IMF Executive Board Completes Second Review Under PRGF Arrangement with The Gambia and Approves US$3.1 Million DisbursementPress Release No. 07/298
December 19, 2007
The Executive Board of the International Monetary Fund (IMF) today completed the second review of The Gambia's economic performance under a program supported by a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the second review enables the release of an amount equivalent to SDR 2 million (about US$3.1 million).
The Board also approved the authorities' request for a waiver of nonobservance of one structural performance criterion pertaining to the submission of monthly budget execution reports.
The PRGF arrangement with The Gambia was approved on February 21, 2007 (see Press Release No 07/28) for an amount equivalent to SDR 14 million (about US$21.9 million).
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½ -year grace period on principal payments.
Following the Executive Board's discussion on The Gambia, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:
"The Gambian authorities' implementation of the program supported by the Poverty Reduction and Growth Facility (PRGF) has been strong, helping to consolidate macroeconomic stability and sustain high economic growth. The Gambia has met the conditions for reaching the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Consequently, it qualifies for additional assistance under the Multilateral Debt Reduction Initiative (MDRI).
"Looking ahead, the achievement of the country's medium-term objectives of sustained growth and poverty reduction will depend on maintaining fiscal discipline, limiting external borrowing, and promoting the private sector. The authorities should ensure that extrabudgetary expenditures are avoided, that public debt remains on a sustainable path, and that budgets reflect the priorities set out in The Gambia's current Poverty Reduction Strategy Paper (PRSP). In this context, it is important that the bulk of the resources obtained from the sale of shares in the Gambia Telecommunications Company be allocated to high priority PRSP-related expenditures and to paying down the domestic debt.
"In order to mitigate the high risk of The Gambia remaining in debt distress even after receiving HIPC and MDRI debt relief, the authorities should rely mostly on external grants for financing their development program. To the extent they need to borrow, loans need to be on highly concessional terms and within the limits agreed under the PRGF-supported program.
"The government is taking steps to enhance the capacity of the civil service to formulate and implement policies. In the 2008 budget, provision has been made for an initial increase in salaries. Further adjustments in pay should be tied to a comprehensive civil service reform program, which is currently under preparation.
"The current stance of monetary policy appears broadly appropriate. Inflation pressures are expected to ease, owing to recent exchange rate appreciation and a slowdown in monetary growth," Mr. Portugal said.