By Mohammed Jallow
The Gambia’s domestic debt, interest rates and the dangerous price of development.
“We are building roads with borrowed money, borrowing money to service yesterday’s borrowing, and then congratulating ourselves because the economy is growing. Perhaps the most expensive infrastructure we are constructing is the debt itself.”
There is an uncomfortable economic conversation that The Gambia can no longer afford to postpone.
It is a conversation about domestic borrowing, the cost of money, the policy rate of the Central Bank of The Gambia, the increasing appetite of Government for local financing, the quality of public investment and, most importantly, whether the economic growth we are celebrating is sufficiently strong to carry the debt burden we are accumulating.
As a former banker and financial analyst, I have always believed that borrowing is not inherently bad. In fact, responsible borrowing is one of the most powerful instruments available to a developing country. Nations borrow to build roads, schools, hospitals, electricity systems, water networks, productive industries and human capital. A government that refuses to borrow under every circumstance may condemn its citizens to perpetual underdevelopment.
But there is a fundamental difference between borrowing to create an economic asset and borrowing to finance a recurring fiscal appetite.
That distinction is where the Gambian debate must begin.
The current economic picture is not entirely gloomy. Far from it.
The World Bank estimates that the Gambian economy grew by approximately 5.9 percent in 2025, following growth of 5.6 percent in 2024. Growth has been broad based, with agriculture, industry and services all contributing. Tourism has recovered, remittances remain important, inflation returned to single digit territory and extreme poverty is estimated to have declined from 21.5 percent in 2024 to 20.3 percent in 2025. The World Bank projects growth of approximately 5.3 percent in 2026.
The IMF is somewhat more conservative, projecting growth of 4.7 percent in 2026 after an estimated 6 percent in 2025. The IMF also projects average consumer price inflation of about 7.5 percent in 2026.
These numbers matter because they demonstrate that The Gambia is not an economy in collapse. The economy is expanding.
But growth alone is not enough.
A country can grow and simultaneously become financially weaker.
That is the paradox we must confront.
The governor’s dilemma
Governor Buah Saidy and the Monetary Policy Committee of the Central Bank deserve credit for operating within a difficult environment.
The Central Bank reduced its Monetary Policy Rate from 17 percent to 16 percent in December 2025 and subsequently to 14 percent in February 2026. The rate was maintained at 14 percent in May and again in August 2026.
This is not an arbitrary decision.
Monetary policy must balance inflation, economic activity, liquidity, exchange rate stability, private sector credit and financial stability. If inflation is falling and economic activity requires support, reducing the policy rate can help lower the cost of money and stimulate borrowing, investment and consumption.
There is therefore a perfectly legitimate economic argument for a lower policy rate.
But here lies the irony.
We want cheaper money for businesses while Government itself remains a major borrower in the domestic financial market.
We want banks to lend more to entrepreneurs while Treasury securities can provide banks with comparatively attractive and relatively low risk investment opportunities.
We want private investment to expand while Government borrowing competes for the same pool of domestic liquidity.
We want the private sector to become the engine of growth while the Government remains one of the largest customers of the banking system
This is the contradiction that deserves national attention.
The domestic debt warning light
The Central Bank reported that Government domestic debt reached approximately D53.3 billion at the end of March 2026, equivalent to about 24 percent of GDP, compared with D51.99 billion, or 23.4 percent of GDP, in the corresponding period of 2025.
More worrying is the composition.
Approximately 54.8 percent of the domestic debt portfolio was concentrated in short term instruments.
This is where a financial analyst becomes uncomfortable.
Short term borrowing can be useful for managing temporary cash flow mismatches. But when a government repeatedly uses short term instruments to finance structural expenditure, refinancing risk becomes increasingly important.
A Treasury bill that matures tomorrow must eventually be repaid or refinanced.
If revenue is insufficient, Government must borrow again.
If interest rates rise, refinancing becomes more expensive.
If liquidity tightens, refinancing becomes more difficult.
If banks become heavily exposed to Government securities, private sector credit can become constrained.
This is not an academic concern.
It is the mechanics of sovereign liquidity risk.
The World Bank has already identified rising domestic debt servicing costs as a major downside risk. It has also warned that public debt remains high and that debt management must remain a priority. The World Bank’s recent analysis estimates public debt at approximately 76.4 percent of GDP in 2025 and continues to classify The Gambia as being at high risk of debt distress.
The irony is extraordinary.
We celebrate every new road as development.
We celebrate every new bridge as development.
We celebrate every new public building as development.
But if the financing structure behind those projects weakens the capacity of Government to finance tomorrow’s schools, hospitals, agriculture and businesses, then we have to ask whether we are creating development or merely creating liabilities with attractive photographs.
Not every borrowing is bad
It is important not to fall into the opposite extreme.
The Government under President Adama Barrow, with Minister of Finance and Economic Affairs Honorable Seedy K.M. Keita, has overseen substantial public investment in infrastructure and social sectors.
The Ministry of Works and the broader Government infrastructure programme have contributed to visible changes in roads, transport connectivity and public infrastructure.
There is economic value in that.
A good road reduces transport costs.
A reliable electricity system reduces the cost of doing business.
A modern bridge increases connectivity.
A functioning water system improves public health.
A productive agricultural project can reduce food imports.
A modern hospital can reduce the economic cost of poor health.
A properly designed school improves human capital.
Therefore, the argument cannot simply be that Government should stop borrowing.
The real argument is that Government must borrow differently.
Borrowing should be subjected to a rigorous economic test.
What is the expected economic return?
How many jobs will the project create?
What tax revenue will it generate?
How much will it reduce imports?
Will it increase exports?
Will it improve agricultural productivity?
Will it increase tourism receipts?
Will it reduce the cost of doing business?
Will it generate foreign exchange?
Can the project eventually generate revenue sufficient to support its financing cost?
If the answer to these questions is no, the project deserves much greater scrutiny.
The 2026 budget and the test of credibility
Minister Seedy Keita’s 2026 Budget Speech deserves recognition for explicitly acknowledging the debt challenge.
The Budget targets a fiscal deficit of 0.3 percent of GDP for Government Local Funds and 1 percent for all funds combined, described as the lowest level in a decade. The Government also committed to domestic resource mobilisation reforms, a Domestic Resource Mobilisation Strategy, mandatory baseline costing for Ministries, Departments and Agencies, and measures to address accumulated arrears.
These are important commitments.
But a budget is ultimately judged not by the elegance of its speech but by the discipline of its implementation.
This is where the Ministry of Finance must become even more uncompromising.
The IMF reported that fiscal performance in 2025 was weaker than anticipated because expenditure exceeded targets, including unbudgeted transfers, arrears payments, emergency subsidies for NAWEC and emergency support to the National Food Security Processing and Marketing Corporation. The resulting fiscal deficit reached about 5 percent of GDP.
The IMF subsequently reported that the Government missed its end 2025 targets for the domestic primary balance and net domestic borrowing, largely because of expenditure overruns. Corrective measures were required.
This should not be interpreted as an indictment of one individual or one administration.
It is a warning about institutional discipline.
A budget is a contract between government and society.
If Parliament approves one fiscal framework and implementation consistently creates another, credibility eventually becomes a financial asset that is lost.
Domestic borrowing versus international borrowing
The Government should not automatically prefer international borrowing over domestic borrowing.
The correct question is the cost, maturity, currency, risk and economic return of each financing source.
Concessional external financing from institutions such as the World Bank, the International Development Association, the IMF and the Islamic Development Bank can sometimes provide longer maturities and more favourable financial conditions than domestic commercial borrowing.
The World Bank approved US$45 million in grant financing in November 2025 to support domestic revenue mobilisation, infrastructure, private sector development and climate resilience.
The Islamic Development Bank continues to support The Gambia. In June 2026, IsDB signed a US$31.01 million financing agreement for the Cattle Production and Productivity Improvement Project. It is also supporting major infrastructure and education projects, including financing of US$40 million for the third phase of the Bertil Harding Highway expansion and US$37.5 million for the School of Medicine and Allied Health Sciences. (IsDB).
This demonstrates the opportunity available to The Gambia.
External concessional financing should be strategically used for long term development projects where the maturity of the financing matches the economic life of the asset.
Domestic borrowing should increasingly be reserved for liquidity management, market development and carefully controlled financing needs.
The Government should avoid using expensive short term domestic borrowing to finance projects whose economic returns will only materialise over ten, fifteen or twenty years.
That is a financial mismatch.
It is like financing a twenty year house with a three month loan.
Eventually someone pays for the mismatch.
What should the government do?
First, Government should establish a firm ceiling for net domestic borrowing based on debt sustainability and not merely the immediate financing requirement.
Second, every major capital project should undergo a transparent cost benefit analysis before financing is approved.
Third, projects should be ranked according to economic return, employment impact, export potential, import substitution, regional development and social necessity.
Fourth, Government should aggressively pursue concessional external financing for productive infrastructure rather than expensive domestic financing.
Fifth, domestic arrears must be systematically cleared because arrears represent hidden borrowing from businesses.
When Government fails to pay contractors, suppliers and service providers on time, the private sector effectively finances the state without voluntarily agreeing to become the financier.
That is dangerous.
Sixth, Government should strengthen State Owned Enterprise governance.
The IMF has specifically highlighted the importance of controlling fiscal risks associated with the public sector and reducing exposure to Government within the banking system.
Seventh, Government should establish a genuine public investment management framework where projects are evaluated not simply because they are politically attractive but because they are economically defensible.
What Should the Ministry of Finance Do?
The Ministry of Finance must become the strongest gatekeeper of public money.
The Ministry should publish a clear quarterly domestic borrowing programme showing how much Government intends to borrow, the maturity profile, the expected interest cost and the purpose of the borrowing.
The Ministry should also publish a debt service dashboard.
Citizens should know how much of every dalasi collected by the Gambia Revenue Authority is going toward salaries, infrastructure, education, health, debt principal and debt interest.
Transparency is not an inconvenience.
Transparency is a form of fiscal insurance.
The Ministry should also accelerate digital tax administration and broaden the tax base.
The World Bank estimates that closing gaps in key tax instruments could potentially unlock revenue equivalent to 3 to 4 percent of GDP. It has also argued that wage bill reforms could create savings equivalent to 2.6 percent of GDP between 2025 and 2029.
That is far more sustainable than repeatedly returning to the domestic market.
The objective must be simple.
Raise more revenue. Spend better. Borrow less. Invest smarter.
The CBG must also walk narrow path
Governor Buah Saidy faces a particularly delicate responsibility.
The Central Bank must continue to use monetary policy to contain inflation while allowing productive economic activity to expand.
The current 14 percent policy rate should therefore not be viewed politically.
It should be viewed technically.
If inflation remains above the medium term target of 5 percent, premature monetary easing could create problems.
If inflation continues to decline and growth weakens, maintaining excessively tight conditions could unnecessarily restrict private investment.
The IMF has explicitly called for the CBG to maintain a tight and data driven policy stance and return inflation toward its 5 percent medium term target. It has also stressed the importance of protecting the Central Bank’s core mandate and limiting financial assistance to the public sector.
That independence matters.
A Central Bank must not become the convenient solution whenever fiscal policy becomes uncomfortable.
Monetary policy cannot permanently compensate for fiscal indiscipline.
No interest rate can repair a budget that consistently spends beyond its sustainable means.
The political question nobody wants to ask
The Gambia is entering a politically sensitive period.
Politicians naturally want to demonstrate achievements.
Roads are visible.
Buildings are visible.
Vehicles are visible.
Ceremonies are visible.
Debt is invisible
Interest payments are invisible.
Refinancing risk is invisible.
The future tax burden is invisible.
This creates a dangerous political incentive.
Politicians can receive applause today for infrastructure that citizens may finance tomorrow.
That is why development economics must rise above political cycles.
The Government should be judged not merely by how much infrastructure it constructs, but by whether that infrastructure creates a productive economy capable of paying for itself.
A kilometre of road that connects farmers to markets is economically different from a kilometre of road constructed primarily for political visibility.
A power project that lowers industrial electricity costs is different from a project that simply adds another fiscal obligation.
A hospital that reduces medical imports and improves workforce productivity is different from a building whose recurrent costs Government cannot sustain.
This is the distinction between development expenditure and development theatre.
The good, the bad and the skepticism
The good news is that The Gambia is growing.
The good news is that tourism is recovering.
The good news is that remittances remain significant.
The good news is that inflation has fallen dramatically from the levels witnessed in previous years.
The good news is that the financial system remains resilient.
The good news is that Government is investing in infrastructure.
The good news is that international partners remain willing to support The Gambia.
But the bad news is that public debt remains high.
The bad news is that domestic debt is increasing.
The bad news is that a large portion of domestic debt remains short term.
The bad news is that debt servicing competes with development spending.
The bad news is that the private sector needs more access to affordable finance.
The bad news is that fiscal slippages can rapidly undermine years of reform.
And the skepticism is legitimate.
Are we growing because the underlying productive capacity of the economy is transforming, or because consumption, public expenditure, tourism and remittances are temporarily supporting demand?
Are infrastructure investments generating sufficient economic returns?
Are we creating productive businesses or simply creating construction contracts?
Are we expanding the tax base quickly enough?
Are our young people finding productive employment quickly enough?
The World Bank notes that approximately 81 percent of workers remain in the informal sector and that 41.3 percent of young people between 15 and 34 are not in employment, education or training.
That is the real economic emergency.
Not merely the debt figure.
The ultimate question is whether today’s borrowing creates tomorrow’s taxpayers.
My verdict
The Gambia does not have a borrowing problem simply because it borrows.
The Gambia has a potential borrowing problem if borrowing begins to outrun productive capacity, domestic revenue and economic returns.
The answer is therefore neither reckless borrowing nor ideological austerity.
The answer is disciplined investment.
Government must borrow where the economic return is greater than the cost of capital.
The Ministry of Finance must become ruthless in expenditure prioritisation.
The Central Bank must remain independent and data driven.
International concessional financing should be maximised for productive long term investments.
Domestic borrowing should be carefully contained and increasingly directed toward efficient debt market development rather than persistent fiscal dependence.
The Government must also resist the temptation to confuse physical development with economic transformation.
A country can have magnificent roads and weak businesses.
A country can have impressive buildings and inadequate human capital.
A country can have rising GDP and stagnant household incomes.
A country can have development projects and rising debt simultaneously.
Therefore, the real measure of success should be whether the infrastructure being built today increases the productive capacity of the Gambian economy tomorrow.
The Minister of Finance, Honorable Seedy K M Keita, has correctly placed fiscal consolidation, domestic resource mobilisation and expenditure discipline at the centre of the 2026 Budget.
Governor Buah Saidy and the Central Bank have equally demonstrated caution by maintaining the policy rate at 14 percent while watching inflation and financial conditions closely.
But both fiscal and monetary authorities must recognise that the problem cannot be solved independently.
The Ministry of Finance cannot borrow without considering monetary consequences.
The Central Bank cannot manage inflation without considering fiscal pressures.