to long-term economic stability, necessitating urgent reforms in revenue mobilization and prudent debt management.

Gaps in Data Hinders Transparency and Accountability

The Budget Performance Report for January to November 2024 contains significant gaps, making it difficult to produce comprehensive analyses of government expenditure. One major issue is the absence of data on expenditures across all funds, including those financed by loans and donor grants. As a result, it is impossible to assess spending from external sources, which is particularly problematic for budget entities like Agriculture that heavily rely on donor funding.

Another key challenge is the lack of a complete list of all budget entities and their expenditures. The latest report only highlights the top ten spending entities instead of providing a full breakdown, limiting transparency and accountability.