IMF executive board approves $47.1m extended credit facility for The Gambia

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Tao Zhang
Tao Zhang

THE executive board of the International Monetary Fund, IMF, approved a thirty-nine-month Extended Credit Facility, ECF, arrangement for The Gambia in the amount of SDR35 million (about US$47.1 million, or 56.3 percent of The Gambia’s quota in the Fund) today.

The ECF-supported programme aims to anchor macroeconomic stability and progress on structural reforms achieved under the 2019 Staff Monitored Programme, SMP and would provide a framework to assist the authorities in developing and implementing effective policy responses to address the COVID-19 challenges. The programme will also help catalyze much-needed donor financing, particularly in the form of grants for budget support, maintain the momentum in reducing debt vulnerabilities, and deliver on key commitments in the National Development Plan 2018–2021, with the focus on inclusive growth and poverty reduction.

The IMF Executive Board decision enables an immediate disbursement of SDR5 million, about US$6.7 million. Disbursements of the remaining amount will be phased over the duration of the program, subject to six half-yearly reviews.

Following the Executive Board discussion on The Gambia, Mr. Tao Zhang, Deputy Managing Director and Acting Chair issued the following statement:

“The Gambian authorities’ commitment to prudent policies and institutional improvements has supported robust economic growth, while voluntary debt service deferrals from their main external creditors have helped attain debt sustainability. However, the ongoing COVID-19 pandemic will challenge the authorities’ efforts to further strengthen economic performance and resilience. The 39-month ECF arrangement focused on advancing reforms in revenue mobilization, public financial management, and economic governance to support inclusive growth, will help anchor macroeconomic stability and meet balance-of-payments needs. Grant financing and technical assistance from development partners will be needed to support the authorities’ reform efforts.

“The authorities should remain committed to fiscal consolidation in the medium-term to ensure debt sustainability. Major projects should be financed through grants or highly concessional financing and public procurement and project selection should be strengthened. The governance and financial management of state-owned enterprises need to be improved to help reduce fiscal risks and enhance efficiency in public service delivery. Further strengthening of tax administration and public financial management is also needed to boost resources for priority investment and social spending.

“The monetary policy framework needs to be enhanced, including by gradually adjusting the interest rate corridor, and enabling the SDF rate to effectively anchor the functioning of the interbank market, and the central bank’s balance sheet should be strengthened.

“The vulnerabilities identified in the 2019 Financial Sector Stability Assessment should be addressed to ensure the soundness of the financial sector and improve the legal and supervisory framework for banking supervision. The authorities should leverage the financial inclusion strategy, including through mobile banking while strengthening the oversight of non-banking institutions and monitoring of risks involved in mobile banking.

“The authorities’ support for social programs and commitment to structural reforms and improvement in governance, as outlined in the authorities’ National Development Plan, will be necessary to help address social needs, combat corruption and promote private-sector-led inclusive growth.”

The Gambia’s programme of economic policies and reforms implemented under two consecutive SMPs covering 2017–18 and 2019 helped consolidate macroeconomic stability, achieve public debt sustainability, improve domestic revenue mobilization, and strengthen public financial management (PFM). Real GDP growth is estimated to have reached 6 percent in 2019 despite erratic rainfall resulting in a 10–percent decline in agricultural production. Inflation picked up in 2019 and averaged 7.1 percent, mainly due to one-off hikes in postal charges, while the underlying trend appears benign and core inflation subdued. Monetary policy has remained appropriately neutral in the context of moderate core inflation. The renewed confidence in the Gambian economy helped support robust private sector consumption and investment on the back of a record tourist season, notwithstanding the bankruptcy of Thomas Cook (UK), formerly, a major business partner in The Gambian tourism. Strengthened balance-of-payments helped rebuild The Gambia’s external buffers and helped replenish bank liquidity, contributing to credit growth. Meanwhile, The Gambia’s banking system remains well-capitalized, liquid and profitable, with non-performing loans at 4.5 percent of gross loans at end-2019.

Program Summary

The ECF-supported program for The Gambia aims to help the authorities attain the poverty reduction and growth objectives set in the 2018–21 National Development Plan, including increased support for social programs drawing on the fiscal space created in part by debt service deferrals granted by The Gambia’s external creditors. The program also emphasizes the need for further PFM reforms to improve governance and increase efficiency in the use of public resources, among others by improving the performance of state-owned enterprises. Disbursements under the ECF arrangement will help to reinforce balance-of-payments buffers, including to cope with the impact of the COVID-19 outbreak.

The structural agenda under the ECF-supported program aims to strengthen The Gambia’s performance in the following areas:

  • Bolstering domestic revenue mobilization through a multi-year program of modernizing tax administration based on the roadmap drawn with the help of the Tax Administration Diagnostic Assessment Tool (TADAT).
  • Consolidating the gains in fiscal policy formulation, public financial management, and debt sustainability by strengthening budget preparation and execution, all stages of cash management, debt management, and fiscal reporting.
  • Pursuing a multipronged strategy to improve economic governance with emphasis on public investment, drawing on the 2019 Public Investment Management Assessment, procurement, and the reform of state-owned enterprises including by strengthening their corporate governance, financial management, and reporting.
  • Broadening the scope of reforms to sustain growth and poverty reduction, by fostering financial inclusion, building on the recommendations of the 2019 Financial Sector Stability Review, mainstreaming gender equality, and counteracting the impact of climate change, which falls disproportionately on the poor.
The Gambia: Selected Economic and Financial Indicators, 2018–25
  2018 2019 2020 2021 2022 2023 2024 2025
  Act. EBS/19/26 Prel. Proj. Projections
National account and prices                  
GDP at constant prices 6.5 5.8 6.0 6.3 5.8 5.5 5.2 5.2 5.0
GDP deflator 5.2 5.6 6.4 6.3 5.5 4.8 4.5 4.4 4.8
Consumer prices (average) 6.5 6.1 7.1 6.7 6.0 5.5 5.1 5.0 5.0
Consumer prices (end of period) 6.4 5.9 7.7 6.2 5.8 5.2 5.0 5.0 5.0
External sector                  
Exports, f.o.b (US$ values) -0.9 6.8 25.2 6.0 7.9 7.3 10.5 10.7 10.1
Imports, f.o.b (US$ values) 11.9 11.0 14.6 13.6 8.3 6.1 7.0 7.5 7.0
Terms of trade (deterioration = -) -1.7 -2.4 -4.1 -3.3 -2.9 -0.5 -0.2 -0.2 0.7
Real effective exchange rate (depreciation = -) -1.5 4.6
Money and credit  
Broad money 20.0 15.2 27.1 15.5 11.5
Net foreign assets 14.0 8.1 18.9 9.2 9.2
Net domestic assets 6.0 7.1 8.2 6.3 2.3
Of which:                  
Credit to central government (net) 7.1 4.0 3.9 1.2 0.0
Credit to the private sector (net) 5.0 4.0 6.0 3.4 2.3
Velocity (GDP/broad money) 2.3 2.2 2.1 2.0 2.0
Central government finances  
Domestic revenue (taxes and other revenues) 12.1 13.1 14.4 13.7 14.0 14.3 14.6 15.0 15.2
Grants 3.3 7.7 7.8 9.3 8.5 7.7 7.0 6.3 6.1
Total expenditures and net acquisition of financial assets 21.7 23.9 24.4 24.4 24.2 23.4 22.7 22.0 21.7
Of which: Interest (percent of government revenue) 26.1 24.3 22.3 19.9 18.1 15.3 14.9 13.2 12.6
Net lending (+)/borrowing (–) -6.2 -3.2 -2.6 -1.7 -1.8 -1.4 -1.1 -0.7 -0.4
Net incurrence of liabilities 5.6 3.2 3.2 2.0 1.8 1.4 1.1 0.7 0.4
Foreign 2.6 1.6 2.7 2.0 1.8 1.4 1.1 0.7 0.4
Domestic 3.0 1.6 0.5 0.0 0.0 0.0 0.0 0.0 0.0
Primary balance -3.0 0.0 0.6 1.0 0.8 0.8 1.1 1.3 1.5
Public debt 86.6 81.8 83.8 77.9 72.7 68.3 64.3 60.1 55.8
Domestic public debt 39.2 37.2 36.6 32.9 29.5 26.6 24.2 22.1 20.1
External public debt 47.4 44.6 47.2 45.0 43.2 41.7 40.1 38.1 35.8
External public debt (millions of US$) 756.6 774.5 796.3 836.0 876.7 915.6 949.0 967.7 979.0
External current account balance                  
Excluding budget support -10.7 -13.8 -8.5 -11.9 -12.4 -11.8 -10.9 -10.7 -10.3
Including budget support -9.7 -10.3 -5.3 -8.7 -9.9 -9.6 -9.0 -9.1 -8.8
Gross official reserves (millions of US$) 157.0 187.0 225.0 268.0 313.4 349.5 382.4 410.5 450.1
(months of next year’s imports of goods and services) 2.7 3.0 3.4 3.7 4.1 4.3 4.4 4.4 4.6
Savings and investment                  
Gross investment 17.9 18.3 20.8 20.5 20.0 19.4 18.7 18.4 18.8
Of which : Central government 7.6 8.9 9.8 10.3 10.2 9.5 8.8 8.1 8.2
Gross savings 8.1 8.0 15.4 11.8 10.1 9.8 9.7 9.2 10.0
Memorandum items:                  
Nominal GDP (billions of dalasi) 78.6 87.4 88.7 100.2 111.9 123.7 136.0 149.3 164.3
GDP per capita (US$) 712.5 782.4 750.9 795.8 840.0 883.1 923.2 964.5 1008.5
Use of Fund resources (millions of SDRs)                  
Disbursements 0.0 0.0 0.0 10.0 10.0 10.0 5.0 0.0 0.0
Repayments -5.5 -4.3 -4.3 -3.6 -4.0 -2.8 -4.1 -3.9 -3.6
Sources: The Gambian authorities; and IMF staff estimates and projections.

– Mar. 24, 2020 @ 11:45 GMT |

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