The Executive Board of the International Monetary Fund (IMF) has approved a 36-month arrangement under the Extended Credit Facility (ECF), in the amount of SDR 74.64 million (about US$100 million), for Gambia.
A statement on Monday said that the Executive Board’s decision enables an immediate disbursement of SDR 10.9 million (US$ 14.56 million).
The programme will build on the recently completed 202023 ECF-supported programme and the authorities’ 2023-2027 Recovery-Focused National Development Plan and aims to strengthen economic recovery, tackle inflation, address foreign exchange pressures, reduce debt vulnerabilities, advance structural reforms, and foster strong and inclusive growth, it said.
The Executive Board also concluded the 2023 Article IV consultation with The Gambia, the statement said.
The policy consultation focused on drivers of inflation, macroeconomic implications of the gender gap, climate-related risks and policies, debt sustainability, and external stability.
The statement pointed out that Gambia has weathered more resiliently successive exogenous shocks, namely the COVID-19 pandemic and Russia’s war in Ukraine, relative to peer countries.
The IMF Board said economic growth, supported by tourism and public and private construction, is expected at 5.6 percent, up from 4.9 percent in 2022.
In the medium term, growth is expected at around 5 percent, supported by strong remittance inflows, sustained recovery in the tourism sector, and new infrastructure projects.
Headline inflation remains elevated, at 18.0 percent year-on-year in October 2023, driven primarily by international commodity prices. Inflation is projected to gradually ease following the tightening of the monetary policy stance.
“Foreign exchange pressures and shortages are reemerging. Forex reserves, in months of imports, are projected to slightly decline in the medium term due partly to the expiration of the debt service deferral period, but to broadly remain at an adequate level (around 4 months) with the support of disbursements from the IMF and other development partners,” the statement said.
Mr. Bo Li, Deputy Managing Director and acting Chair, said Gambia has been consolidating its democratic transformation. The 202023 ECF arrangement accompanied the country’s socioeconomic reforms and helped alleviate the repercussions of the COVID19 pandemic and Russia’s war in Ukraine.
Nonetheless, inflation persists, foreign exchange pressures are reemerging, and debt vulnerabilities remain high, he said, adding that the authorities are committed to maintaining macroeconomic stability, reducing debt vulnerabilities, and pursuing reforms under a new IMFsupported programme.
Fiscal, monetary, and exchange rate policies under the new programme aim to address the near- and medium-term challenges.
Mr. Li said as such, policy efforts should focus on fiscal consolidation to build fiscal resilience, while safeguarding priority and poverty-reducing spending. Monetary and exchange rate policies will aim to tackle inflationary pressures and address foreign exchange pressures through a marketdetermined exchange rate.
“To firmly put public debt on a downward trajectory, it is paramount to implement the planned medium-term fiscal strategy, including further streamlining of tax incentives and fuel subsidies, rationalisation of subsidies to state-owned enterprises, and better prioritisation of public investment projects. The authorities are committed to overhauling the SOE sector, bolstering domestic resource mobilisation, and advancing governance reforms, in line with the recommendations from an IMF governance diagnostic mission.”
Mr. Li said given lingering vulnerabilities, including the upcoming expiration of debt service deferrals, it would be important to build fiscal and external buffers.
In this regard, maintaining prudent domestic borrowing, strictly adhering to the external borrowing plan, and seeking grants and highly concessional financing would be key.
“The authorities are encouraged to persevere in their ambitious structural reform agenda, including on enhancing governance and improving the business environment to support private sector-led growth and poverty reduction. Adopting strong climate-related policies and tackling gender inequality would also support more resilient and inclusive growth,” Mr. Li said.