Dr. Ousman Gajigo
There is a fiscal emergency unfolding in The Gambia, and too few people are talking about it with the urgency it deserves.
The country’s domestic debt now stands at approximately D52 billion – a staggering 36% jump from D37 billion just 4 years ago. On its own, that number is alarming enough given the size of the GDP. But the real danger is not simply the size of the debt. It is the structure of it, the conditions under which it grows, and what it is quietly doing to the economic future of every Gambian.
Let us be direct: this debt is unsustainable. And the consequences of ignoring that fact will be felt not just by policymakers in Quadrangle, but by every small business owner, every young entrepreneur, and every family hoping for better economic opportunities in the years ahead.
THE CROWDING-OUT CRISIS NOBODY IS NAMING
When the government needs to borrow money domestically, it goes to commercial banks and other financial institutions. To convince them to lend, it must offer attractive returns – and that means higher interest rates on treasury bills and bonds. By the end of 2024, government treasury bill rates had climbed to 14%. Think about that figure for a moment.
The problem is straightforward: money is finite. When commercial banks pour their capital into financing government debt – and in 2024 they held a remarkable 70% of the total domestic debt – there is simply less left over for everyone else. The private sector, the engine of job creation and economic growth, gets pushed to the back of the queue. This is what economists call “crowding out,” and The Gambia is experiencing it at a scale that should trigger alarm across government and civil society alike.
The data tells a damning story. The Gambia allocates one of the lowest shares of financial resources to its private sector as a proportion of GDP in the entire ECOWAS region – second only to Sierra Leone. In a regional neighborhood that includes some of the world’s least financially developed economies, we are nearly at the bottom. Our private sector is not just underfunded; it is starved.
SHORT-TERM THINKING, LONG-TERM PAIN
The composition of the debt makes matters worse. Nearly half (49%) of domestic debt at the end of 2024 was short-term, meaning it matures in less than a year. This is not sound fiscal management; it is a treadmill. The government is perpetually rolling over debt, refinancing obligations before the ink is barely dry on the last agreement. This creates a constant pressure that makes it extraordinarily difficult to reduce borrowing levels, even when the political will exists to do so.
Governments that are trapped in cycles of short-term debt refinancing lose fiscal flexibility. They cannot easily redirect funds toward development priorities because a significant portion of their financial attention (and budget) is consumed simply by keeping the debt machine running. The Gambia is caught in precisely this trap. In our annual budget, you can see this from the high percentage of recurrent expenditures compared to development expenditures.
WHEN THE INTEREST RATE BEATS THE GROWTH RATE, DEBT ALWAYS WINS
Here is perhaps the most damning arithmetic of all. For debt to be sustainable, a country’s economic growth rate should, over time, outpace the interest rate it pays on its borrowing. If the economy grows faster than the cost of debt, the debt burden shrinks relative to the size of the economy. If it does not — if interest rates persistently exceed growth rates – debt grows on its own, independent of whether there is even a budget deficit.
In The Gambia’s case, the average interest rate on domestic debt is far higher than the economy’s growth rate. This means we are locked in a dynamic where the debt expands continuously and automatically, even in years of reasonable fiscal discipline (which are rare). We are running uphill on a slope that keeps getting steeper.
THE COST OF BORROWING WITHOUT INVESTING
There is one further dimension that deserves scrutiny: what is all this borrowing actually financing? Debt, in and of itself, is not inherently destructive. Governments borrow to build infrastructure, invest in human capital, and stimulate productive economic activity. High debt can be justified when it finances high-return investments that generate growth greater than the cost of the debt itself.
But the evidence does not suggest that The Gambia’s government borrowing is predominantly directed toward high-return, productivity-enhancing investments. When you borrow heavily, crowd out the private sector, accept punishing interest rates, and do not channel those resources into transformative economic activities, you get the worst of all possible outcomes: high debt, low growth, and a private sector too financially starved to compensate. As mentioned above, The Gambia annual budget heavily dominated by recurrent expenditures, as opposed to capital expenditures.
WHAT NEEDS TO CHANGE
The path forward requires more than fiscal tinkering. It demands a serious, sustained commitment to lengthening the maturity profile of domestic debt to reduce rollover pressure. It requires deliberate policy action to bring interest rates down to levels that do not automatically guarantee debt growth. Most critically, it requires a fundamental rethinking of how the government finances itself – reducing its dominance in the domestic financial market so that commercial banks can actually do what they are supposed to do: fund the businesses and entrepreneurs who generate growth and employment. In other words, a better public finance management
The Gambia is a small, open economy with immense potential. But potential means nothing if the financial system that should be channeling resources toward its realization is instead occupied with propping up government debt at 14% interest rates.
This is a crisis that demands honest acknowledgement, urgent policy reform, and a national conversation that goes far beyond budget speeches. The debt is growing. The private sector is gasping. Our economy is not going anywhere.
