Wednesday, January 14, 2015

IMF to put Gambia on a short leash with Staff Monitored Program

Hot off the press is the IMF release on its recently concluded mission which is, as expected, not a a good report.  It shows that the Fund has finally come to terms with the regime's persistent lack of discipline in managing an economy that continues to be on the skid.  The full press release is here.

The Fund observed, and rightly so, that although The Gambia is Ebola-free, the outbreak has caused tourists to stay away with a projected decline by 60%, prudent management has been lacking for two years running, characterized by high government borrowing which pushes interest rates upward which increased interest payments considerably,

The Mission Leader then made the following remark :   “In light of substantially higher borrowing by the government and looming risks, it is imperative to reinforce corrective measures and to make bold choices about spending priorities."  One of the "bold choices" that the Fund is finally insisting that the Jammeh regime takes is to submit itself into a Staff Monitored Program (SMP).

Although it is described in Fund Manuals as a "voluntary program", SMP means, in short, that Gambia will be on a short leash if it is to get further Fund assistance.  Missions will be more frequent and each target missed has a penalty associated with it, including withholding of tranches   Liberia was on a SMP and so was Zimbabwe and Sudan.  Gambia has joined a group of countries that had the worst record on economic management at some point.

The regime has once again promised the Fund that it will limit net domestic borrowing to one percent of GDP this year which, the Fund noted, will require vigilance - a very rare commodity in this regime.  The economy is in the mess it's in for lack of vigilance and discipline.  It is a regime that likes to "celebrate" "commemorate" and throwing expensive parties on so frequent a basis in order to divert the attention of the citizenry from the harsh economic realities.

The Fund has informed us that discussions are underway with authorities about entering into a staff monitored program (SMP) "with a view to a future lending arrangement." The party may not be over but the punch bowl has just been pulled from the drunks.  We'll see who'll be the first to notice.

Reforms of public enterprises is also being demanded of the regime.  We all know how the Gambian Ports Authority (GPA), GAMTEL, Social Security and Housing Finance Corporation (SSHFC), National Water and Electricity Company (NAWEC) and others have been mismanaged over the years leading to insolvency that is straining the budget.  NAWEC appears to be a prime target for restructuring but, according to the Fund,"similar efforts will be required for a number of other public enterprises that have recently experienced financial distress."

The Fund, in concluding, acknowledged the regime's "bold steps in its budget agreements, its reform agenda for public enterprises, and its rallying of the donor community." To turn interest rates around and reduce pressure on the Dalasi, the budget agreements and all other commitment the regime has made to the Fund will have to be be adhered to and efforts maintained.

It now all boils down to the Staff Monitored Program negotiations.  Will Jammeh buy into the final deal that will be struck because, essentially what it means is a significant reduction of his dictatorial powers he has over the entire Gambian economy.  Only time will tell.