For more information, see The Gambia and the IMF
Banjul, November 8, 1999Mr. Michel Camdessus
International Monetary Fund
Washington, D.C. 20431
Dear Mr. Camdessus:
1. The medium-term objectives of The Gambia's new program of economic and financial adjustment supported by the second annual arrangement under the Enhanced Structural Adjustment Facility (ESAF) are set forth in the policy framework paper (PFP) for the period 1999-2001, which was prepared in close cooperation with the staffs of the IMF and the World Bank and forwarded to you on November 8, 1999. The government will make this letter, the attached memorandum of Economic and Financial Policies for 1999-2000, and the PFP available to the public.
2. The attached memorandum on The Gambia's economic and financial policies for 1999-2000, which is based on the above-mentioned PFP, outlines the objectives and specific measures that it intends to implement during the one-year period beginning October 1, 1999. To support these objectives and policies, the government of The Gambia hereby requests the second annual arrangement under the three-year ESAF, in an amount equivalent to SDR 8.6 million (27.6 percent of quota). This access entails an increased amount of SDR 1.73 million under the second annual arrangement due to the rephasing of the amounts undisbursed under the first annual arrangement. The government will also request support from the World Bank and from bilateral and multilateral donors and creditors.
3. The government of The Gambia will provide the Fund with any information the Fund may request in connection with The Gambia's progress in implementing the economic and financial policies and achieving the objectives of the program.
4. The government of The Gambia believes that the policies and measures set forth in the attached memorandum are adequate to achieve the objectives of the program, but it will take any further measures that may prove necessary to this end. During the period of the second annual ESAF arrangement, the government will consult with the Managing Director on the adoption of any measures that may be appropriate, at the initiative of The Gambia or whenever the Managing Director requests such a consultation. Moreover, after the period of the second annual arrangement and while The Gambia has outstanding financial obligations to the Fund arising from loans under that arrangement, The Gambia will consult with the Fund from time to time, at the initiative of the government or whenever the Managing Director requests consultation on The Gambia's economic and financial policies.
5. The government of The Gambia will conduct with the Fund the first review of its program under the second annual arrangement, which should be completed by mid-June 2000. The second review will take place shortly after the end of the program period and be completed by end-November, 2000.
Attachment: Memorandum on Economic and Financial Policies for 1999-2000
1. In the context of its continued reform efforts to promote economic growth and poverty alleviation, the government of The Gambia adopted a medium-term economic and financial program (April 1, 1998-March 31, 2001), supported under a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF). This memorandum reviews performance under the program supported under the first annual arrangement, approved by the Executive Board on June 29, 1998 (EBS/98/102; 6/30/98, Supplement 1,). It also outlines the government's objectives and policies for 1999-2000 (October-September). The Gambia's updated medium-term economic and financial program for the three-year period to September 30, 2001 is described in detail in the policy framework paper (PFP), prepared in collaboration with the staffs of the Fund and the World Bank.
2. Overall economic performance under the first annual ESAF arrangement was mixed. Despite significant progress, there were some setbacks, through early 1999, in implementing the program, which prevented the completion of the midterm review under the first annual ESAF arrangement. Moreover, governance problems arose in connection with the government's seizure of the property of the Gambia Groundnut Corporation (GGC). The government is determined to consolidate the economic gains made in 1998 and so far in 1999 while addressing a number of slippages and adverse developments during this period so as to achieve strong momentum toward realizing its medium-term economic and financial objectives. Already, significant progress has been made in strengthening budgetary performance and implementing structural measures, as well as in efforts to reaching a settlement with the GGC.
3. Real GDP growth in 1998 was, at 4¾ percent, higher than programmed, with better performance across the board, notably in the agricultural and tourism sectors. The good harvest in 1998 helped to contain average inflation at about 1 percent--below the program target. The stronger-than-envisaged import demand coincided with worse-than-programmed terms of trade, contributing to an increase in the external current account deficit (excluding official transfers) to 11½ percent of GDP. Gross official reserves increased to SDR 75.4 million in 1998, the equivalent of about four month of imports of goods and services. For 1999, real GDP growth is projected to moderate to 4½ percent, while some recovery in food prices is projected to contribute to an increase in average inflation to 2½ percent. Moreover, the more moderate growth in imports is likely to be more than offset by the growth in exports, notwithstanding a projected 13 percent deterioration in the terms of trade. All external debt service obligations have been met in a timely fashion. The CPI-based real effective exchange rate of the dalasi, which depreciated by 1.6 percent during 1998, appreciated by 3.6 percent through July 1999.
4. Despite setbacks in implementing the budget during the fourth quarter of 1998, the government managed to address the underlying problems to bring fiscal performance broadly on track in 1999. Fiscal policy was tightened appreciably through September 1998. However, with slippages in the fourth quarter, the overall fiscal deficit (excluding grants) of 4½ percent of GDP for the year exceeded the program target of 4 percent and resulted in the breaching of the end-December benchmarks with respect to the primary balance and domestic arrears. This outturn reflected shortfalls in customs tax revenue collection because of administrative problems in the customs department and the impact of the reduction, effective July 1998, in the maximum duty rate from 90 percent to 25 percent (except for alcohol, tobacco, and vehicles), and the reduction in the number of import duties from 30 to 18. On the expenditure side, there were overruns in recurrent outlays that were only partially offset by shortfalls in capital expenditure. The budget for 1999 did not fully incorporate either the potential impact of a reduction of the maximum import duty further to 20 percent effective January 1, 1999 or the reduction in taxes on petroleum products aimed at passing through the decline in world market prices. To rectify this, the government adopted supplementary budgetary measures in June to strengthen customs revenue collection and contain recurrent expenditure. However, the impact of these measures, together with a more realistic level of foreign-financed development expenditure, is to be partly offset by a D 18 million emergency expenditure to repair damage caused by inclement weather. The government intends to include in the budget for 2000 the cost implications of an agreement with the GCC when details become available, together with offsetting measures. The overall budget deficit (excluding grants) in 1999 is now projected at 3 percent of GDP.
5. The growth of broad money was reduced to about 10 percent in 1998 from a level of 22 percent in 1997 and is projected to increase to 14 percent in 1999. In both 1998 and 1999, it exceeds the growth rate of nominal GDP, mainly because of a much larger-than-envisaged increase in the net foreign assets of the banking system. Credit to the government declined in 1998 and remained below the programmed level as government relied more on nonbank financing; it is projected to grow only moderately in 1999. Private sector credit growth was 15 percent in 1998 and was provided mainly to the trade and transport sectors. For 1999, credit to the private sector is projected to moderate slightly to 14 percent. With low inflation, the treasury-bill rate fell in a number of steps from 16 percent in September 1998 to 14 percent in December. Lending rates declined also from 19 percent to 18 percent. In October 1999, the treasury-bill rate declined further to 13 percent.
6. To strengthen the soundness of the banking system, measures were taken to reduce the share of nonperforming loans in the banks' portfolio from an average of 27 percent at the end of 1997 to 22½ percent at the end of 1998, while the average shortfall of provisions against the required amount decreased from 46 percent to only 10 percent. Moreover, the government reached agreement with a major commercial bank on the settlement of D 45 million of nonperforming loans of the ex-Gambia Cooperative Union (GCU), and the Central Bank of The Gambia (CBG) agreed with commercial banks on a program for full provisioning in 1999, which was achieved as of June 1999.1 The financial sector was further strengthened with the establishment of a commercial chamber in the High Court in 1998 to facilitate collateral liquidation and bankruptcy procedures. To further open up the banking sector to private activity, the Trust Bank was privatized through a competitive bidding process ahead of the original schedule.
7. The implementation of other structural measures encountered some difficulties mainly because of the limited institutional capacity. In particular, the structural performance criterion for end-November 1998 on the adoption of a new divestiture strategy, and structural benchmarks with respect to the adoption of a procurement code and implementation of a new investment incentive code were not observed. Accordingly, the government made greater efforts in 1999 to address these issues. It convened several workshops in Banjul, including in April, with the support of the World Bank and participation of the private sector, to discuss the drafting of a comprehensive divestiture strategy. The World Bank provided further assistance in preparing a detailed work program, including terms of reference for a consultant. Further progress was also made in revising the draft of the investment code with technical assistance from UNCTAD.
8. In the groundnut sector, the government decided to liquidate the GCU in April 1998, and cleared a small outstanding debt to Sonacos--a Senegalese groundnut marketing company--in order to increase competition in crop marketing. In January 1999, the government took over the GGC processing plant, following a period of growing dissatisfaction with the role of the company in the groundnut sector and the difficult negotiations on the producer price for the 1998/99 crop season. However, recognizing the need to restore private sector activity in this important sector, and with a view to restructuring it to increase competition (with financial and technical assistance from the European Union), the government initiated discussions with Alimenta in order to resolve the problems in a mutually agreeable manner. However, in July Alimenta filed for arbitration with the International Center for Settlement of Investment Disputes (ICSID), and in August the government filed charges against the GGC and its directors in the Banjul magistrates court.
9. To consolidate the economic and financial progress made under the first annual arrangement, the main elements of the government's medium-term strategy are to (a) further strengthen public finances to contain the budget deficit and the unsustainable domestic debt; (b) continue and deepen structural reforms to promote private sector development; (c) strengthen the institutional capacity with the help of better access to technical assistance; and (d) implement a comprehensive social agenda, especially in the agricultural, education, and health sectors. Within this framework, the key macroeconomic objectives of the program are to (a) limit average inflation to 2½ percent per annum; (b) reduce the external current account deficit (excluding official transfers) from 11½ percent of GDP in 1998 to 10¾ percent in 1999 and 10½ percent in 2000; and (c) maintain gross external reserves at above four months of imports of goods and services. Real GDP growth is projected at 4¼ percent in 1999 and 5 percent in 2000. Total investment is projected to increase from 18½ percent of GDP in 1998 to 19½ percent in 2000, and the envisaged increase in government savings-investment balance of 2 percentage points of GDP would contribute to the improvement in the external current account.A. Fiscal Policy
10. The fiscal program through 2000 aims at reducing the overall deficit (excluding grants) from 4½ percent of GDP in 1998 to about 3 percent in 1999 and 2½ percent in 2000, with a repayment of domestic debt of about D 59 million in 2000 (equivalent to 5.1 percent of total outstanding government domestic debt at end-1998). The basic primary balance is projected to increase from 5¾ percent of GDP in 1998 to 6½ percent in 1999 and then to 7½ percent in 2000. For the last quarter of 1999, the government has issued a circular for across-the-board cuts (except for priority areas) to reduce expenditure by about D 17 million. The targets for 2000 are incorporated in the government budget, which was approved by the cabinet on October 22, 1999 and will be underpinned by further efforts to strengthen revenue performance while improving expenditure control and the efficiency of expenditure allocation, partly with IMF technical assistance.
11. Domestic revenue is projected to grow to about 20 percent of GDP in 2000 from about 18¾ percent in 1998, supported by a number of measures, including (a) strengthening of income tax collection through better assessment and enforcement, as well as the provision of personnel, incentives, and equipment to the income tax department; (b) continued strengthening of customs tax administration with input from IMF technical assistance, the completion of the introduction of the Automated System of Customs Data (ASYCUDA) by April 2000, and the introduction of preshipment inspection effective October 1999; (c) an increase in the price for petroleum products of about 6 percent effective January 2000 (raising an estimated D 24 million, or 0.4 percent of GDP), entailing also a switch from specific to ad valorem taxes while providing discretionary powers to the Secretary of State for Finance to adjust petroleum product prices in line with regional and world prices; and (d) an adjustment in government fees and charges in line with inflation to generate an estimated D 7 million. In addition, the government plans to introduce unique taxpayer identification numbers by 2000 to facilitate coordination between the revenue departments, to be followed by a study to assess the establishment of an autonomous revenue authority by 2000.
12. With regard to expenditure, the government will implement the recommendations of the recent IMF technical assistance mission in order to enhance procedures for timely reporting and establish control and allocative efficiency. The measures include (a) replacement of the obsolete computers during the last quarter of 1999; (b) a move to a comprehensive and more timely reporting and reconciliation of government accounts by mid-2000; (c) introduction of better controls of expenditure commitments during 2000; and (d) completion of a survey of government arrears by February 2000. To complement these measures, the government has requested technical assistance from (a) the World Bank to train eight budget officers who will be placed in key government departments; and (b) the IMF for a long-term resident budget expert. The aim is to reduce recurrent expenditure to 16¼ percent of GDP in 2000 from 18 percent in 1998 with the benefit of lower domestic interest payments. The government will protect expenditure on the social sectors (see below) while providing for a 5 percent increase in the wage bill to support institutional capacity building, in particular, to help retain skilled staff following a wage freeze for senior personnel in 1999. This increase allows for a wage drift, as well as for an across-the-board cost of living increase of about 2½ percent. New hiring will be restricted to the agriculture, education, and health sectors. With donor support, capital expenditure is to increase to 7 percent of GDP in 2000 (6 percent in 1998), mainly to strengthen the physical infrastructure and the agricultural, health, education, and judicial sectors; the ultimate goal is to alleviate poverty, strengthen private sector activity, and promote exports. The government will work closely with the World Bank to strengthen the public investment program during 2000 and develop a medium-term expenditure framework by 2001.B. Monetary Policy and Financial Sector Reform
13. The monetary program will aim at containing annual inflation at about 2½ percent in 1999 and 2000 and supporting the official reserve position. The money supply is projected to grow by 14 percent in 1999; for 2000 it is projected to grow by 7½ percent in line with nominal GDP growth. The limit on government borrowing from the banking system will provide room for adequate private sector credit growth. The CBG will continue to evaluate exchange rate trends and the functioning of the interbank market, mindful of the need to maintain The Gambia's external competitiveness. The CBG licensed a new bank (First International Bank) earlier in 1999 and has started to introduce reforms to improve competition and the operation of the money market, as recommended in the 1998 IMF technical assistance report. These measures include (a) development of a framework for short-term liquidity forecasting; (b) increasing the frequency of treasury bill auctions; (c) using the bank rate (the rate that applies to the emergency facility) as a signaling rate; (d) promoting further development of the interbank market; (e) removing the floor on bank deposit rates; and (f) preparing for the introduction of repurchase agreements with commercial banks. Given the continued low level of inflation, there is scope for further reduction in interest rates if the government holds firm on the fiscal policy stance. In this context, the central bank intends to expedite the above-mentioned financial sector reforms so as to increase interest rate flexibility; if necessary, it will seek Fund technical assistance in making the framework for short-term liquidity forecasting operational.
14. To strengthen the legal framework for better financial institution supervision, the CBG has proposed revisions to the Financial Institutions Act and has drafted an Insurance Act, which should become law in 2000. Meanwhile, total nonperforming bank loans declined as a share of total loans from 22½ percent in 1998, with 90 percent provisioning, to 20 percent as of June 1999, with full provisioning. The central bank will agree with the commercial banks on a program for banks to maintain full provisioning for 2000 and strengthen bank reporting. Moreover, the government will provide adequate budgetary resources to strengthen the new commercial court and will review the possibility of privatizing the Asset Management and Recovery Corporation (AMRC) as part of efforts to reduce banks' nonperforming loans.C. Governance and Structural Reforms
15. The government is seriously concerned about governance issues and is taking several steps to address them, mainly through the strengthening of the legal and institutional framework. With the assistance of the UNDP, the government convened a conference in Banjul on July 28, 1999 to address governance issues and laid out a comprehensive strategy and program of action. In this context, the government has attempted to negotiate with Alimenta in order to address the seizure of the GGC property and restore private sector participation in groundnut marketing while curbing illegal activities. In the meantime, the government has appointed an arbitrator and intends to be in full compliance with ICSID rules for dispute settlement.
16. The government is also collaborating with the IMF, the World Bank and donors in implementing structural measures, some of which are outstanding from the first annual ESAF arrangement. The outstanding measures include in particular, prior actions that were approved by the cabinet on October 22, 1999.With regard to the investment code, the government has introduced an interim code that provides tax incentives for priority sectors consistent with the practice in the region, notably in Senegal. However, the government will continue to liberalize the external tariff regime to obviate the need for such tax incentives and will review the code within two years to take account of the ongoing tax reforms in The Gambia, as well as those envisaged in the West African Economic and Monetary Union (WAEMU) countries.
17. Concerning the procurement code and the divestiture strategy, the government recognizes that these processes are likely to take time to be fully implemented and, thus, require a well-articulated work agenda for 2000-01, agreed with the World Bank, to push them along. As detailed in the PFP, laws will be enacted and institutions put in place to provide the essential operating framework in each case. In October 1999, the government adopted an interim procurement code that promotes competitive and transparent procurement of public goods and services. The government has agreed with the World Bank on terms of reference for an international consultant that, subject to funding, include the enactment of a procurement legislation and the adoption of a comprehensive code by end-2000. The divestiture strategy calls for a bold scope of privatization and a revamping of business laws to facilitate a vibrant private sector that will maintain The Gambia's competitive edge into the next century. Under the strategy, the government intends to bring to the point of sale or transform at least four public enterprises into private limited companies (PLC) and restructure (to unbundle) at least two public enterprises into component units for their eventual privatization by end-August 2000. More specifically, action will be taken to privatize the Atlantic Hotel, transform the Post Office into an autonomous organization, and separate GAMTEL's telecommunications business from its radio and television activities prior to its privatization.
18. Regarding the other public enterprises, the government will review the implementation of the memoranda of understanding that were agreed upon with a number of public enterprises in 1998, as well as ensure that no arrears are being accumulated, all public enterprises fully meet their tax, debt service, and dividend obligations, and the payment arrears are being settled.
19. The government intends to further simplify the external tariff structure by July 2000, taking into account the planned introduction of a common external tariff in the WAEMU member countries. The envisaged tariff system would comprise a maximum of four import duties, with duty rates ranging from zero percent to a maximum of below 20 percent. Import duties would be based on an economic trade classification of products, and the zero-duty rate would apply to a limited number of essential goods only. To partially compensate for the negative impact on government revenue, the sales tax will need to be more broadly based and all duty waivers not required by international treaties abolished.
20. In the agricultural sector, the government has assisted farmers to empower themselves through the Federation of Agricultural Cooperatives and by holding discussions with private exporters such as Sonacos to ensure that the difficulties with the GGC will not disrupt the production and marketing of the 1999/2000 groundnut crop. In particular, these measures will safeguard the free access of private and foreign marketing companies; meanwhile arrangements have been made with European Union (EU) support to maintain producer prices for groundnuts broadly in line with world market prices, without providing further government subsidies to farmers. The government will continue to support the Agribusiness Service Center Association in its efforts to introduce better seed varieties and develop a commercially managed agricultural credit system. These efforts are receiving financial support from the EU, as well as from the International Fund for Agricultural Development (IFAD) project, launched in July 1999, which will provide US$10 million over a six-year period.D. Social Policies
21. The government's social strategy aims at accelerating the development of human resources and the alleviation of poverty. This will be accomplished through sustainable high growth rates with low inflation, improved employment opportunities in the key sectors such as agriculture and tourism, and the improved provision of social services. To attain the latter, the National Education Policy aims to significantly raise enrollment rates in basic education from 70 percent in 1998/99 to 77 percent in 2001/02 while improving the quality of teachers through the upgrading of skills and a reduction in the number of unqualified teachers (currently about 20 percent). To consolidate these achievements and the average 8 percent annual growth in primary school enrollment during the1990s, budgetary allocations to education will be increased from 23¼ percent of noninterest current spending in 1999 to 26 percent in 2000, in line with the medium-term public expenditure review.
22. The Public Expenditure Review of the Health Sector (1998) indicates that many of The Gambia's health needs are most cost-effectively addressed at the primary and secondary health care levels. However, these needs can only be met if the per capita expenditure on these subsectors which currently averages US$8-10, could be increased to at least the minimum package (US$12-13) for basic health care recommended by the World Bank. Further, under the auspices of the Health Policy 1994-2000, the government aims to introduce health services in all villages with a population of at least 400 people. In this context, the proposed ESAF-supported program will call for additional resources to basic health services and preventive programs, which target the main causes of morbidity and mortality. Accordingly, the expenditure allocation to the health sector will increase from about 14½ percent of noninterest current spending in 1998 to 14¾ percent in 1999 and 15¼ percent in 2000, in line with the medium-term public expenditure review.E. External Sector Policies and Outlook
23. The projected budget outturn for 1999 and even more so, the budget for 2000 reflect continued domestic adjustment supported by external assistance to strengthen institutional capacity, provide for increased investment, and improve external balances. The programmed improvement in public finances underpins the projected strengthening of the external current account. More specifically, the volume of exports and reexports is projected to grow by an average of 8 percent per year in light of the recovery of groundnut production. The volume of imports is expected to grow by about 4 percent a year, mainly reflecting the increase in project-related imports. The terms of trade, which are projected to deteriorate by 13 percent in 1999 mainly on account of rising oil prices, are not expected to change substantially during the remainder of the program period. Accordingly, the external current account deficit (excluding official grants) is projected to decline to 10½ percent of GDP in 2000 from 11½ percent in 1998. A cumulative financing gap of SDR 4 million for 2000 and 2001 is to be covered through additional donor assistance; a roundtable meeting is scheduled for November 23-24, 1999 in Geneva. The CBG will continue to pursue a flexible exchange rate policy that is underpinned by sufficiently tight financial policies, with a view to maintaining external competitiveness while avoiding disorderly market developments.F. Technical Assistance and Data Issues
24. The government is determined to fully utilize broader access to technical assistance to strengthen economic data compilation and policy implementation of the ESAF-supported program and to implement the more comprehensive agenda to build institutional capacity. During 1998 and 1999, the Fund provided technical assistance to the Central Statistics Department, the CBG, and the Department of State for Finance and Economic Affairs to strengthen (a) the national accounts (b) the conduct of indirect monetary policy and the compilation of balance of payments statistics, and (c) customs tax administration and the reporting and control of expenditures. Follow-up measures in the context of the program include (a) the establishment of a balance of payments unit in the CBG in August 1999, (b) the planned rebasing of the national accounts to a more recent year than the current base year, 1976/77, by April 2000, (c) the conducting of a household expenditure survey, followed by the introduction of a more comprehensive consumer price index by mid-2001, (d) the establishment of a short-term liquidity forecasting framework by the CBG by June 2000, (e) the strengthening of the Accountant General's Office through further technical assistance and computerization to improve expenditure data reporting and reconciliation, (f) the conduct of a comprehensive survey of government arrears on a department-by-department basis by February 2000, and (g) the further strengthening of the customs department, including the completion of the installation of ASYCUDA by April 2000. Supplementary technical assistance from the World Bank will include addressing Year 2000 (Y2K) issues, the compilation of external debt data, and the proposed institutional capacity building project targeted at the major economic institutions. Other donors, notably the United Kingdom and the UNDP are also providing assistance to strengthen institutional capacity. Finally, the Fund is providing technical assistance to The Gambia to help the authorities to use the General Data Dissemination System (GDDS) as a framework for statistical development. The government intends to provide adequate domestic resources to support the various technical assistance projects.G. Program Monitoring and Review
25. To monitor policy implementation under the program, a number of prior actions, quantitative performance criteria for end-March 2000, two structural performance criteria, and quarterly quantitative benchmarks are proposed for the second annual ESAF arrangement. The prior actions entail cabinet adoption of (a) the 2000 budget consistent with the program; (b) the investment code, on the understanding that it will be subject to a review within two years to incorporate tax reforms in The Gambia and the envisaged tax and investment reforms in WAEMU countries; (c) the interim procurement code incorporating a further reform agenda through end-2000; and (d) a divestiture strategy incorporating a work agenda for the period 1999-2001.
26. The proposed quantitative performance criteria will comprise the following (Table 1 and Annex): (a) a ceiling on net bank credit to the government; (b) a ceiling on net domestic assets of the central bank; (c) a ceiling on the basic primary balance of the central government, defined to exclude interest payments and foreign-financed investment spending; (d) the nonaccumulation of external payments arrears; (e) a minimum level of net official international reserves; (f) a limit on new nonconcessional external loans contracted or guaranteed by the government in the maturity ranges of 1-5 years and 1-12 years; and (g) a zero ceiling on the outstanding stock of short-term external public debt (excluding normal import-related credits). The nonaccumulation of external payments arrears will be applied on a continuous basis. Limits on items (a)-(g) above for end-March 2000 will serve as quantitative performance criteria; the benchmarks for end-June and end-September 2000 are indicative. Definitive targets for end-June 2000 and quantitative performance criteria for end-September 2000 will be set at the time of the first review. In addition, a number of reform measures have been identified to serve as structural performance criteria and benchmarks (Table 2). Furthermore, quarterly financial indicators will be established on total government revenue, the wage bill, and the estimated domestic arrears.
27. The program for October 1, 1999-September 30, 2000 provides for a first review on the basis of, among other things, performance with respect to the quantitative and structural performance criteria and benchmarks for end-March 2000, as well as a second review for end-September 2000. Disbursement of the second loan under the second annual ESAF arrangement will be conditional on the observance of the end-March 2000 performance criteria and the completion of the first review no later than mid-June 2000. The disbursement of the third loan will be subject to the observance of the end-September 2000 performance criteria and completion of the second review no later than end-November 2000.
1Excluding the nonperforming loans of the ex-Gambia Cooperative Union (GCU), the total stock of nonperforming loans at end-1998 amounted to some 15 percent of total loans, and the provisioning shortfall was less than 5 percent.