by Ousman Sillah
Bhaswar Mukhopadhyay, the International Monetary Fund (IMF) Chief of Mission to The Gambia, advised that the Gambia government needs to urgently implement corrective policies to prevent a further deterioration of the country’s worsening economic situation that could bring about a disruptive forced adjustment with devastating consequences.
This alarm bell was raised at the second IMF outreach Forum with Civil Society Organisations (CSOs) held on Friday, 19 June, 2015 at the TANGO conference hall.
The IMF Mission Chief said the Gambia government has been implementing loose fiscal policies for a very long time which has created serious economic problems. He said these slippages alongside the persistent financial difficulties in public entreprises have pushed the country’s extended credit facility arrangements off track. He said the excessive borrowing from local sources through treasury bills to address significant government over spending financed by the Central Bank of The Gambia (CBG) which include unbudgeted spending, among others, are no longer sustainable. He added that the recent exchange rate restrictions, pressures on the Gambian Dalasi, withholding of donor support and external shocks such as the Ebola etc. have also contributed in exacerbating the economic problems.
Mr. Mukhopadhyay said the purpose of this IMF Mission visit to the Gambia this time round is not about giving financial support to the country but to impress on the authorities the need to urgently undertake corrective actions to stave off an impending economic catastrophe.
He said things have become much worse than expected as domestic debt is now 50 percent of GDP.
“We have passed the message to both the government and the National Assembly,” said the IMF official.
The IMF’s Mission Chief gave an assessment of a worsening economic situation if the correct fiscal policies are not immediately implemented. It indicated that policy implementation has been characterized by very large fiscal slippages, including quasi-fiscal spending to address financial difficulties in key public entreprises such as NAWEC, Gamtel and Gamcel on loan repayments and operations.
Mr. Mukhopadhyay disclosed that the IMF has been talking to the government of the Gambia and that there is an understanding among officials of the gravity of the problem and the need to adopt immediate corrective measures to save the already bad situation from deteriorating further. He, however, added that it is unfortunately not the case at all levels of government, especially among those who should take the decisions.
The IMF head of mission said “there is no time for Gambia to waste in implementing corrective measures before the bottom drops out.”
He said Gambia government’s main source of revenue is on import duties and value added tax (VAT) on goods and services. He explained how pressures on the Gambian Dalasi based on restrictions and an overvalued currency affects imports as well as revenue earnings from these sources.
The IMF official further revealed that the government’s net domestic borrowing through treasury bills was targeted at 2.5 percent of GDP as advised but that it reached 12.5 percent in 2014.
He said the commercial banks have limited resources and can no longer meet the government’s excessive financing needs and that as such the Central Bank has stepped in by printing money and dipping into the reserves which will increase pressure on currency and inflation.
The IMF noted that even if all the corrective measures are undertaken and external shocks avoided, it will take some time for the economy to fully recover.
The IMF Mission Chief said the purpose of meeting with civil society is to share with them information on the current economic problems facing the country with a view to engaging them in the process of influencing policy changes.
Also addressing the forum were Mr. Gaston K. Mpatswe, IMF Resident Representative in The Gambia, Mr. Ousman Yarbo, Executive Director of TANGO, and Mr. Kebba K. Barrow, Programme Officer-Networking, TANGO.
The IMF delegation also included Madam G. Nkhaya, Senior Advisor –Gambia, and Mr. Bernard Mendy, local Economist.