A mission from the International Monetary Fund (IMF) led by Bhaswar Mukhopadhyay, visited Banjul from June 9-22, 2015 to conduct discussions for the 2015 Article IV consultations and to take stock of performance under the Staff Monitored Program (SMP) approved in April 20151.
At the end of the mission Mr. Mukhopadhyay issued the following statement:
“The Gambian economy experienced sizable exogenous shocks in 2014 on top of persistent policy slippages. The regional Ebola outbreak is estimated to have cut tourism receipts for the 2014/15 season by more than half while the delayed summer rains in 2014 led to a 15 percent decline of the year’s crop with serious implications for food security. These shocks come in the wake of an extended period of weak policy implementation, putting additional pressure on the current account, fiscal deficits and public debt. Real GDP contracted by about 0.25 percent in 2014 while inflation increased to about 7 percent at end-2014 from 5.5 at end-2013. Gross international reserves declined from almost 5 months of imports at end-2013 to 3.7 months at end-2014 while public debt rose sharply to 100 percent of GDP as at end-2014.
“To support the Gambian economy the IMF disbursed $10.8 million in April 2015. The Gambian authorities also undertook to implement corrective policies with the broad objective of achieving a sound fiscal position over the medium-term, which IMF staff agreed to monitor at the authorities request. The Gambia’s other development partners committed to provide significant levels of assistance in support of the Gambian authorities’ policy efforts.
“The outlook for 2015 is, however, again clouded by policy slippages. Significant spending pressures have emerged since April 2015, and faced with pressures on the exchange rate at the onset of the lean season for foreign exchange receipts, the authorities issued a directive fixing the exchange rate at a level overvalued by more than 20 percent compared with prevailing market rates in May. The significant revenue fallout from this measure and the spending pressures have started to weigh on the government’s domestic borrowing.
“As a result, The Gambia’s external and fiscal sustainability are at a grave risk. Moreover, in the absence of urgent action, the social progress made in recent years is also under threat. The mission urges the authorities to implement quickly the measures identified in the 2015 budget. Furthermore, since the imposition of the exchange directives has materially damaged the economic prospects and fiscal situation facing The Gambia, the authorities must take additional steps in order to limit domestic borrowing. The mission also urges the authorities to rescind the recent exchange rate directive as soon as possible and return The Gambia to a flexible exchange rate policy, which has served the country well.
“The mission encourages the authorities to strengthen efforts to address the financial problems of the National Water and Electricity Company (NAWEC) and other public enterprises in order to limit their strain on the state budget. The authorities also need to get a firm grip on key public enterprises’ cash flow and establish promptly a monthly monitoring mechanism. Over the medium term, the authorities should also expeditiously firm up the medium-term restructuring strategy on the energy and telecommunication sectors.
“Although The Gambia has made visible progress in improving social indicators, there is still significant scope to enhance prospects for inclusive growth. The authorities are encouraged to delineate a strategy to reduce vulnerability to droughts so as to avoid repeated breaks in economic growth. In this regard, the government’s medium-term development plan currently being developed should prioritize continued investment in the country’s water management system to boost agricultural productivity and rural incomes.
“There is significant room to enhance the business environment by simplifying the tax system, improving access to electricity and creating room for lending to the private sector in order to unlock private sector investment and growth. The mission encourages the Central Bank of The Gambia to continue leaning against inflationary pressures and stepping up measures to foster financial intermediation and safeguard financial sector stability.
“The mission met with Finance Minister Abdou Kolley, Secretary General and Minister for Presidential Affairs Lamin Nyabally, Central Bank Governor Amadou Colley, other senior government officials, members of parliament, senior officials in public enterprises, and representatives of the private sector, civil society organizations, the banking sector, and development partners.”