I. Introduction
1. Developments during 1998 provided for a major turning point in the government's efforts to reestablish conditions for sustained economic growth and poverty alleviation supported by the multilateral institutions and The Gambia's donors. In June, the IMF Executive Board approved a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) for The Gambia with the objective of achieving macroeconomic stability and establishing the conditions for strong and durable economic growth. The World Bank approved new projects concurrently with the endorsement of the Country Assistance Strategy. Moreover, the Roundtable Conference for The Gambia, held in Geneva in July, endorsed the government's economic program for 1998-2000, and donors pledged support equivalent to at least US$140 million for the period 1998-2001. The government is now embarking on the second annual arrangement under the ESAF within the framework covering the period 1999-2001, during which it hopes to consolidate its efforts to create an environment conducive to private sector activities. This is to be achieved through the deepening and extension of structural reforms, including in the area of the external tariff, the financial and public sectors, the legal and regulatory framework, the management of public financial resources, good governance, and improving the statistical base. The economic program will also extend efforts to improve the provision of education and health services and accelerate measures to alleviate poverty and promote exports.
2. The macroeconomic objectives for 1998 under the first year of the ESAF program were to (a) achieve real GDP growth of 3¾ percent; (b) limit average consumer price index (CPI) inflation to 3 percent; (c) reduce the external current account deficit (excluding official transfers) to 10½ percent of GDP; and (d) maintain gross official reserves at a level equivalent to more than five months of import cover.
3. Overall economic performance under the first annual ESAF arrangement was mixed. Despite significant progress, there were some setbacks, through early 1999, in implementing the program, which, together with the government's seizure of the property of the Gambia Groundnut Corporation (the GGC, owned by the Swiss company, Alimenta--see details below), did not allow the midterm review of the program to be completed. The government is determined to consolidate the economic gains made in 1998 and so far in 1999 while addressing a number of slippages and adverse developments during this period, in order to generate a strong momentum toward realizing its medium-term economic and financial objectives. Already, significant progress has been made in strengthening budgetary performance and implementing structural measures as well as in making efforts to reach a settlement with the GGC. In addition, real GDP grew by about 4¾ percent in 1998, with the benefit of favorable weather conditions and robust activity in the reexport trade and in the construction and tourism sectors. Average inflation remained low, at about 1 percent.
4. Despite an appreciable tightening of fiscal policy through September 1998, the slippages in the last quarter contributed to an overall deficit (excluding grants) of 4½ percent of GDP, above the targeted 4 percent; this outturn was nevertheless a significant improvement over the performance in 1997. Total revenue declined to 18¾ percent of GDP and was below the program target, mainly because of a shortfall in import tax revenue. This shortfall reflected administrative problems in the customs department and the impact of the reduction, effective July 1998, in the maximum duty rate from 90 percent to 25 percent (except for alcohol, tobacco, and vehicles), and in the number of import duties from 30 to 18; however, the reduction in the average tariff rate was limited. Nontax receipts were also sharply lower than projected, largely because of smaller profit transfers from the Central Bank of The Gambia (CBG). Domestic sales tax revenue was broadly on target, partly on account of the extension of the sales tax to professionals in August. On the expenditure side, there were sizable overruns in recurrent expenditure during the last quarter of 1998, as spending units rushed to exhaust their allocations; total expenditure and net lending (excluding interest payments and foreign-financed public investment) exceeded the program target by some ½ of 1 percent of GDP. However, there was a significant shortfall in foreign-financed capital spending, and overall capital expenditure was below target. To finance the deficit, the government had greater recourse to domestic financing, thereby contributing to further increases in domestic interest payments to 21¾ percent of total government revenue in 1998. Total government domestic debt increased to 26 percent of GDP from 23½ percent in 1997.
5. The budget for 1999, which was adopted by parliament in January, targeted an overall deficit (excluding grants) of 10¾ percent of GDP. However, the budget did not fully incorporate the potential impact of a number of factors, including the reduction of the maximum import tariff rate further to 20 percent, effective January 1, 1999, and the sharp reduction of taxes on petroleum products aimed at passing through the decline in world market prices. Accordingly, supplementary budget measures to improve revenue collection and to contain recurrent expenditure were introduced in June. These measures, together with a more realistic level of foreign-financed development expenditure, were projected to limit the deficit (excluding grants) to about 3 percent of GDP and recourse to domestic bank financing to D 8.9 million, with the latter envisaged almost entirely to reduce domestic arrears.
6. Broad money was more than halved to about 10 percent in 1998 as net bank credit to the government declined and remained below the programmed level in 1998, owing to the greater reliance on nonbank financing. The declining velocity reflected growing confidence following the elections in 1997 and the onset of the ESAF-supported program in 1998. Credit to the private sector expanded by 15 percent in 1998, mainly to the trade and transport sectors. With low inflation and the moderation in the fiscal deficit, the treasury bill rate fell in a number of steps from 16 percent in September 1998 to 14 percent by end-December 1998. Lending rates followed, with the prime rate coming down from 19 percent to 18 percent during 1998. For1999, broad money is projected to increase to 14 percent, reflecting the early slippages in fiscal policy implementation and the larger-than-foreseen increase in the net foreign assets position of the banking system. Credit to the private sector is projected to grow by 14 percent. As of October 1999, the treasury bill rate had declined further to 13 percent .
7. Several steps were taken in 1998 and 1999 to improve the soundness of the banking system, increase the efficiency of financial markets, and enhance financial sector competition. The CBG licensed a new bank, (First International Bank, which has a substantial foreign ownership), earlier in 1999. The share of nonperforming loans in the banks' loan portfolio declined on average from 27 percent at end-1997 to 22½ percent at end-1998, and the average shortfall of provisions against the required amount decreased from 46 percent to only 10 percent. In addition, the government finalized negotiations with a major commercial bank on the settlement of D 45 million (equivalent of about US$4.2 million) of nonperforming loans of the ex-Gambia Cooperative Union (GCU), and the CBG reached agreement with all banks on a program to achieve full provisioning in the course of 1999.2 To facilitate bankruptcy and collateral liquidation procedures, a commercial chamber in the High Court was established in October 1998 and became fully operational in 1999. The required reserve ratios on all deposits were unified at a rate of 14 percent in June 1998, and reserve assets requirements have been calculated, since then, on a biweekly basis. Furthermore, the CBG initiated a weekly marketplace for interbank deposits and foreign exchange. Finally, the Trust Bank was successfully privatized through a competitive bidding process ahead of the original schedule.
8. The external current account deficit (excluding official transfers) widened to 11½ percent of GDP in 1998 but is projected to moderate to 10¾ percent in 1999. The strong increase in imports in 1998 coincided with a significant deterioration in the terms of trade and somewhat offset the strong recovery in exports. For 1999, the moderate growth in import volume is likely to be more than offset by the growth in export volume, notwithstanding a projected 13 percent deterioration in the terms of trade and the current account is expected to narrow. However, short-term capital outflows are likely to partly offset the higher recourse to suppliers' credits and the capital account surplus is likely to be reduced. Gross official reserves increased in SDR terms in 1998 and are targeted to be slightly higher in 1999; in both years, they are estimated to be equivalent to about four months of imports of goods and services. All external debt-service obligations were met in a timely fashion. The CPI-based real effective exchange rate of the dalasi depreciated by 1.6 percent in 1998, but for the period from end-December 1998 through July 1999 it appreciated by 3.6 percent, reflecting mainly the depreciation of the euro and to some extent the pound sterling.
9. As regards other structural measures, only limited progress was made in 1998. Key prices in the economy, notably of groundnuts and petroleum products, remained government controlled. The envisaged streamlining of business regulations and modernization of business-related legislation, as well as the implementation of a new investment incentives system, were delayed. Furthermore, the new procurement code that was programmed for adoption in September was delayed. Although progress was made in normalizing financial relations between the government and public enterprises during the first three quarters of 1998, mutual payments arrears reemerged toward the end of the year. In addition, the adoption of a new divestiture strategy for the public enterprise sector was not implemented as scheduled by end-November.
10. During 1999, greater efforts were made to address the pending structural reforms from the previous year. The government convened several workshops in Banjul, with the support of the World Bank and participation of the private sector, to discuss the drafting of a comprehensive divestiture strategy. Further progress was also made in revising the draft of the investment code with assistance from United Nations Conference on Trade and Development (UNCTAD), and the authorities have agreed on terms of reference for an international consultant with the World Bank, who would help set up a comprehensive procurement system by 2000.
11. In the groundnut sector, the government decided to liquidate the GCU in April 1998 and cleared a small outstanding debt to Sonacos, in order to increase competition in crop marketing. Following a period of growing dissatisfaction with the role of the GGC in the groundnut sector and the difficult negotiations on the producer price for the 1998/99 crop season, the government took over the operations of the GGC in January 1999. However, recognizing the need to restore private sector activity in this important sector, and with a view to restructuring the sector to increase competition (with financial and technical assistance from the European Union), the government initiated discussions with the GGC in order to resolve the problems in a mutually agreeable manner.
12. Consistent with its Vision 2020 document, the government will maintain a strategy that emphasizes achieving macroeconomic stability, maintaining an appropriate, market-based incentive structure, and stimulating private sector activities. In the period ahead, the focus will be on (a) consolidating government finances through a further reduction in the budget deficit and the unsustainable domestic debt; (b) resuming and deepening structural reforms tailored to encourage private sector development, attract foreign investment, and facilitate economic diversification; (c) strengthening the institutional capacity of the public administration; and (d) implementing a comprehensive social agenda, especially in the education and health sectors. The government will follow closely the reform and harmonization progress among the member countries of the West African Economic and Monetary Union (WAEMU), with a view to safeguarding The Gambia's external competitive position. In addition, the monitoring of economic developments and policy implementation will be strengthened. To this end, the government has requested IMF and World Bank technical assistance to strengthen institutional capacity in a number of areas. In addition, the High-Level Economic Committee will continue to meet monthly to review developments and take appropriate action to ensure attainment of the program targets.
13. The main areas for action on the structural front will include (a) streamlining business regulations and improving the legal and judicial environment for economic activities, including the investment incentive system; (b) deepening financial intermediation and upgrading the soundness of the banking system through strengthening of the supervisory regime and its legal framework; (c) reforming public administration to foster good governance in the provision of public services; (d) accelerating public enterprise reform; (e) reforming the energy sector; and (f) strengthening the agricultural sector, including the rehabilitation of the groundnut sector. A summary of the government's policies under the economic program is provided in Table 1.
14. Consistent with this overall strategy, and on the basis of the projected inflows of external assistance and the medium-term outlook for the external environment, the main macroeconomic objectives of the program for 1999-2002 are to (a) achieve annual real GDP growth of about 5 percent a year; (b) keep annual inflation, as measured by the CPI, at about 2½ percent; (c) reduce the external current account deficit (excluding official transfers) from 11½ percent of GDP in 1998 to 9½ percent by 2002; and (d) raise gross official reserves to the equivalent of about five months of imports of goods and services (Table 3). The expansion of economic activity is expected to result mainly from a further recovery in agricultural production, made possible by the planned rehabilitation of the groundnut sector, assuming normal weather conditions; a further expansion of activities in the tourism sector and the strengthening of its linkages with the rest of the economy; and a continued revival of the reexport trade. To achieve these objectives, gross investment is targeted to increase from 18½ percent of GDP in 1998 to 20½ percent in 2002. In particular, the implementation of the above-mentioned measures to create a better business climate should contribute to an increase in nongovernment investment of some ½ of 1 percentage points to 12¾ percent of GDP by 2002 while improving its efficiency. At the same time, the gross domestic savings rate should rise from 7¾ percent of GDP in 1998 to 10¾ percent by 2002, largely on account of the targeted increase in government savings.
15. The government will continue its efforts to better integrate The Gambia into the world economy. Following the reduction of the maximum external tariff rate to 20 percent as of January 1, 1999, the government intends to further simplify the tariff structure in 2000 and beyond, taking into account the planned introduction of a common external tariff in the WAEMU. The envisaged tariff system would comprise a maximum of three or four import duties, with duty rates ranging from zero percent to a maximum of less than 20 percent. Import duties would be based on an economic classification of products, and the zero rate would be applied to a limited number of essential goods only. Before deciding on the implementation of the tariff reform in the context of the 2000 budget, the government will update a study by 2000 on its modalities and quantitative impact on government revenue, in consultation with the Fund and the World Bank. The government has received technical assistance from the Fund in strengthening balance of payments statistics and customs administration, inter alia, to facilitate further tariff reforms. The government is also negotiating with the World Bank a Gateway Project to create an export processing zone linked to the port of Banjul and the airport with a view to expanding the export base.
16. The current account deficit is targeted to narrow in the medium term toward levels that can be financed by net inflows of private capital and concessional external project aid. This will make it feasible to attain the gross official reserves target of more than four months of import cover. This level of reserves is critical to maintaining confidence in The Gambia's liberal exchange and trade system, as it will provide a cushion against adverse exogenous shocks. The flexible exchange rate policy will be maintained and underpinned by prudent macroeconomic policies to facilitate a broadly stable exchange rate.
17. In order to continue with efforts to increase government savings and reduce the government's domestic debt, fiscal policy will aim at further reducing the deficit (excluding grants) from 4½ percent of GDP in 1998 to 3 percent in 1999, and eventually to 2½ percent in 2001. To offset the potential adverse revenue impact of the external tariff reform, greater efforts will be made to broaden the tax base and strengthen tax administration, as well as to strictly control government expenditure. To this end, the Fund is providing technical assistance, in particular to improve customs administration and expenditure reporting and control; ongoing negotiations for a World Bank Institutional Capacity-Building Project would eventually lead to the introduction of a medium-term expenditure framework (MTEF) and better overall management of public finances. In the meantime, the World Bank will continue to assist with improvements in the public investment program.
18. In order to increase revenue to 20¼ percent of GDP by 2001, the strategy to shift from reliance on taxes on international trade to domestic consumption will be continued, as efforts will be made to expand the coverage of taxes, particularly sales and excise taxes. Income tax coverage will be extended to the self-employed, especially small-scale enterprises, while customs tax exemptions will be limited to those provided for under international agreements. The coverage of consumption taxes will be extended to goods and, most important, services that are not in the tax net, with a view also to establishing a uniform tax rate. For the longer term, the government intends to undertake a study by mid-2001 on the feasibility of introducing a broad-based value-added tax (VAT). Tax administration will also benefit from better coordination in collecting various taxes, including through computerization and broad application of taxpayer identification numbers. At customs, the functioning of the Automated System for Customs Data (ASYCUDA) will be improved and the control of customs declarations strengthened. During the program period, the government intends to establish a semiautonomous revenue board with a performance-based pay structure and independent auditing; measures will also be taken to improve the skills of the revenue officials. The government will undertake an annual review of service charges and will strictly enforce agreements with public enterprises to service their tax, interest, and dividend obligations, so as to avoid unbudgeted government subsidies.
19. With regard to expenditures, the government remains fully committed to improving efficiency in allocating public resources and implementing a very tight spending policy through improvements in the budgetary process. The burden of adjustment will fall especially on recurrent expenditure to prevent a recurrence of the 1998 fourth-quarter expenditure slippages while providing room for quality investment in human capital and the infrastructure. It is envisaged that total government expenditure and net lending will be reduced from 23¼ percent of GDP in 1998 to 22¾ percent in 2001. The wage bill and all low-priority outlays, including travel, will be strictly contained. In particular, the wage bill for 2000 provides for about a 2½ percent cost of living increase for all civil servants to help retain employees, given the freeze in wages for senior personnel in 1999. For the future, prudent adjustments will continue to be made to both public sector wages and net recruitment.
20. Spending on health and education is targeted to increase in line with the recommendations of the public expenditure reviews in these sectors. At the same time, the Gambia Local Fund will be provided with adequate resources as counterpart funds for foreign-financed investment projects. The government intends to strengthen the budgeting and expenditure control procedures, as well as develop a system for the timely monitoring of fiscal developments with the expected Fund technical assistance. The reforms envisaged in this context should provide for greater transparency and help strengthen performance under the ESAF-supported program. They will also complement the broader set of institutional capacity-building measures--leading, among other things, to medium-term budgetary planning--for which the government is negotiating a project with the World Bank.
21. The government continues to attach the highest importance to improving the programming, budgeting, and monitoring of public investment, giving priority to investments in the directly productive sectors, infrastructure, and human resources development. The government will adopt, by 2000, a three-year rolling public investment program (PIP) for the period 2001-03, in consultation with the World Bank. The extended PIP will be based on a viable financing plan, taking into account recurrent cost implications. With World Bank assistance, the government will further develop the PIP system with a focus on (a) establishing a comprehensive framework for preparing and implementing the PIP, consistent with sound macroeconomic policies; (b) aligning the PIP with clearly defined sectoral development priorities on the basis of rigorous project analyses and effective aid coordination; and (c) developing operational materials, including manuals. The government will conduct annual PIP reviews, in consultation with the World Bank.
22. The government's domestic debt stock, which is equivalent to about 26 percent of GDP, requires careful management to prevent it from spiraling further upward. At the same time, reform measures will be taken to begin to bring the debt stock down to sustainable levels. In this regard, it is important to maintain prudent fiscal policies along with the revenue and expenditure reforms discussed above, which will permit moderation in the stance of monetary policy and, in turn, further declines in domestic interest rates. The flexibility in the adjustment in the domestic interest rates may itself depend also on financial sector institutional reforms, as discussed below. A sustained track record of fiscal prudence will then provide the confidence to move ahead with a restructuring of the government's stock of domestic debt, supported by the implementation of a comprehensive privatization program and possible assistance from external donors.4
23. The main objective of monetary policy will continue to contain annual inflation at about 2½ percent, while maintaining an adequate level of gross official reserves. The exchange rate will continue to float freely, and the central bank will limit its interventions to smoothing out seasonal fluctuations and to meeting its external reserves objective. To this end, the CBG aims at keeping broad money growth broadly in line with nominal GDP; thus, the rate of growth of broad money is projected to decline from some 10¼ percent in 1998 to about 7½ percent in 2001. The demand for credit to the private sector is expected to expand at rates exceeding the growth rate of broad money by 2001, as the targeted reduction in the domestic indebtedness of the government is expected to lead to a gradual decline in interest rates.
24. The monetary authorities will monitor closely the excess reserves of the banking system and continue to rely on indirect instruments, in particular auctions of treasury and CBG bills. Liquidity management will aim at ensuring that short-term domestic interest rates remain positive in real terms, with appropriate differentials vis-à-vis interest rates abroad. During the program period, the central bank will draw on the recommendations of the 1998 Fund technical assistance mission to substantially improve the functioning and regulation of the financial markets--and in particular, the primary and secondary markets for treasury bills and CBG instruments--in order to promote smooth interest rate adjustments. In this connection, the CBG will (a) develop a framework for short-term liquidity forecasting and transform the Treasury Bill Committee into an Open Market Committee that by June 2000 meets regularly; (b) increase the frequency of treasury bill auctions; (c) use the bank rate (the rate that applies to the emergency facility) as a signaling rate; (d) promote the further development of interbank markets; (e) remove the floor on bank deposit rates; (f) introduce a book-entry system for transactions in treasury bills and CBG instruments; (g) adopt a phased reduction in the high commercial bank reserve requirements (currently at 14 percent) and/or start to remunerate these reserve requirements; (h) introduce repurchase agreements with commercial banks; (i) allow foreign currency-denominated deposits at commercial banks; and (j) introduce foreign currency open position and liquid asset ratios.
25. The monetary authorities consider the strengthening of banking supervision and the regulatory framework essential to improving the soundness of the financial institutions and enhancing financial sector competition. To this end, the Financial Institutions Act will be strengthened as necessary with supplementary provisions. For the period 1999-2001, the CBG will enforce the agreed program with commercial banks to build up provisions while the government will make payments toward extinguishing the outstanding ex-GCU loans on a schedule agreed with a major commercial bank. Measures will be taken to strengthen the capacity of the Assets Management Recovery Corporation (AMRC), so as to make further progress in reducing the outstanding nonperforming loans. Appropriate penalties, such as limiting the access to rediscount facilities, will be introduced during 2000 for those banks that do not comply with the provisioning regulations and capital adequacy requirements. The staff of the banking supervision department at the central bank will be expanded and provided with training in order to increase the frequency, to at least once a year, of on-site examinations of commercial banks, which will be held according to a fixed timetable. Moreover, the budget will provide adequate resources to the judiciary to ensure, among other things, that the new commercial chamber in the High Court is strengthened and is effective in simplifying and expediting bankruptcy and collateral liquidation procedures. Finally, the central bank will continue to develop and enforce a prudential regulatory framework for the insurance industry; the draft Insurance Act is expected to become law in 2000.
26. The objective of the government is to implement policy reforms aimed at promoting a business environment conducive to increasing both domestic and foreign investment and to accelerating related employment creation and income generation. To this purpose, key elements of the government's strategy are (a) maintaining the liberal price system; (b) improving the legal environment, including the adoption of the Companies Act, the Contract Act, the Partnership Act, and the Business Registration Act; (c) strengthening performance of the judicial system to enforce new corporate and commercial laws; (d) improving the labor laws; (e) and streamlining procedures for the registration of businesses ("one-stop shop") and creating an export-processing zone, notably in the context of IDA's Trade Gateway Project.
27. To provide public services more effectively, the government will continue its civil service reform efforts, with a view to establishing a leaner, better-focused, and better-motivated civil service. Savings derived from possible reductions in the size of the public service could then contribute to improving the remuneration of qualified personnel. In this regard, the government will continue the staff inspection program; base civil service income policy on the availability of budgetary resources, economy-wide productivity gains, and changes in the cost of living; and continue the development of the new job evaluation and merit-based pay system.
28. To strengthen expenditure budgeting and control, as well as the capacity for policy design and implementation, the government is committed to (a) adopting and implementing the new procurement code; (b) computerizing expenditure control and the Accountant General's Department; (c) conducting annual sectoral public expenditure reviews; (d) allocating adequate resources for the preparation of economic and social statistics, notably the national accounts and the balance of payments; and (e) continuing training efforts to improve economic management capacity. In the medium term, the government will implement the Capacity Building for Economic Management Project (CBEMP). This project aims notably at improving the government technical and managerial capacity for, among other things, revenue mobilization and budget management. In addition, the government will adopt a program on good governance, including the ongoing reform and decentralization of local governments, which will be implemented during the program period.
29. The government will adopt a new comprehensive divestiture strategy for public enterprises, including the establishment of a legal framework to ensure transparency (Box 1). The divestiture program, which will be supported in the context of the Trade Gateway Project, will also focus on the adoption of the privatization law and the creation of a regulatory agency. Meanwhile, the divestiture of the Atlantic Hotel and the sale of the government's share in Novotel are in progress and will be brought to the point of sale by mid-2000. In addition, the post office will be transformed from a government department into an autonomous organization. The strategy for greater private sector involvement in the operation of the port, airport, and the telecommunications company (GAMTEL) will be developed and implemented in the context of the Gateway Project. The strategy for NAWEC will form part of an energy sector reform plan to be developed in consultation with the World Bank. The Department of State for Finance and Economic Affairs (DOSFEA) will continue to serve as the central coordinating agency in charge of monitoring public enterprises, and it will improve the reporting of comprehensive data on their financial position, including foreign accounts, on a semiannual basis. The government will devise a plan to settle cross debts with the parastatals, which reoccurred at the end of 1998. Finally, the capital budgets of public enterprises will continue to require prior approval by the Office of the President with the advice of DOSFEA.
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and the Procurement Reform |
| Divestiture strategy: accompanying measures
Procurement reform
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30. The government's medium-term strategy for the agriculture and natural resources sector aims at raising rural incomes through diversified production; ensuring food security; conserving the natural resources base; and generating incremental export earnings. Consistent with these objectives, sector policies and programs will continue to emphasize the creation of an enabling environment for the private sector, and the stemming of rural-to-urban migration. The government will continue to (a) implement market-based pricing policies for all inputs and outputs; (b) foster the private sector's role in the provision of inputs and services; (c) strengthen local governments, community groups, farmers' organizations, and women's groups so that they can take charge of irrigation systems and local infrastructure; (d) strengthen and streamline extension and research services, focusing specifically on a farming system approach; (e) promote the production and marketing of high-value products (e.g., vegetables, fruits, fish, and shrimp) for urban, tourist, and export markets; (f) promote upland production, including of sorghum, cassava, and maize, to help meet food security needs; (g) establish an environment conducive to the development of rural financial systems, including microcredit financing, with technical assistance from the World Bank; (h) allocate adequate resources to develop basic rural infrastructure; and (i) carry out the institutional reforms and develop the human resources necessary to facilitate broad-based participation in the development process, including land reform.
31. The government is committed to implementing determined actions to rehabilitate the groundnut subsector, with assistance from the European Union and the International Fund for Agricultural Development (IFAD). Within the framework of the Agribusiness Service Plan, steps will be taken to maintain producer prices in line with world market prices; promote the availability and distribution of high-quality seeds and fertilizers; strengthen research and extension services; and gradually develop a new, autonomous agricultural credit system, strictly managed on commercial terms.
32. To increase production, employment, and exports of the still underutilized fisheries subsector--particularly the pelagic species--the government will continue to foster a greater role for the private sector. To this end, the government's policy will seek to (a) build the capacity to regulate and monitor industrial fishing to optimize exploitation in a sustainable manner in the exclusive economic zone; (b) rationalize the issuance of fishing licenses; (c) support artisanal fishermen and groups of women fishmongers to increase productivity and improve market access; (d) encourage sustainable community management of small-scale fisheries; and (e) encourage the development of aquaculture. In addition, in June 1999, the government updated a study to assess the feasibility of establishing a fisheries port. To develop the infrastructure, a fisheries port project is being developed with the assistance of the African Development Bank.
33. The government is keenly aware of the need to manage natural resources and protect the environment in order to sustain long-term economic growth. The key environmental issues include inadequate management of renewable and nonrenewable natural resources; forest depletion through bushfires; rapid population growth; and growing urban environmental problems, including inadequate sanitation. The government will continue to implement the National Environmental Action Plan in order to (a) build national capacity to regulate and monitor the rational utilization and management of natural resources and punish misuse; (b) strengthen land and tree tenure security for communities and individuals; (c) enforce actions to control bushfires, including education and community participation; and (d) formulate and implement programs to manage coastal resources, with technical assistance from the African Development Bank, including protection against sand mining along the coastline.
34. The government's objective is to promote private investment in industry, especially in export activities. To foster private investment in export-oriented activities in the context of the Gateway Project, including establishment of an industrial estate with agroprocessing facilities, the government will introduce legal, regulatory, and incentive frameworks for reexports and for the establishment of an export processing zone (EPZ) at the port and airport of Banjul. In connection with the EPZ, greater flexibility in the labor legislation governing the port of Banjul will be introduced, with technical assistance from the World Bank.
35. Although vulnerable to external shocks, tourism is a dynamic sector in the economy, with considerable potential for further growth and employment creation. The government assigns high importance to the creation of an environment conducive to private sector investment. In addition, the government will continue to improve the incentive system to encourage private hotels and restaurants to enhance the quality of services and promote diversity; it will also continue to review the use of the tourism development area, so as to allow the construction of new hotels and conference facilities. The government will also assign high priority to improving the sanitation infrastructure in the greater Banjul area, and to developing human resources.
36. To increase the access to, and reduce the cost of, telecommunications in The Gambia, the government will establish a regulatory framework in conjunction with the new divestiture strategy to deregulate the sector and increase private sector participation in the industry, with the assistance of the World Bank. In the meantime, the government will restructure GAMTEL by separating its telecommunications business from the radio and television activities. In this respect, the government will look into alternative means of partially funding the broadcasting operations. The government will also build its capacity to regulate and monitor the industry.
37. The government is determined to increase, in an economic and environmentally sound manner, the supply of electrical power, petroleum products, and household fuels in support of more rapid economic growth and an improved quality of life for the Gambian population. In 1999, after the adoption of the new divestiture strategy, the government will prepare an energy sector strategy with World Bank assistance. The strategy will seek to promote measures to reduce the cost of energy and eliminate monopolies and oligopolies in the fuelwood trade and in the petroleum and electricity sectors.
38. With regard to electrical power, the government is committed to further improving the operational efficiency and financial management of NAWEC, in order to reduce the cost of power, augment the enterprise's generating capacity, and rehabilitate and extend the transmission and distribution network. To achieve these objectives, the government will restructure the power sector and establish a regulatory framework for the sector, with a view to increasing competition and to further opening up the capital of NAWEC and the market for independent power producers. With regard to petroleum products, the government will develop its regulatory capacity while allowing the private sector to continue to play the key role in the subsector. To foster competition, the government will improve the legal framework and incentive regime, including the guarantee of open access to petroleum storage facilities. The government will also increase its capacity to regulate and monitor the technical aspects of the industry, in particular with regard to safety standards for unloading, storing, and distributing petroleum products.
39. The energy policy will seek to reduce the heavy dependence on fuelwood by introducing more efficient cooking stoves; expanding the sustainable production of bioenergy sources; implementing a sustained program of forest regeneration and afforestation; and introducing petroleum fuel substitutes for fuelwood, taking into account cost and access considerations. To this end, the management of forestry resources will be transferred to local communities. Finally, the government will promote the use of solar energy in hotels and public buildings.
40. Deficiencies in road maintenance have, over the years, led to a deterioration of the national road network. The government will adopt an effective road maintenance policy and establish a Highway Authority as part of a national transportation policy that includes establishing investment priorities in the sector and setting up the regulatory framework. The government will seek external concessional aid for this purpose, in line with the PIP project selection criteria. In the postal subsector, the government will promote the private sector's role in providing inland package delivery and pickup services.
41. Considerable progress has been achieved in enlarging the scope of the primary health care program and expanding the program of immunization by reaching a greater number of communities. The government's policy objective is to consolidate achievements in the provision of primary and secondary health services, so as to improve the delivery of, and access to, health services, particularly for vulnerable groups. To address major challenges facing the health sector, the government will continue to (a) improve the management and efficiency of health delivery services within the context of its decentralization policy; (b) promote greater community participation in health policy development, and in the financing and management of health care units; (c) promote collaboration with nongovernmental organizations (NGOs); (d) enhance health facilities and medical equipment and stimulate the distribution and use of generic drugs; and (e) emphasize human resources development, including nurse-training programs. Health promotion through information, education, and communication campaigns will also be emphasized.
42. The government recognizes, based on the preliminary outcomes of the public expenditure review (PER) in the health sector, that distortions in intrasectoral resource allocation have favored the tertiary level of care at the expense of priority primary health care objectives. To address this issue, the government will implement the health PER recommendations in consultation with the World Bank; ensure that budgetary allocations to primary and secondary health care will, at a minimum, be preserved in real per capita terms; gradually phase in additional health facilities, including the Farafenni and Bwiam hospitals, based on the availability of bilateral technical cooperation to provide equipment and health specialists at minimal cost; ensure further cost-saving measures and cost recovery in the hospital sector; and promote the development of mutual health insurance organizations.
43. The high rate of population growth and the low level of family planning are serious factors hindering The Gambia's socioeconomic development. The current population growth rate is estimated at about 4.2 percent (the natural population growth is estimated at 3 percent), and the total fertility rate has remained high. The government recognizes the macroeconomic and social implications of these indicators and is fully committed to enlarging the scope of family planning services and ensuring the integration of these services into the primary health care system.
44. The government is committed to conducting an ongoing review of its health financing policy in order to provide a more solid information base on which to take decisions. To that end, in 1999-2001, it will be carrying out a series of studies, including a health-mapping study, which will assess the existing health pyramid (primary, secondary, and tertiary), and make efficiency recommendations as to norms and standards for the future; a study on household expenditures and ability to pay, and on the provision of health care linkages by the public and private sectors; and a more extensive dialogue between public and private health care providers. It will also be developing a comprehensive health management information system, which will provide data on health, finance, human resources, and drugs and maintenance information.
45. In terms of specific improvements and goals in health care, by 2003, the government intends to reduce infant mortality to 65 per 1, 000 live births from 80 per 1, 000 (1995); reduce by 50 percent the number of pregnant women with clinical evidence of active sexually transmitted illnesses; reduce by 10 percent the total fertility rate; and reduce by 25 percent malnutrition in children.
46. The government will continue to implement the National Education Policy (NEP, 1998-2003) and its accompanying investment program through a Sector Education Program, which aims at providing educational opportunities for all its citizens. The recently enhanced and extended NEP aims at the provision of a nine-year basic education. To this end, the NEP targets a 98 percent gross enrollment ratio in primary education (grades 1-6), and a gross enrollment ratio of 70 percent in grades 7-9 by the year 2006. These objectives are partly based on the ongoing trend, which shows that the primary gross enrollment ratio rose to 77 percent in 1996 from 63 percent in 1990. To improve learning outcomes, the policy aims at making sufficient textbooks and teaching materials available to children and upgrading teacher education and the curriculum. It will also promote equity, capacity building, and sector management, which have not received sufficient attention in the past, as well as emerging issues in higher education and sector financing.
47. The main education issues to address are provision and maintenance of sufficient facilities, and the lowering of barriers to enrollment for girls and the poor. These will be addressed by (a) developing a construction and maintenance strategy; (b) making better use of existing resources by significantly expanding double-shift and multigrade teaching and providing support to madrassas (Muslim schools or universities); and (c) increasing the supply of trained teachers in an affordable way and making sufficient textbooks and teaching materials available.
48. Considerable progress has been made in the 1990s in increasing budgetary resources for education. As a result, the share of education in the recurrent budget rose from about 15 percent in 1990/91 to almost 22 percent in 1998. However, student-teacher ratios are low, and inadequate resources are spent on instructional materials, compared with expenditure on scholarships for tertiary education, school bus services, and the school-feeding program. Based on the outcomes of the public expenditure review in the education sector, the government will undertake measures to rationalize expenditure at all levels of education, inter alia, by expanding double-shift and multigrade teaching; developing a partnership between the public and private sectors in the provision and financing of vocational and technical training (VTT); and introducing a management information system. The government will proceed prudently with the development of tertiary education by upgrading the Gambia Technical Training Institute, the Management Development Institute, and the Gambia College.
49. The government attaches high priority to poverty alleviation, among other reasons because over 50 percent of the population lives below the national poverty line. The Strategy for Poverty Alleviation (SPA), adopted in 1994, is based on macroeconomic and sectoral policies aimed at promoting equitable economic growth and improving social services to the poor. The strategy, endorsed by the donor community at the 1994 roundtable meeting, comprises four pillars: (a) enhancing the productive capacity of people; (b) improving access to, and quality of, social services; (c) building capacities at the local level; and (d) promoting participatory communication. In the context of the SPA, the government will continue to emphasize the provision of public services to the poor and the promotion of a national dialogue on poverty alleviation by creating an enabling environment for fruitful partnership with NGOs, the private sector, development partners, and community-based organizations. To facilitate the (a) national dialogue, (b) the coordination of the National Poverty Alleviation Program (NPAP) and the SPA process, (c) poverty monitoring, (d) resource mobilization, (e) local capacity building, and (f) the channeling of SPA resources to the beneficiaries, the government has established the Strategy for Poverty Alleviation Coordination Office (SPACO) at DOSFEA. The authorities will focus on building the capacity of SPACO with donor assistance; fostering local institutional capacity to identify, implement, monitor, and coordinate development programs and projects that focus on poverty reduction; and establishing and monitoring poverty indicators.
50. The Gambia's adjustment and reform strategy, including the envisaged trade reform, is aimed at improving its competitiveness and integration into the world economy while ensuring its medium-term financial viability. The volume of total exports and reexports is expected to grow on average by 8 percent annually during 1999-2001, in light of a strong recovery of groundnut exports and an expansion of nontraditional exports. The earnings from tourism are expected to continue to increase as well. The total volume of imports is expected to grow by about 4 percent a year, mainly reflecting a strong increase in project-related imports, higher nongovernment investment, and tourism-related imports. The terms of trade, which are projected to deteriorate by 13 percent in 1999 on account of rising oil prices, are expected to remain virtually unchanged during 2000-01. As a result, the external current account deficit (excluding official transfers) is projected to narrow from 11½ percent of GDP in 1998 to 10 percent in 2001.
51. External financing requirements for 1999-2001 amount to SDR 164½ million, of which SDR 53 million is needed in 1999 (Table 4). These requirements will be largely financed by assistance from multilateral and bilateral donors and lenders to The Gambia's development projects, in the form of transfers and concessional long-term loans. There remains nevertheless a residual financing gap for 1999-2001 estimated at SDR 23 million, which would be covered by the use of Fund resources under the ESAF and by budget support from the European Union and other donors. A roundtable meeting is scheduled for November 23-24, 1999 in Geneva.
52. The Gambia's total outstanding external public debt amounted to US$439.2 million at end-December 1998, or 105.7 percent of GDP (Table 5). Debt owed to multilateral creditors represented approximately 80 percent of the total stock of outstanding debt, including about 3.2 percent to the International Monetary Fund and 3.8 percent to the World Bank. Debt owed to official bilateral creditors accounted for almost 19 percent of the total outstanding, including about 8 percent to Taiwan Province of China and less than 5 percent to Paris Club creditors. All debt-service obligations on rescheduled debt to Paris Club creditors have been fulfilled. Projected debt service is estimated at US$16.6 million in 1999, including US$5.6 million in interest. Some 74 percent of the debt service is due to multilateral creditors. Debt-service obligations in 1999 represent about 7.2 percent of exports of goods and nonfactor services.
53. An external debt sustainability analysis was conducted jointly by the Gambia authorities and the IMF and World Bank staff in 1998. The updated calculations (including recent projections for revenue and exports, which exceed 15 percent and 30 percent of GDP, respectively) indicate that, at end-1998, the net present value of the external public debt stock and debt service amounted to 105 percent and 9¼ percent of exports of goods and nonfactor services, respectively. In 2001, the net present value of the external public debt and the total debt service are estimated at 88.3 percent and 8.1 percent of the exports of goods and nonfactor services, respectively. The NPV of debt-to-revenue ratio was 285 percent at end-1998 and, on this basis, is projected to fall to about 255 percent in 2000 and 239 percent in 2001. The Gambia would thus, in principle, be eligible to be considered for assistance under the fiscal criteria of the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative) framework recently proposed in the Cologne Summit Communiqué. However, the country has a Paris Club cutoff date of July 1, 1986, and the impact of traditional debt-relief mechanisms on remaining debt may be quite limited. A closer examination of the possible costs and benefits of seeking assistance under the HIPC Initiative is desirable, and, with the recently begun exercise to update The Gambia's external debt data, assisted by the World Bank, the government will collaborate with the IMF and the World Bank to complete a detailed Debt Sustainability Analysis in the near future.
54. To continue to improve its external debt-service profile, The Gambia will keep seeking grants and loans on concessional terms. Accordingly, the government will neither contract nor guarantee any new nonconcessional external loans (that is, loans not entailing a grant component of at least 35 percent). Similarly, the government will neither contract nor guarantee any external loans with maturities of less than one year, with the exception of normal import credits. It will subject any loan contracted or guaranteed by the government to prior approval from DOSFEA, and it will ensure that the recommendations in the World Bank consultant's report on the debt-reporting system are fully implemented. The government will not accumulate any external payments arrears.
