IMF Executive Board Concludes 2017 Article IV Consultation; and Completion of the First Review under and Extension of the Staff monitored Program with The Gambia

March 23, 2018

On March 22, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with The Gambia.

The Gambian economy has started to recover, following the sharp growth slowdown in 2016. For 2017, economic growth is estimated at 3.5 percent with a better agricultural season and a strong rebound of tourism and trade. Headline inflation has declined from 8.8 percent in January 2017 to 6.4 percent in January 2018, reflecting the stabilization of the dalasi and a gradual decrease in food prices. With much-improved fiscal discipline and external financial support, the Dalasi has remained stable since April and gross international reserves increased from 1.6 months of import cover at end-2016 to 2.9 months at end-2017. The Executive Board also granted a waiver.

The authorities’ commitment to the staff-monitored program (SMP) [2] is strong. Performance under the program was broadly satisfactory, including good progress in implementing the structural agenda despite severe capacity constraints. The Managing Director approved the authorities’ request for an extension of the SMP by six months to end-September 2018. This will provide more time to establish a track record of performance for the transition to an arrangement under the Extended Credit Facility (ECF) to which the authorities aspire.

Over the medium term, The Gambia can achieve a more robust growth path. This will require continued strong policy implementation and effective fiscal reforms, including ensuring debt sustainability. The authorities are committed to further national development through the planned strong expansion of reliable and affordable electricity by 2020, and increasing the economy’s productivity by promoting irrigation and commercial agriculture, light manufacturing, tourism, and continued infrastructure investment.

Executive Board Assessment [3]

Following the Executive Board discussion, Mr. Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their strong commitment to reforms underpinned by the staff monitored program, and welcomed the progress achieved in stabilizing the economy. They noted that strict fiscal discipline together with substantial external support has enabled the authorities to significantly cut domestic borrowing. Going forward, it will be important to maintain the focus on reducing debt vulnerabilities and implementing reforms to increase private sector activity.

Directors agreed that efforts to maintain fiscal stability will need to continue. It will be important to contain spending while raising domestic revenue, including by implementing the revenue measures that were delayed to 2018, as well as further efforts to streamline the civil service. Directors welcomed the ongoing work to develop a medium term economic and fiscal framework together with a debt management strategy to help anchor fiscal policy. They noted that rehabilitation, reform, and improved oversight of public enterprises will be crucial to limit contingent liabilities and protect fiscal outcomes, improve service delivery, and strengthen the business environment.

Directors noted with concern The Gambia’s substantial debt vulnerabilities and high risk of external debt distress. They agreed that concerted support by the international community will be key in addressing the high debt overhang. Mobilization of assistance for the implementation of the National Development Strategy will need to focus on grants, with only very limited room even for highly concessional loans in the medium term. Directors also called on the international community to provide additional resources to foster debt sustainability, including through debt restructuring and softening of terms on existing commitments. Directors urged the authorities to carefully prioritize and sequence investment projects and refrain from contracting any large new debt or contingent liabilities that would jeopardize debt sustainability.

Directors agreed that further progress in reducing inflation would provide room to lower the policy interest rate. They welcomed the authorities’ commitment to maintain a flexible exchange rate system, which will support rebuilding international reserves. They stressed that it will be important to strengthen the central bank’s independence, governance, and operational effectiveness.

Directors emphasized that it will be important to crowd in the private sector to support broad based growth, including through measures to increase access to financing. They noted that it will be key to safeguard financial stability through heightened and risk based supervision in light of lower interest rates and maturity lengthening of domestic debt. Directors also noted the importance of strengthening the AML/CFT framework to address the decline in correspondent banking relationships. Directors urged a further improvement of the business environment and a strengthening of governance. They also noted that reducing income and gender inequality would support economic growth while achieving better social outcomes.

Table 1. The Gambia: Selected Economic Indicators

2015

2016

2017

2018

2019

2020

2021

2022

2023

Actual

EBS /17/61

Proj.

Projections

National account and prices

'(Percent change; unless otherwise indicated)

Nominal GDP (millions of dalasi)

38,581

42,252

47,139

47,289

52,577

57,973

63,645

69,848

76,574

83,941

Nominal GDP

10.9

9.5

11.6

11.9

11.2

10.3

9.8

9.7

9.6

9.6

GDP at constant prices

4.3

2.2

3.0

3.5

5.4

5.2

4.9

4.8

4.8

4.8

GDP per capita (US$)

451

473

488

480

500

518

531

542

554

563

GDP deflator

6.4

7.1

8.3

8.1

5.5

4.8

4.6

4.7

4.6

4.6

Consumer prices (average)

6.8

7.2

8.3

8.0

5.8

5.0

4.8

4.8

4.8

4.8

Consumer prices (end of period)

6.7

7.9

7.6

6.9

5.1

4.8

4.8

4.8

4.8

4.8

External sector

(Percent change; in beginning-of-year broad money)

Trade balance (in percent of GDP, deficit -)

-25.7

-17.9

-22.8

-27.8

-31.9

-29.5

-26.2

-24.9

-23.8

-24.1

Exports of goods and services

-9.5

5.0

-6.0

-6.0

16.9

9.3

9.0

8.2

8.0

6.5

Imports of goods and services

11.3

-10.2

12.3

23.2

20.5

3.2

0.9

4.0

4.4

6.1

Broad money

-0.9

15.3

11.4

19.3

11.0

9.1

8.4

8.2

7.1

7.1

Net foreign assets

-11.6

-4.5

4.3

28.3

9.8

6.1

3.8

6.6

2.3

2.5

Net domestic assets, of which:

10.7

19.8

7.1

-9.0

1.2

3.0

4.6

1.6

4.8

4.6

Credit to the government (net)

16.0

24.8

4.4

-7.8

-7.0

0.0

1.2

-1.6

0.2

0.1

Credit to the private sector (net)

-2.1

-3.0

2.8

-0.2

2.0

2.3

2.5

2.6

2.8

3.0

Other items (net)

-5.8

-1.1

-0.1

-4.7

6.3

0.6

1.0

0.5

1.8

1.5

Velocity (level)

1.9

1.8

1.8

1.7

1.7

1.7

1.7

1.8

1.8

1.9

Central government budget

(Percent of GDP; unless otherwise indicated)

Domestic revenue (taxes and other revenues)

19.7

18.4

18.7

19.6

20.9

18.9

19.2

19.7

20.2

20.4

Grants

1.9

1.7

6.8

11.1

13.2

10.0

7.3

6.2

4.3

4.2

Total expenditures and net acquisition of

financial assets

29.7

29.8

28.0

34.5

34.8

30.6

27.6

25.6

25.1

24.6

Of which: Interest payments

(percent of government revenue)

36.8

42.0

31.5

24.2

18.2

18.1

19.1

15.6

14.1

13.0

Net lending (+)/borrowing (–)

-8.1

-9.7

-2.5

-3.9

-0.8

-1.7

-1.1

0.3

-0.6

0.0

Net incurrence of liabilities

12.1

13.7

2.3

3.9

0.8

1.7

1.1

-0.3

0.6

0.0

Foreign

0.0

1.1

-0.3

6.6

3.5

1.9

0.6

0.5

0.3

-0.3

Domestic

12.0

12.6

2.5

-2.8

-2.8

-0.2

0.5

-0.8

0.3

0.2

Primary balance

-0.9

-2.0

3.3

0.87

3.04

1.74

2.5

3.4

2.2

2.7

Public debt

105.3

118.5

112.7

122.6

111.5

105.2

99.5

92.7

87.7

82.0

Domestic public debt

53.9

61.9

61.8

59.4

49.4

45.1

42.1

37.5

34.5

31.7

External public debt

51.4

56.6

50.9

63.2

62.1

60.1

57.5

55.2

53.1

50.2

External public debt (millions of US$)

499.0

544.7

517.2

627.7

666.1

687.9

695.2

701.7

706.0

702.0

External sector

(Percent of GDP; unless otherwise indicated)

Current account balance

Excluding budget support

-16.9

-9.7

-14.4

-19.4

-23.7

-21.2

-18.1

-16.9

-16.0

-16.0

Including budget support

-15.0

-8.9

-9.4

-14.3

-18.4

-16.9

-14.4

-13.2

-14.1

-13.6

Current account balance

(Millions of U.S. dollars; unless otherwise indicated)

Including budget support

-134.0

-85.4

-97.0

-144.2

-200.1

-196.4

-177.2

-170.8

-192.1

-193.6

Overall balance of payments

-41.3

-10.3

13.4

75.2

44.0

26.6

28.9

33.8

20.0

19.9

Gross official reserves

76.1

59.8

84.8

143.9

180.0

200.0

223.6

251.7

267.7

281.9

(months of next year's imports of goods and services)

2.3

1.4

2.0

2.9

3.5

3.8

4.1

4.5

4.5

4.4

Use of Fund resources

(Millions of SDRs)

Disbursements

7.8

0.0

11.7

11.7

0.0

0.0

0.0

0.0

0.0

0.0

Repayments

-3.8

-4.3

-3.0

-5.2

-5.5

-4.6

-3.6

-4.0

-2.8

-4.0

Financing gap

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Sources: Gambian authorities; and Fund staff estimates and projections.




[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] An SMP is an informal agreement between country authorities and Fund staff, whereby the latter agree to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.

 

[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

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