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Press Release No. 99/54
November 19, 1999
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Approves US$11.8 Million Loan to The Gambia
under the Second Annual ESAF Review

The International Monetary Fund (IMF) today approved the second annual loan under the Enhanced Structural Adjustment Facility (ESAF)1 in the amount of SDR 8.6 million (about US$11.8 million) for The Gambia to help establish durable and broad-based economic growth and a lasting reduction in poverty. The Gambia's three-year ESAF loan was approved on June 29, 1998 (see Press Release 98/28) in an original amount of SDR 20.61 million (about US$28.4 million), of which SDR 3.44 million (about US$4.7 million) has been disbursed.

At the conclusion of the Executive Board's discussion on The Gambia, Shigemitsu Sugisaki, Deputy Managing Director, made the following statement:

"Directors noted that, despite broadly encouraging developments under the first annual ESAF arrangement, there had been some difficulties in 1998 regarding fiscal policy and a number of structural reforms. Furthermore, private sector confidence had been set back by the government's seizure of the Gambia Groundnut Corporation (GGC). Directors welcomed the measures taken since then in a number of key areas, including the prior actions required to launch the program. The program seeks to achieve sustainable growth and a reduction in poverty through reestablishing macroeconomic stability, deepening structural reforms, and rebuilding investor confidence. Directors emphasized the need for determination in implementing fully the necessary measures.

"Directors stressed the need for a prudent monetary policy and a continuation of fiscal consolidation. This would promote a virtuous circle of lower domestic debt and government interest payments, thereby freeing resources for higher social and investment spending. Further improvements in tax administration are essential to maintain a sound revenue base, especially given continued efforts to reduce and rationalize external tariffs. On the expenditure side, there is a need to strengthen the allocative efficiency of the budget, while updating the computerization of operations.

"Regarding structural reforms, Directors regretted the government's seizure of the GGC, and urged the authorities to pursue an early settlement. Directors welcomed the authorities' recognition of the need to improve governance, enhance transparency, and promote private sector activity, as well as their efforts to strengthen the judiciary. They urged the authorities to proceed vigorously in restructuring and privatizing public enterprises, and improving regulatory arrangements. They also encouraged continuing efforts to ensure the soundness and efficiency of the financial system.

"Directors noted the need for a closer examination of the possible costs and benefits of seeking assistance under the enhanced HIPC Initiative, and welcomed the forthcoming comprehensive debt sustainability analysis," Sugisaki said.

ANNEX

Program Summary

Under the first annual ESAF arrangement, The Gambia encountered difficulties in implementing the program mainly in fiscal policy but also in a number of structural reforms. Moreover, the government's seizure of the property of The Gambia Groundnut Corporation (GGC)-a marketing monopoly of major economic importance-created a confidence problem for private investors. Under these circumstances, the midterm review of the program was not completed.

The government's strategy for 1999-2000, however, is aimed at consolidating the gains made in 1998 and so far in 1999, despite some slippages and adverse developments during that period. In 1998, GDP grew by 4.7%, compared to the program target of 3.8%. In 1999, GDP is projected to moderate to rise by 4.2% and rise by 5% in 2000.

The fiscal program through 2000 aims to reduce the overall deficit to 2.5% of GDP in 2000 from 4.5% in 1998, with a repayment of domestic debt equivalent to 5.1% of total outstanding government domestic debt. In its budget for 2000, the government plans to further reduce expenditure to 16.3% of GDP in 2000 from 18.1% in 1998, while at the same time bolstering domestic revenue to about 20% of GDP in 2000 from 18.8% in 1998.

The 1999-2000 program further aims at reducing the external account deficit to 10.8% of GDP in 1999 and to 10.5% in 2000 from 11.5% in 1998, while increasing gross external reserves to an equivalent of about 4 months of imports of goods and services during 1999-2000.

Monetary policy will focus on containing average annual inflation at about 2.5% in 1999 and 2000, while maintaining an adequate level of gross official reserves. The exchange rate will continue to float freely and the central bank will limit its interventions to smoothing out seasonal fluctuations and meeting its external reserves objective. The monetary authorities will monitor closely the liquidity of the banking system and continue to rely on indirect instruments for monetary control.

On structural reforms, the government is taking steps to strengthen the legal and institutional framework, including efforts to quickly resolve the dispute concerning the GGC's property. It also adopted and will continue to approve the divestiture strategy and investment and procurement codes. It intends to further simplify the external tariff structure and improve the soundness of the banking system.

The government's strategy on social policy will focus on improving employment opportunities in key sectors such as agriculture and tourism and on providing better social services. It aims to raise enrollment rates in basic education to 77% in 2001/02 from 70% in 1998/99, while improving the quality of teachers. The government also plans to improve health care provisions and increase spending for primary and secondary health care to 14.8% in 1999 and 15.4% in 2000 from 14.5% of noninterest current spending in 1998.

The Gambia joined the IMF on September 21, 1967 and its quota2 is SDR 31.10 million (about US$42.8 million). Its outstanding use of IMF financing currently totals SDR 5.86 million (about US$8.1 million).

The Gambia: Selected Economic and Financial Indicators, 1994/95-2002 1/

 
                           
               

 

       

1994/95

1995/96

1996/97

 

1997

 

1998

1998

1999

2000

2001

2002

 
     

 

 

Est.

 

Prog.

Prel.

Program

Proj.

 
                             
                             
 

(Annual percentage changes, unless otherwise indicated)

 

National income and prices

                           

GDP at constant prices

-3.4

5.3

 

0.8

 

4.9

 

3.8

4.7

4.2

5.0

5.0

5.0

 

GDP deflator

4.4

3.3

 

4.5

 

2.3

 

2.7

1.8

2.3

2.4

2.4

2.4

 

Consumer price index (period average)

4.0

4.8

 

2.1

 

2.8

 

3.0

1.1

2.5

2.5

2.5

2.5

 

Consumer price index (end of period)

5.2

0.2

 

4.8

 

0.3

 

3.0

4.4

2.0

2.5

2.5

2.5

 
                             

External sector

                         

Exports, f.o.b. (in SDRs)

-7.8

-2.6

 

-2.7

 

-0.5

 

11.2

23.7

7.2

10.0

7.2

5.3

 

Imports, f.o.b. (in SDRs)

-22.1

28.2

 

-5.8

 

-5.3

 

4.1

16.1

6.6

8.2

5.8

6.0

 

Export volume (excluding reexports)

-5.1

-6.3

 

-25.2

 

-26.2

 

61.4

74.1

10.0

7.1

7.6

7.6

 

Import volume (excluding imports for reexport)

-25.9

41.2

 

-10.0

 

-7.6

 

7.2

17.2

2.8

4.8

4.5

4.5

 

Terms of trade 2/

14.8

-1.4

 

4.8

 

10.8

 

2.6

-9.4

-13.0

-0.2

0.5

0.5

 

Nominal effective exchange rate (period average)

-0.7

-2.1

 

2.1

 

3.0

 

...

-1.2

3.9

...

...

...

 

Real effective exchange rate (period average)

-7.0

-0.5

 

1.8

 

4.7

 

...

-1.6

3.6

...

...

...

 
                         

Government budget

                         

Revenue

-11.7

-1.2

 

15.3

 

11.1

 

8.7

4.0

11.1

10.1

8.0

9.1

 

Total expenditure and net lending

2.7

28.1

 

8.6

 

-6.3

 

-7.0

-8.5

4.2

6.7

8.0

6.7

 

Current expenditure

0.8

8.1

 

10.5

 

15.8

 

-3.5

0.7

4.0

-0.8

2.8

5.5

 

Development expenditure and net lending

-3.0

97.5

 

6.0

 

-35.9

 

-15.3

-30.5

5.2

32.5

21.6

9.5

 
                             

Money and credit

                         

Net domestic assets 3/

8.9

-11.5

 

13.2

 

15.9

 

2.7

-1.9

6.2

3.8

4.1

2.1

 

Credit to the government 3/

9.8

8.2

 

2.8

 

2.4

 

-1.0

-1.7

0.7

-3.9

-4.4

-6.1

 

Credit to the private sector 3/ 4/

5.0

-13.7

 

2.2

 

9.9

 

3.7

5.6

5.5

7.8

8.5

8.3

 

Broad money

8.1

8.8

 

16.7

 

22.3

 

6.8

10.2

14.0

7.5

7.5

7.5

 

Velocity (GDP relative to broad money)

4.2

4.2

 

3.8

 

3.5

 

3.5

3.4

3.2

3.2

3.2

3.1

 

Treasury bill rate (in percent; end of period)

15.5

16.0

 

16.0

 

16.0

 

...

14.0

...

...

...

...

 
                             
 

(In percent of GDP)

             

Gross domestic investment and savings

                       

Gross investment

16.0

23.4

 

19.3

 

17.2

 

18.7

18.4

17.8

19.5

20.5

20.6

 

Government

6.1

12.9

 

12.7

 

8.4

 

6.9

5.9

5.7

7.0

7.7

7.8

 

Private 4/

9.9

10.5

 

6.6

 

8.8

 

11.8

12.5

12.1

12.5

12.8

12.8

 

Gross domestic savings

3.5

2.9

 

6.0

 

7.1

 

9.6

7.8

7.4

9.4

10.6

10.7

 

Gross national savings

11.7

10.0

 

12.6

 

13.5

 

14.4

15.3

14.0

15.6

17.6

17.7

 

Government

10.1

8.0

 

8.2

 

8.5

 

9.9

10.6

10.5

11.6

12.8

12.5

 

Private 4/

1.6

2.0

 

4.4

 

5.0

 

4.5

4.8

3.5

4.0

4.8

5.2

 
                             

Central government budget

                           

Surplus or deficit (-), excluding grants 5/

-5.9

-12.1

 

-11.4

 

-7.8

-4.0

-4.5

-3.1

-2.5

-2.5

-2.0

 

Surplus or deficit (-), including grants 5/

-3.3

-9.9

 

-9.7

 

-6.5

-2.7

-2.5

-1.7

-0.9

-0.2

0.2

 

Basic primary balance

3.7

3.6

 

5.1

 

4.9

7.0

5.7

6.6

7.6

7.8

7.8

 

Current balance

0.9

0.1

 

0.9

 

0.1

2.3

0.7

2.0

3.8

4.6

5.2

 

Revenue

19.5

17.7

 

19.4

 

19.3

19.6

18.8

19.6

20.1

20.2

20.4

 

Net foreign financing

0.1

5.5

 

7.4

 

4.1

3.0

1.2

0.9

1.8

1.5

1.6

 

Net domestic financing

3.1

4.2

 

1.8

 

1.5

0.3

1.8

0.6

-1.2

-1.3

-1.8

 
                             

External sector

                         

Current account balance

                           

Excluding official transfers

-12.5

-20.1

 

-12.8

 

-10.6

 

-10.6

-11.6

-10.8

-10.5

-10.1

-9.5

 

Including official transfers

-4.3

-13.4

 

-6.7

 

-3.7

 

-4.3

-3.0

-3.8

-3.9

-2.9

-2.4

 

External debt outstanding, including Fund

109.2

111.1

 

107.0

 

104.4

 

104.6

107.5

104.1

109.2

112.7

112.8

 
                             
 

(In percent of exports and travel income)

External debt service

                           

Including Fund

18.1

16.2

 

13.1

 

13.5

 

10.9

11.4

10.3

8.8

9.2

9.4

 

Excluding Fund

14.4

11.8

 

8.9

 

9.2

 

8.2

8.5

7.0

7.6

8.6

8.1

 
                             
 

(In millions of SDRs, unless otherwise indicated)

Current account balance

                           

Excluding official transfers

-30.8

-53.4

 

-36.3

 

-31.4

 

-33.0

-35.6

-32.9

-34.4

-35.7

-36.2

 

Including official transfers

-10.6

-35.6

 

-19.0

 

-11.0

 

-13.3

-9.3

-11.8

-12.8

-10.4

-9.1

 

Overall balance of payments

-4.6

12.4

 

5.2

 

4.7

 

2.2

7.1

6.6

1.8

1.6

6.0

 

Gross official reserves (end of period)

62.5

70.1

 

70.4

 

69.6

 

76.8

75.4

82.4

91.4

101.1

107.1

 

In months of imports, c.i.f.

5.9

5.2

 

5.5

 

5.6

 

5.6

5.1

5.3

5.6

6.0

6.0

 
                             

In months of imports, c.i.f.

                           

Over the next 12 months

4.6

5.5

 

5.3

 

4.7

 

5.4

4.8

5.1

5.4

5.6

5.7

 

Plus all other services payments

3.9

4.6

 

4.4

 

3.9

 

4.4

3.9

4.2

4.4

4.8

4.9

 
                             

As a share of short-term debt 6/

5.1

5.5

 

6.2

 

5.7

 

4.9

4.9

5.8

6.8

6.6

6.6

 
                             
                             
Sources: The Gambian authorities; and IMFstaff estimates and projections.

1/ Until 1996/97, fiscal years (July-June); from 1997, calendar years.
2/ Excluding reexports and imports for reexport.
3/ In percent of broad money at the beginning of the period.
4/ Includes public enterprises.
5/ On a commitment basis.
6/ Only includes principal on public external debt.


1The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and to improve their growth prospects. ESAF loans carry an interest rate of 0.5% a year and are payable over 10 years with a 5 -year grace period.

2A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.


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