Sustainable Public Debt Management in The Gambia
The Role of Waqf and Sukuk as Islamic Financing Alternatives
DOI:
https://doi.org/10.33102/jmifr.739Keywords:
Budget deficits, Islamic finance, sukuk, Debt-to-GDP, waqfAbstract
Macroeconomic instability, such as budget deficits, currency depreciation, and inflationary pressures, is a current challenge facing the Gambian economy despite a commendable Real Gross Domestic Product (RGDP) growth rate of 5.9% in 2025, which surpassed the average growth rate of 4.1% for sub-Saharan African countries. Among all the macroeconomic challenges faced by The Gambia, the most significant is the continuous budget deficit, which affects the overall economy. The debt-to-GDP ratio as of 2025 stands at 68%, surpassing the 50% benchmark for many developing countries. This research examines alternative financing mechanisms by applying Islamic finance instruments, such as waqf and sukuk, using a qualitative research method. A cash waqf model was developed, and the results showed that waqf has the potential to support the government’s operational expenditure, thereby allowing tax revenues to be redirected toward debt servicing and the financing of development projects. In addition, sukuk instruments can serve as an effective means for the government to mobilise funds to finance development projects through collaboration with Islamic financial institutions acting as Special Purpose Vehicles (SPVs). These SPVs would negotiate and issue sukuk on behalf of the government, enabling the acquisition of development financing while minimising direct government expenditure and reducing reliance on conventional borrowing. Overall, the study demonstrates that Islamic finance instruments can offer sustainable and fiscally prudent alternatives to address The Gambia’s ongoing budgetary and debt challenges.
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