Friday, March 23, 2018

IMF extends Gambia's Staff Monitored Program, tells government to focus on reducing debt vulnerabilities and to "streamline the civil service."

IMF Executive Board 
The IMF Board met yesterday and concluded the Article IV consultation with The Gambia.  The Board took note that the Gambian economy has started to recover after a slowdown in 2016. 

In 2017, growth is estimated at 3.5% with the assumption that there will be a good agricultural season and a strong rebound of tourism.  Inflation has also declined to 6.4% in January 2018 from 8.8% in January 2017 suggesting that the dalasi has stabilized and a gradual decrease of food prices.

The IMF also noted that with much improved fiscal discipline and external financial support,  the dalasi has remained stable since last April and reserves increased from 1.6 months of import cover at end 2016 to 2.9 months at end 2017.

The Gambia's request for an extension of the Staff Monitored Program (SMP) first approved in March 2015 was approved by the IMF Managing Director for another six months, providing the government with more time to develop a track record of performance to qualify the country for an Extended Credit Facility which is the ultimate goal of the government.

The Executive Directors noted that strict fiscal discipline coupled with substantial external support resulted in substantial reduction in domestic borrowing.  "Going forward," observed the Directors, "it will be important to maintain the focus on reducing debt vulnerabilities and implementing reforms to increase private sector activity."

While encouraging government to continue its efforts in maintaining fiscal stability,  the Directors urged that spending be contained while raising domestic revenue.  To achieve this goal, the revenue measures delayed to 2018 must be implemented, as well as further efforts "to streamline the civil service."   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.

The Gambia's debt exposure, specifically the substantial debt vulnerabilities, was highlighted by the Executive Directors as cause for concern.  The resource mobilization strategy that Gambia is urged to adopt will need to focus on exclusively grants.  Even highly concessional loan must be avoided in the medium term because of the external debt situation Gambia finds itself. 

The government is encouraged to crowd in the private sector to support broad-based growth by increasing access to credit for private enterprises to invest and grow.  Directors urged further improvement of the business environment and the strengthening of governance.   They also noted that reducing income and gender inequality would support economic growth as well as achieving better social outcomes.