IMF Executive Board Completes Third Review under PRGF Arrangement for The Gambia and Approves US$3.1 Million DisbursementPress Release No. 08/203
September 8, 2008
The Executive Board of the International Monetary Fund (IMF) has completed the third review of The Gambia's performance under a program supported by a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review allows for the disbursement of SDR 2 million (about US$3.1 million), which would bring total disbursements under the arrangement to SDR 8 million (about US$12.4 million).
The Executive Board also approved the authorities' request for waivers of nonobservance of four structural performance criteria concerning the submission of two special audit reports, the making operational of a credit reference bureau, and the establishment of a central register of fiscal expenditure commitments.
The PRGF arrangement with The Gambia was approved on February 21, 2007 (see Press Release No. 07/28) for an amount of SDR 14 million (about US$21.7 million).
Following the Executive Board's discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said:
"The Gambian authorities are to be commended for maintaining macroeconomic stability in the context of robust growth and moderate inflation. The PRGF-supported economic program has been implemented satisfactorily, despite the recent increases in world food and fuel prices.
"Over the medium term, The Gambia will face the challenge of maintaining strong growth while further reducing poverty and attaining the Millennium Development Goals. To this end, the authorities are committed to promoting fiscal discipline, private sector growth, and investment in infrastructure, education, and health. The authorities are advised to consider steps to improve The Gambia's international competitiveness through measures to improve the business climate, such as alleviating the burden of central and local government taxation on businesses.
"The Gambia has made strong and successful efforts to improve revenues, in particular through improvements in tax administration. The authorities recognize the need to focus now on broadening the tax base and making it more buoyant, including by reducing the scope of import duty exemptions. Making further progress in strengthening public financial management will also help to ensure that budget formulation is realistic and in line with priorities in the country's Poverty Reduction Strategy Paper (PRSP).
"The current stance of monetary policy appears broadly appropriate, and has been able to contain inflationary pressures so far. Exchange rate appreciation has also helped to restrain inflation. The authorities should continue to pass through the increases in international food and fuel prices to consumers, while considering carefully-targeted measures to help the poor.
"Despite receiving debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative and under the Multilateral Debt Relief Initiative (MDRI) at end-2007, The Gambia remains at high risk of debt distress due to the high level of outstanding debt and the country's vulnerability to external shocks. The authorities are formulating a national debt strategy to guide future borrowing decisions, but intend to rely primarily on grants to finance their development program," Mr. Kato said.
The PRGF is the IMF's concessional facility for low-income countries. 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.