IMF Concludes Visit to The Gambia for the Seventh Review of the Program Under the Extended Credit FacilityPress Release No. 10/426
November 11, 2010
A mission from the International Monetary Fund (IMF) led by Mr. David Dunn visited Banjul October 29–November 11 to assess performance for the seventh review of The Gambia’s economic program supported by the IMF under the Extended Credit Facility (ECF). The mission met with the Secretary General, Dr. Njogou Bah; Minister of Finance, Mr. Abdou Kolley; Minister of Economic Planning and Industrial Development, Mr. Mambury Njie; and Governor of the Central Bank of The Gambia (CBG), Mr. Momodou Bamba Saho, as well other senior members of government and representatives of the private sector, development partners, and civil society.
At the conclusion of the visit, Mr. Dunn issued the following statement:
“The Gambian economy has performed well in 2010, mainly because of continued strong growth in agriculture. The IMF mission expects real growth in The Gambia’s gross domestic product (GDP) to be about 5½–6 percent in 2010, up from our previous projection of about 5 percent. Also, sectors dependent on tourism and remittances from abroad, which were hit hard by the global economic crisis, are beginning to show signs of recovery. Looking ahead, real GDP growth is projected to remain strong at about 5½ percent in 2011. Headline inflation edged up to just over 6 percent in recent months, prompting the CBG to raise its rediscount rate by 1 percentage point (to 15 percent) in September. The IMF mission expects inflation to decline slightly to 5 percent in the year ahead.
“Since June, performance under the ECF program has improved considerably. In the first half of 2010, severe revenue shortfalls led to an excessive fiscal deficit. The rising cost of fuel imports, in particular, cut sharply into fuel tax revenues, which were squeezed by fixed pump prices. The Gambian government took difficult, but appropriate actions with mid-year increases to some fuel prices and by adjusting expenditures in line with a tighter overall resource envelop. The government achieved a slight surplus in the third quarter and is on course for another slight surplus in the fourth quarter. These surpluses are helping to ease pressure on inflation, the exchange rate, and interest rates.
“The Gambia continues to face a heavy debt burden. Interest on debt consumes about 20 percent of government revenues, mostly in interest on domestic debt. To generate fiscal savings that could be used for other spending priorities—such as a possible stepping-up of infrastructure investment under the government’s forthcoming Programme for Accelerated Growth and Employment—preparations for the 2011 budget have focused on reducing T-bill yields by minimizing government’s domestic financing needs. At the same time, strong ongoing efforts to improve budgeting procedures and public financial management would help achieve greater value-for-money from government spending. Building upon the success of the Ministry of Basic and Secondary Education, which has made excellent progress toward achieving the Millennium Development Goals, the government intends to pilot a medium-term expenditure framework in some line ministries in 2011.
“The rapid expansion of the banking system in recent years is providing much needed financing for the Gambian economy. At the same time, it creates challenges for banking supervision. The mission welcomes the CBG’s progress in building up its supervisory capacity and its commitment and vigilance to further strengthen the regulatory framework.
“The mission welcomes the Gambian authorities’ corrective actions for the missed end-March 2010 performance criterion on the basic fiscal balance, notably by making difficult adjustments to execute a more balanced budget. Looking ahead, the mission very much encourages the authorities to continue the good performance, which should yield dividends for the budget and for the Gambian economy as a whole. On this basis, the IMF’s Executive Board could consider the completion of the seventh review of the ECF in early 2011.”