A team from the International Monetary Fund (IMF), led by Mr. Ivohasina Fizara Razafimahefa, Mission Chief for The Gambia, has completed a virtual mission with the Gambian authorities in which they discussed the second review of The Gambia’s economic program supported by the IMF’s Extended Credit Facility (ECF).
Mr. Razafimahefa said: “The mission team reached staff-level agreement with the Gambian authorities on economic and financial policies that could support the approval of the second review of the ECF-supported program. Performance under the program has been strong despite the challenges caused by the COVID-19 pandemic. All quantitative targets at end-December 2020 were met. The structural benchmarks were also completed.
“The staff-level agreement is subject to approval by IMF management and the IMF Executive Board. Consideration by the Board is tentatively scheduled for May 2021; upon approval of this second review of the program, SDR10 million (around US$14 million) will be made available to The Gambia,” he said.
“The Gambian economy has significantly been affected by the COVID-19 pandemic. Economic growth is estimated to have decelerated from 6.1 percent in 2019 to zero percent in 2020, due primarily to a sharp decline of the tourism sector, partly attenuated by good agricultural production and strong private construction financed by large inflows of remittances. Inflation subsided from 7.7 percent (year-on-year) at end-2019 to 5.7 percent at end-2020, partly reflecting weak domestic demand.
“The budget deficit was contained at 2 percent of GDP despite the authorities’ swift and effective responses to address the spread of the COVID-19 pandemic and support the population and the economy. This commendable fiscal outturn helped bring down further the public debt-to-GDP ratio. Liquidity expanded significantly, fueled by private remittances, but credit to the private sector grew only by 0.8 percent as banks have adopted a prudent approach in providing loans given the highly uncertain economic environment. Foreign exchange reserves strengthened further, exceeding 5 months of prospective imports in February 2021.
“The Gambian authorities are adhering to their commitments on the transparency of COVID-19 spending. They have published the details of all COVID-19-related procurement contracts on the website of the Gambia Public Procurement Authority (GPPA). An audit of this spending is underway, and the report is expected to be published in September 2021. Good progress has also been made on revenue administration and public financial management, including on the cleaning of taxpayers’ registry, a digital transformation of the revenue administration, an audit of the ministries/departments/agencies, civil service reforms, the selection of public investment projects, cash management, and the roll-out of the integrated financial management information system.
It would be important to unlock the constitutional reform process, still being debated, to allow advancing some key macroeconomic policies, including on state-owned enterprises and public finance management.
“Going forward, some recovery of economic activity is expected in 2021, predicated on a continued good performance of private construction and agriculture, the acceleration of projects related to the Organization of Islamic Cooperation, as well as a gradual resumption of other activities following the COVID-19 vaccination campaign. In the medium term, economic growth is expected to return to its long-run average of about 6 percent as tourism returns to pre-pandemic levels and the global economy recovers. The authorities are making the necessary efforts to address fiscal pressures on both revenue and expenditure in 2021. They are committed to pursuing their prudent borrowing policy to continue to reduce debt vulnerabilities in the medium term.
“The mission held discussions with Minister of Finance and Economic Affairs Mambury Njie, Governor of the Central Bank of The Gambia Buah Saidy, senior staff of the Ministry of Finance and Economic Affairs, the Central Bank of The Gambia, the Ministry of Agriculture, the Ministry of Works and Transport, the Ministry of Tourism, the Ministry of Justice, and some state-owned enterprises. The mission also discussed with representatives of the private sector and development partners. The mission would like to thank the Gambian authorities for the constructive discussions and their cooperative spirit.”
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. It supports countries’ economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. The ECF may also help catalyze additional foreign aid.