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Thursday, 18 October, 2001, 08:31 GMT 09:31 UK
Gambia struggles with economic reform
Banjul street scene
Most of the population relies on the groundnut industry
by BBC News Online's Emma Clark

Presidential elections this week in the Gambia will push the small West African nation into the international limelight.

Already there are mutterings of electoral fraud and possible human right abuses - charges that may discourage the IMF from providing the country with a new loan facility.

President Yahya Jammeh
President Jammeh: 'Lack of discipline'
The Gambian economy is still very much a work in progress, with much of the government's efforts spent on reducing poverty.

President Yahya Jammeh is not known for his disciplined approach and has exasperated international donors by issuing decrees without consulting his administration.

"He has a habit of mandating the construction of hospitals without taking into account the impact on the budget of the government," says one economist, who preferred not to be named.

The government has also committed a series of policy mistakes which have dented its economic progress.

Click here to view the Gambia's Gross Domestic Product

Peanuts

To date, the country has survived largely on its groundnut industry, which provides a livelihood for 70% of the population.

Most of the groundnut crop is processed into peanuts and sold on the international markets.

Last year the country had a bumper year because of good rains, and the Food and Agriculture Organisation expects another good season this year.

Agriculture contributes a third of the country's gross domestic product, generating much of its foreign exchange.

Government dispute

Until recently, however, the Gambia was plagued by problems with marketing its groundnuts to buyers.

A dispute between the government and a Swiss-based company called Alimenta, which controlled groundnut processing and marketing in the Gambia, disrupted harvests between 1998 and 2000.

Groundnut plant
Good rains produced a bumper crop last year

A crisis arose in February 1999 after the government alleged that Alimenta had been involved in money laundering and seized processing plants belonging to the company.

Alimenta challenged the action in international courts, and Gambia has been forced to pay Alimenta $11.4m for lost earnings and investment.

Despite grants from the European Union, the Alimenta payout was one reason why the Gambian government missed IMF performance criteria earlier this year.

Failed scheme

The country's services sector - mainly trade - makes up 54% of GDP.

Like the groundnuts, trade has also had its fair share of problems.

A new scheme in October 1999 to monitor imports into the country and boost customs revenues failed spectacularly.

Banjul
Port of Banjul hit by government scheme

"It made imports more expensive and changed trade routes," says John Arthur, an economist at the Economist Intelligence Unit.

Delays and prohibitive charges merely prompted traders to avoid the Gambian Port of Banjul and ship goods direct to neighbouring Senegal.

As a result, port traffic dropped by 22.5% between December 1999 and January 2000, adds Mr Arthur.

Transit trade, which once thrived before the introduction of the scheme, is only just beginning to recover following the cancellation of the scheme in July.

The Gambia's dependence on these two sectors has left the economy vulnerable to one-off shocks like the Alimenta affair.

Tourism

Efforts to boost other areas such as tourism, horticulture and the export of exotic fruits have been constrained by under-investment, corruption and government red tape.

Montegu Don in hot water springs in Hammat Gader for Summer Holiday programme
Tourism is expected to suffer

In the aftermath of the terrorist attacks on New York last month, tourism is expected to suffer, with the EIU predicting that "it could take time before it returns to pre-2000 levels".

In 1999-2000, 77,488 air charter tourists visited the country - 60-70% of which were British.

The numbers were down from 119,983 in 1998-99 and 90,810 in 1997-1998.

This has been attributed to yet another policy blunder when the Gambia banned all-inclusive holidays over fears that foreign tour operators were taking all the profits.

The ban has since been lifted.

"We have put this behind us now," says Saye Drameh, a senior tourism officer at The Gambia National Tourist Office in London.

Ms Drameh also says that the government plans to give the Office more funds to promote the industry.

She is, however, cautious about the impact of the attacks in the US.

"These events do have a knock-on effect, but we are still having enquiries about holidays in the Gambia.

"Hopefully, things won't turn out drastically because the industry is quite fragile."

Corruption

The uncertain political climate since President Jammeh took power in 1994 with a military coup has kept investors and entrepreneurs at bay.

"Corruption is rife and government is significant issue," says the unnamed economist.

"Many economic activities are held by a clique close to the government."

This week's elections are not expected to bring any radical changes - most observers believe the current president "already has it in his pocket".

The question will be whether the IMF holds back on its funding for 2002-2005 if human rights abuses are manifest.

Currently, the government is planning to publish a poverty reduction strategy paper at the end of the year, as part of the bid to win the money.

One of its goals is to improve tax collection and control government expenditure - leaving more money in the budget to combat poverty.

Growth targets

GDP graph

The country's GDP growth rates have been over 5% a year since 1999, according to estimates.

The government is forecasting growth nearer to 6% in 2002 and 2003, but whether it achieves this will depend upon the success of its poverty reduction plan.

A weak administration and the threat of more political instability do not bode well.

See also:

17 Oct 01 | From Our Own Correspondent
Gambia's election challenge
11 Oct 01 | Country profiles
Country profile: Gambia
04 Oct 01 | Africa
Violence mars Gambia campaign
21 Aug 01 | Africa
Gambia hit by pre-poll fever
01 Sep 00 | Africa
Gambia gets first green light
25 Jul 01 | Africa
Timeline: Gambia
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