BAC public debt and the institutional inheritance question in The Gambia
By Dr Lamin K Janneh
The analytical question should not be framed as, “What went wrong?” There is presently insufficient evidence to conclude that something went wrong.
The more rigorous question is: What has changed between the assumptions that supported the original three-year financing structure and those that now make refinancing a substantial portion of the remaining obligation over a further five years preferable?
If BAC has identified a superior treasury-management opportunity, comparative analysis should demonstrate it. If revenue, expenditure or development priorities have changed, those factors should instead form part of the explanation. Either outcome is legitimate.
What matters is that the second decision is evaluated against the assumptions that justified the first.
D43 million paid: what does the payment history tell us?
The Chairman’s disclosure that D43 million has already been paid is significant. Two separate questions arise from it.
The first concerns funding capacity: Which revenue sources financed the D43 million already paid, and what does that payment history reveal about BAC’s demonstrated capacity to complete the remaining obligation under the original structure?
The second concerns investment performance: What has the underlying investment produced? These questions should not be conflated.
Payment performance tells us whether contractual obligations have been met. Investment performance tells us whether the assets acquired are generating the public value expected of them.
The relevant public-value chain is:
resources → assets → services → outcomes → institutional capability.
The expenditure acquired machinery. The machinery should expand operational capacity. Expanded capacity should improve services. Improved services should generate measurable public outcomes. Those outcomes should strengthen BAC’s ability to perform its municipal functions. Relevant indicators could include fleet availability, collection coverage, service frequency, volume of waste collected, vehicle utilisation, maintenance expenditure, downtime and avoided outsourcing costs. The purpose is not to require a public sanitation service to behave like a commercial enterprise.
It is to establish whether capital expenditure is translating into public value.
A productive public asset need not be self-financing
Waste-management assets illustrate an important distinction between financial appraisal and economic or public-value appraisal. A municipal garbage truck does not have to generate enough direct revenue to repay its acquisition cost in order to justify investment. Its benefits may arise through improved sanitation, expanded service coverage, reduced environmental contamination, lower dependence on contractors, avoided expenditure, reduced public-health risks and improved quality of life. Financial appraisal asks:
What will the transaction cost the Council, and can the Council sustain it?
Economic and public-value appraisal asks: Do the resulting benefits justify the resources committed relative to feasible alternatives?
Where benefits can reasonably be monetised, social cost-benefit analysis can assist that judgement. Where substantial benefits cannot credibly be monetised, cost-effectiveness analysis can compare which feasible option achieves the required service outcome at the lowest appropriately adjusted whole-life cost.
The distinction becomes particularly important when service-generated revenue is included in the repayment model. Once direct revenue is expected to carry part of the financing burden, the credibility of that revenue assumption becomes material to the financial appraisal. The Gambian local-government experience already provides a useful domestic comparator.
What KMC’s Mbalit experience should teach us
Kanifing Municipal Council’s Mbalit project should not be used as evidence about BAC, nor as a prediction of BAC’s outcome. Its value is as a domestic comparator showing why repayment-source assumptions matter in municipal asset finance. KMC ultimately reported completing repayment of the approximately US$2 million financing associated with the project and assuming full ownership of the vehicles. That outcome deserves recognition.
Later testimony before the Local Government Commission of Inquiry, however, indicated that revenues collected specifically through the Mbalit project were insufficient by themselves to service the truck obligations and that repayments were supplemented from KMC’s main account. These statements should be treated as testimony before an inquiry rather than final adjudicated findings. The relevant lesson is narrower than declaring the project a success or failure.
Eventual repayment and the quality of the original repayment model are different questions.
Where repayment is modelled on project-specific revenue but that revenue underperforms, the residual debt-service burden must be absorbed by another identified funding source, potentially including general municipal revenues. That does not mean the underlying assets lacked public value. Nor does it mean councils should avoid financing waste-management assets.
It means that repayment assumptions should be tested before commitments are entered into, and that the source ultimately carrying the liability should be incorporated transparently into medium-term financial planning. KMC’s experience also illustrates a broader institutional principle: resilient institutions do not merely survive previous decisions; they learn from them.
Evidence from earlier investments should change how subsequent projects are appraised, procured, financed, monitored and evaluated.
From affordability to resilience
A financing decision should not be assessed only under its expected scenario.
Institutional resilience requires the capacity to continue delivering statutory functions, maintain productive assets, honour contractual commitments, absorb foreseeable shocks and adapt without repeatedly resorting to emergency financing or disruptive liability restructuring. A useful debt stress test should therefore begin with a baseline scenario and then examine moderate and severe-but-plausible downside conditions.
Depending on the actual contractual structure, relevant risks may include revenue underperformance, rising fuel and operating costs, significant vehicle-repair requirements, unexpected capital needs, interest-rate exposure, liquidity risk, asset obsolescence, supplier or contractual risk and other contingent liabilities. The purpose is not to assume that all such risks apply to BAC.
It is to identify which risks actually arise under the transaction, determine who bears them and establish how they would affect the Council if they materialised. The stress test should assess the resulting effect on annual debt service, uncommitted cash resources, essential-service expenditure, reserve adequacy and planned capital expenditure. The question is straightforward: If reality differs materially from the baseline forecast, can BAC continue servicing the obligation without materially impairing its essential functions or financial stability?
That is a more meaningful test than affordability under favourable assumptions alone.
Gambian law already recognises repayment capacity
The Public Finance Act 2014 already provides an important statutory foundation for this discussion. Sections 54 and 55 establish a framework governing borrowing by local-government authorities, including borrowing limits informed by repayment capacity, ministerial approval requirements where applicable, and reporting obligations concerning borrowing and outstanding debt.
Nothing in the publicly available information presently establishes that BAC has failed to comply with those provisions. The important distinction is between legal permissibility and economic prudence.
Compliance establishes whether a transaction satisfies the applicable legal and procedural requirements. It does not, by itself, establish that the transaction represents the economically preferred financing option.
The policy opportunity is therefore not to invent a new principle. Gambian law already recognises repayment capacity. The opportunity is to deepen the analytical discipline through which repayment capacity and value for money are demonstrated. For material borrowing, that should include a medium-term debt-service assessment rather than reliance on a single revenue or cash-balance figure.
Opportunity cost belongs inside the analysis
Debt service is not undesirable merely because it consumes public revenue. Every public expenditure decision uses resources that could otherwise be allocated elsewhere. The proper question is what alternative public value is displaced.
A repayment obligation may be affordable in accounting terms but economically costly if it prevents an investment producing substantially greater public benefit. Conversely, a comparatively expensive financing structure may still be defensible if preserving near-term resources enables investments whose benefits materially exceed the additional cost.
The three tests are therefore different: Affordability asks: Can we pay?
Opportunity-cost analysis asks: What do we give up in order to pay?
Value-for-money analysis asks: Does what we obtain justify what we surrender relative to the feasible alternatives? A mature public-investment system needs all three.
Political time and institutional time are different
Public institutions generally outlast the officeholders and political administrations that make decisions in their name. A council can therefore make a decision today whose financial consequences continue beyond the tenure of those who authorised it. That creates an intertemporal governance problem.
There is nothing inherently undesirable about transferring part of the cost of a long-lived asset into future budgets. Indeed, intergenerational financing can be equitable. If an asset provides benefits for many years, there may be a strong case for allowing citizens who benefit from it in future years to bear part of its cost. The problem arises when the duration of the liability becomes disconnected from the duration of the corresponding public value.
I use intergenerational displacement here to describe a financing structure in which a material share of a present decision’s cost is transferred into future budgets without a commensurate transfer of enduring assets, capabilities or public benefits.
Intergenerational financing is defensible when tomorrow’s citizens inherit both an obligation and enduring value. It becomes intergenerational displacement when they inherit the obligation after much of the corresponding benefit has already been consumed.
The institutional danger is therefore not debt itself. It is the repeated use of tomorrow’s budgetary capacity to resolve today’s constraints without creating sufficient productive or institutional capacity in return. Every long-term liability is a claim on future revenues. It is also a claim on future choices.
Future budgetary capacity is not an invisible resource. Every liability transferred to a future administration lays claim to future fiscal resources, including revenues not yet collected, and can narrow choices that have not yet been made. Long-term borrowing is therefore not merely a financing decision. It is also an allocation of future institutional discretion.
The Institutional Inheritance Test
A practical way of operationalising this principle is to subject material long-term public commitments to an Institutional Inheritance Test, drawing on the established principles of fiscal sustainability, intergenerational equity and institutional stewardship. Conventional appraisal asks whether debt is sustainable, whether an investment is worthwhile and whether an institution can afford it. The Institutional Inheritance Test adds another question:
What combination of capability and constraint does the decision transfer to those who next inherit responsibility for the institution?
It examines four dimensions. Asset inheritance: Will successors inherit functioning assets with meaningful remaining useful life?
Liability inheritance: What debt and contractual obligations will remain?
Capability inheritance: Will the transaction leave stronger revenue systems, operational capacity, institutional knowledge, service capability or other durable improvements?
Discretion inheritance: After inherited commitments are serviced, how much uncommitted budgetary capacity will remain for future administrations to address priorities that cannot currently be foreseen?
The assessment should also recognise different time horizons.
At the administrative handover point, what assets, liabilities and uncommitted resources will the next administration inherit?
At debt maturity, what institutional capability and productive assets will remain after the financing has been extinguished?
Across the asset lifecycle, will the machinery continue providing meaningful public benefit after the associated financing has been repaid, or will major replacement expenditure arise while debt remains outstanding?
This last question is especially important: At the date of the final Ecobank repayment, what proportion of the financed assets’ economically useful life is expected to remain?
If substantial useful life remains, spreading part of the cost over time may be economically coherent. If significant debt persists as the assets approach replacement, the financing case becomes more difficult. The Institutional Inheritance Test is therefore not an argument against long-term commitments. It is a test of their institutional quality.
Five tests for the BAC decision
Applied to the present transaction, the analysis can be reduced to five tests.
1. Transaction economics
What is the complete remaining cost of the existing Espace arrangement?
What was the underlying supplier price before financing charges, if separately identifiable, and what portion of the D101 million contractual value represents deferred-payment or other financing costs?
What are the Ecobank interest basis, fees, security requirements, repayment frequency, amortisation structure, total nominal repayment and annual debt-service profile?
How will the approximately D8 million difference between the reported D58 million outstanding obligation and the proposed D50 million facility be treated?
And what is the comparative cost of the Ecobank structure against the realistic alternatives?
Public debt should be evaluated through its debt-service profile, not merely its principal amount.
2. Debt-service capacity and resilience
Which revenue streams financed the D43 million already paid?
What does that payment history indicate about BAC’s demonstrated capacity under the original arrangement?
What proportion of uncommitted recurrent resources would the new debt service absorb?
How would that position change under moderate and severe-but-plausible downside scenarios?
And would sufficient liquidity, reserves and operating flexibility remain after debt service?
3. Asset performance and public value
What assets were ultimately contracted and delivered?
What proportion remains operational?
What are their utilisation, maintenance and operating costs?
What measurable improvements have occurred in waste collection, sanitation, service coverage, avoided expenditure or institutional capability?
And what economically useful life is expected to remain at debt maturity?
4. Use of the released budgetary headroom
What precisely will the reported D20 million and D23 million released in 2026 and 2027 finance?
Will those resources support capital assets, revenue systems, cost reductions or essential service improvements?
Would the investments otherwise be postponed?
And does their expected public value provide a sufficient rationale for accepting the additional financing cost and longer commitment?
5. Institutional inheritance
What obligations will remain at the next administrative handover?
What assets and institutional capabilities will accompany them?
How much future revenue will already be committed?
And will successor administrations inherit greater capacity alongside the obligations they are required to service?
These are not hostile questions.
They are the questions a financially mature public institution should ask itself before entering a material multi-year commitment.
The D8 million question is one of reconciliation
If approximately D58 million remains outstanding while the proposed Ecobank facility is D50 million, approximately D8 million requires separate treatment. There may be a straightforward explanation. BAC may intend to finance it from its own resources, retain part of the existing arrangement or have agreed another settlement. The correct response is not speculation.
It is reconciliation. A complete financing plan should reconcile how the entire remaining liability will be discharged.
Likewise, if Ecobank was prepared to finance the full D58 million, the choice of D50 million should emerge from analysis rather than availability alone. Why D50 million rather than D40 million, D45 million or the full balance? The optimal amount should reflect the relationship between financing cost, annual repayments, liquidity, reserves, risk and future budgetary discretion.
The ultimate number is not D50 million
The headline loan amount is not the economically decisive figure. Two different cost concepts matter.
The first is the whole-life asset cost: acquisition, operation, fuel, maintenance, repairs, downtime, residual value and eventual replacement.
The second is the whole-life financing cost: any financing premium embedded in the original hire-purchase structure, Ecobank interest, fees, charges and other financing-related expenditure. Those should not be collapsed.
Only when both are understood alongside actual asset performance can two fundamental value-for-money questions be answered: What will these assets ultimately have cost the public? And what durable public value will that expenditure have produced?
Those questions should accompany every material public capital investment in The Gambia.
From a BAC transaction to a national governance framework
The wider policy lesson reaches beyond BAC. The Gambia’s local authorities will increasingly require sophisticated capital financing as urbanisation and demographic change intensify demand for roads, drainage, markets, sanitation, waste-management systems, digital infrastructure and other long-lived municipal assets. A governance regime that simply discourages borrowing would therefore be counterproductive. The objective should be to institutionalise responsible capital investment and responsible borrowing.
The Gambia already has public-finance, local-government and procurement legislation. The task is not to create governance from institutional emptiness, but to integrate and strengthen the appraisal disciplines surrounding material capital and financing decisions.
A standard Subnational Capital Investment and Borrowing Framework could build upon that existing architecture. For material multi-year commitments, it could require seven proportionate instruments.
A Capital Investment Business Case should establish the public problem, service need, strategic rationale, expected benefits, implementation capacity and principal risks.
A Whole-Life Cost Assessment should capture acquisition, financing, operation, maintenance, major repairs, residual value and eventual replacement.
A Financing Options Appraisal should compare realistic alternatives against an explicit counterfactual using annual cash-flow analysis, present-value comparison and relevant risk factors.
A Debt Sustainability and Stress Test should demonstrate repayment capacity under baseline and adverse scenarios and show the implications for essential services, reserves and future capital expenditure.
An Institutional Inheritance Statement should identify the assets, liabilities, institutional capabilities and future budgetary constraints expected to remain beyond the current decision-makers’ tenure.
A Post-Investment Benefits Realisation Review should compare actual costs, asset performance and public outcomes with the original business case and feed the lessons into subsequent decisions.
A Public Decision Summary, once financing is approved and legitimate commercial confidentiality no longer requires protection, should disclose the purpose, principal, tenor, repayment structure, interest basis, material fees, repayment sources, total nominal repayment, annual debt-service profile, major alternatives considered, principal risks and expected public benefits.
The requirements should be proportionate. Enhanced appraisal should be triggered by materiality, duration, fiscal exposure and risk rather than imposed identically on every municipal procurement. The framework would also need to assign responsibility for preparation, independent technical challenge, statutory approval, public disclosure and ex-post evaluation within the mandates of existing institutions. The resulting governance cycle would be: appraise → cost → compare → stress-test → approve → procure/contract → disclose → evaluate → learn.
That final stage matters.
A public-investment system should not merely authorise transactions. It should improve the quality of the next decision.
Developmental local government requires a broader transition
The larger objective should be a transition towards developmental local government.
A developmental council does more than collect rates and finance annual expenditure. It understands the economic geography of its jurisdiction, maps its revenue base, anticipates demographic and infrastructure demand, manages its assets, integrates capital investment with medium-term financial planning and measures whether expenditure is producing improved public outcomes. For BAC, growth creates both fiscal pressure and developmental opportunity.
Population expansion, settlement growth and commercial activity increase demand for waste collection, roads, drainage, markets and other services. But they can also expand the property base, commercial activity, market revenues, licences and other sources of municipal income. The institutional challenge is therefore to convert urbanisation into capacity. The developmental sequence should be mutually reinforcing:
better municipal data → stronger revenue identification and collection → more reliable own-source revenue → better capital investment → improved services and economic activity → a stronger basis for compliance and institutional capacity.
If managed effectively, growth need not merely enlarge municipal obligations. It can enlarge the institutional capacity available to meet them. That is the distinction between managing annual administration and building a developmental institution.
Isntitutional resilience should become a measure of public leadership
Political systems naturally reward visible achievements. Vehicles, roads, markets and public buildings can be seen. The systems that finance, maintain, monitor and eventually replace them are less visible, yet those systems often determine whether visible achievements endure.
A government that can construct but cannot maintain may create infrastructure without sustainability. A council that increases gross revenue while simultaneously increasing inflexible long-term commitments may improve its receipts without improving its strategic autonomy. An administration that repeatedly solves immediate constraints by pre-committing future revenues may increase present flexibility while narrowing the choices available to the institution itself. The most consequential decisions in government are therefore not always those determining what can be done today.
They are often those determining what the institution will still be capable of doing tomorrow. This principle extends beyond municipal borrowing. It applies to national debt, public-private partnerships, concessions, pensions, state-owned enterprises, infrastructure contracts and other commitments whose consequences outlive those who authorise them.
The Chairman’s clarification should deepen the debate, not close it
Chairman Darboe’s clarification deserves recognition because it provides additional information about the D101 million contractual value, the D43 million already paid, the D58 million outstanding, the near-term instalments and BAC’s stated reason for seeking a longer repayment structure. That is useful progress.
But transparency should not be understood as the end of scrutiny. Its purpose is to make better analysis possible. Even if BAC’s reported revenue growth, current cash position and ability to meet its obligations are accepted in full, a separate question remains: Does the proposed Ecobank structure represent the financially and institutionally superior way of managing the remaining obligation? That question is answerable.
It requires the financing terms, debt-service profile, comparison with realistic alternatives, treatment of the residual liability, repayment-capacity analysis, asset-performance evidence, intended use of the released budgetary headroom and implications for future fiscal discretion.
If those demonstrate that refinancing strengthens BAC, the facility should be judged accordingly. If another structure provides better value, that should equally inform the decision.
Evidence-led governance requires no predetermined conclusion. It requires a decision capable of surviving rigorous analysis.
Governing beyond one’s tenure
The significance of this debate therefore extends far beyond D50 million, BAC or even local government. The Gambia needs institutions capable of thinking beyond annual budgets, immediate administrative pressures and individual political tenures. Borrowing can accelerate development. Refinancing can improve treasury management.
Capital investment can transform public services. Long-term financing can distribute the cost of enduring assets across the periods in which their benefits are enjoyed. None of these instruments is inherently problematic.
Their quality depends upon the institutional disciplines surrounding them. The measure of public leadership should therefore include not only what an administration delivers while holding office, but the quality of the institution it transfers to those who follow.
Did revenue-raising capacity improve?
Were productive assets maintained?
Were liabilities sustainable?
Were adequate buffers preserved?
Did institutional systems become more capable?
Did evidence from previous investments improve subsequent decisions?
Did service capacity expand?
And did future leaders inherit sufficient discretion to confront problems their predecessors could not have anticipated?
That is the essence of institutional inheritance. No material public financing decision should therefore be considered fully appraised until decision-makers can demonstrate its debt-service implications, whole-life economic and financing costs, resilience under plausible adverse conditions, expected public value, superiority to realistic alternatives and consequences for those who will inherit the institution.
The same standard should apply to BAC, KMC, every area council, every ministry, every state-owned enterprise and every government of The Gambia. Public authority is temporary. Institutional consequences are not.
Before committing future public revenues, the decisive question should therefore not simply be: Can we afford this today?
It should also be:
What institution will those who come after us inherit because we made this decision?
That is ultimately a question of whether public leadership is judged only by what it delivers during its tenure, or also by the institutional capacity, fiscal discretion and developmental possibilities it preserves for those who follow.
Countries do not become resilient merely because governments complete projects. They become resilient when institutions retain the capacity to solve the next problem after today’s leaders have left.