## cr18197

## Source details

**Canonical URL:** [cr18197](https://www.imf.org/-/media/files/publications/cr/2018/cr18197.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2018/cr18197.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2018/cr18197.pdf.json)

---

### Recent economic developments and key indicators
- Real GDP growth: 3.5 percent for 2017 compared to 2.2 percent in 2016.
- Gross international reserves (months of next year’s projected imports): increased from 1.4 months at end-2016 to about 2.8 months at end-2017.
- Private sector credit:
  - Declined by -1.2 percent (year-on-year) for 2017 as a whole.
  - Grew by 13.8 percent (year-on-year) at end-April 2018.
- Inflation (consumer price inflation, year-on-year): eased from 8.8 percent at end-January 2017 to 6.6 percent at end-April 2018.
- External current account: deficit of $195 million (19.3 percent of GDP) in 2017.
- Overall balance of payments: surplus of about 3 percent of GDP in 2017.
- Fiscal outturn, end-2017:
  - Overall fiscal deficit: 7.9 percent of GDP.
  - Primary deficit: about 1.0 percent of GDP.
  - Financing of overall balance from foreign sources: 7.7 percent of GDP.
- Fiscal deviations (end-2017, percent of GDP):
  - Total Revenue: 2.8
  - Tax: -0.2
  - Non-tax: -1.8
  - Grants: 4.8
  - Total Expenditure: 8.4
  - Primary Expenditure: -2.1
  - Interest: 1.2
  - Net Acquisition of nonfinancial assets: 9.3
  - Total Deviation: -5.6

### Program performance under the Staff Monitored Program (SMP)
- SMP status: Implementation remains broadly satisfactory.
- Quantitative and structural targets:
  - All-but-one indicative quantitative targets through end-March 2018 were met.
  - Most structural benchmarks were implemented; three structural benchmarks needed to be re-phased and redefined.
- Breach:
  - Continuous target on contracting new nonconcessional external debt breached at end-2017 by a $25 million loan (grant element of 26 percent). Corrective measures in place.
- Program purpose:
  - SMP extended to September 2018 to establish a track record for a possible Extended Credit Facility (ECF) arrangement and to incorporate outcomes of the International Conference for The Gambia.

### Debt vulnerabilities and authorities’ strategy
- Public debt stock: debt-to-GDP ratio reached nearly 130 percent of GDP by end-2017 (Public Debt: 129.2 percent in table).
- Debt service burden: total debt service-to-revenue (excluding grants) projected to average 53 percent over 2018–20.
- Debt sustainability: Updated DSA shows public debt is unsustainable with high external and domestic debt and a large pipeline of already-contracted loans posing solvency risks.
- Authorities’ multi-pronged strategy to restore debt sustainability:
  - Measures to boost domestic revenue mobilization.
  - Re-prioritizing the existing projects pipeline and seeking improvements in the terms of the already-contracted loans to raise their concessionality.
  - Request for debt relief and restructuring from external creditors.
  - An NDP financing strategy that emphasizes grant financing and private investment.
- Additional measures: Strengthening investment appraisal and selection processes to boost investment efficiency and productivity.

### Fiscal framework, public investment, and key projections
- MTFEF and MTDS:
  - Authorities developing a medium-term economic and fiscal framework (MTEFF) and a medium-term debt strategy (MTDS); MTDS foresees lengthening domestic debt maturities to reduce rollover risk.
- NDP and public investment:
  - NDP estimated cost: about $2.4 billion.
  - Current macroeconomic framework for 2018–21 features foreign-financed public investment of $860.6 million.
- Selected baseline projections and indicators:
  - Real GDP Growth: 2018 (baseline) 5.4; 2019 5.4; 2020 5.2; 2021 5.0; 2022 4.8; 2023 4.8.
  - Headline Inflation (average): 2018 6.1; 2019 5.1; 2020–23 4.8.
  - Banking system credit to the private sector: expected to expand at 12.7percent in 2018 and at 15 percent thereafter.
  - Overall fiscal deficit (percent of GDP, baseline): 2018: -3.9; 2019: -0.6; 2020: -1.9; 2021: -2.1; 2022: -1.8; 2023: -0.9.
  - Primary Balance (percent of GDP, baseline): 2018: 1.0; 2019: 3.8; 2020: 2.2; 2021: 1.6; 2022: 1.6; 2023: 2.4.
  - External current account balance (incl budget support, percent of GDP): 2018: -19.0; 2019: -20.5; 2020: -21.0; 2021: -21.4; 2022: -20.2; 2023: -17.8.
  - Public Debt (percent of GDP, baseline): 2018: 121.3; 2019: 113.4; 2020: 107.4; 2021: 102.0; 2022: 97.7; 2023: 92.6.
  - Gross Official Reserves (months of next year's imports, gross reserves): 2017: 2.8; 2018: 2.9; 2019: 2.8; 2020: 3.3; 2021: 3.6; 2022: 4.2; 2023: 4.8.
  - Staff expectation: Gross reserves increase from just under three months at end-2017 to six months by 2023 (text projection).

### Financial sector, central bank, and governance reforms
- Financial intermediation: subdued amid elevated, albeit declining, NPLs; NPL fell from 9.3 percent of gross loans at end-2016 (end-2017 NPL not provided in excerpt).
- Central Bank and supervision:
  - Strengthening risk-based supervision and willingness to act on early signs of asset quality problems.
  - Authorities amending the legal framework of the central bank to strengthen operational autonomy and support financial intermediation and inclusion.
  - At the CBG’s MPC meeting of May 30, 2018, the policy rate was lowered from 15 percent to 13.5 percent.
  - Introduction of standing deposit and lending facilities effective August 30, 2018; plans to issue short-term CBG bills and an overnight repo standing facility post-recapitalization.
- State-owned enterprises (SOEs):
  - Risks include lack of control over external debt accumulation by SOEs.
  - Critical SOE reforms recommended: strengthen governance, enhance operational efficiency, transparency, and complete special audits of key SOEs (six key SOEs accounting for over 90 percent of SOEs’ assets and liabilities).

### Risks to the outlook and Risk Assessment Matrix highlights
- Primary risks:
  - Possible resurgence of political instability.
  - Rising public debt and debt service ratios.
  - Lack of control over external debt accumulation, including by SOEs.
- RAM selected items:
  - Reduced financial services by correspondent banks: Relative Likelihood: High; Expected Impact: High. Recommendations: Strengthen AML/CFT framework; use alternative methods, seek new CBRs.
  - Financial Instability: Relative Likelihood: Medium; Expected Impact: High. Recommendations: Debt management strategy; enhance risk-focused supervision; improve CBG independence.
  - Fiscal policy slippages: Relative Likelihood: Medium; Expected Impact: High. Recommendations: Implement PFM TA, strengthen cash management, implement SOE reforms.
  - Political Instability: Relative Likelihood: Medium; Expected Impact: High. Recommendation: Policy priority to socio-economic stability.
  - Natural disasters: Relative Likelihood: Low; Expected Impact: High. Recommendations: Insurance against crop failure; build fiscal and reserve buffers.

### Policy recommendations and IMF support
- Fiscal and debt policy:
  - Tighten external debt contracting policy and pursue mainly grant financing while negotiating debt relief where feasible.
  - Implement measures to strengthen domestic revenue mobilization (including risk-based compliance and technological measures expected to yield 1.4 percent of GDP in 2018).
  - Re-prioritize projects and seek more concessional terms for already-contracted loans.
  - Budget anchor: limit net domestic borrowing to 1 percent of GDP.
- Governance and institutional reforms:
  - Strengthen investment appraisal and selection processes; request for Fund TA in PIMA.
  - Implement SOE governance and operational reforms and carry out special audits of key SOEs.
  - Amend legal framework to strengthen Central Bank operational autonomy and banking supervision; establish TSA and improve liquidity forecasting.
- Monetary and financial stability measures:
  - Maintain flexible exchange rate policy; CBG to refrain from FX intervention except for orderly market conditions.
  - Establish interest rate corridor and standing facilities; ring-fence CBG T-bill account from the TSA.
  - Strengthen bank resolution framework and build safety nets as finances allow.
- IMF engagement:
  - IMF staff ready to continue policy advice and provide technical assistance to support implementation of reform agenda toward a possible ECF arrangement.
- Staff recommendation:
  - Support completion of the second review under the SMP and urge authorities to ensure macroeconomic stability and step up structural reforms to address debt legacy.

### Debt dynamics, pipeline, creditor composition, and restructuring options
- External debt and composition (end-2017):
  - External debt stood at 69 percent of GDP; Total external debt: US$685.6 million; Present Value: US$489.3 million.
  - Creditor shares of external debt stock at end-2017:
    - Multilateral creditors: 35 percent (US$239.8 million; 24.1 percent of GDP).
    - Plurilateral creditors: 35 percent (US$238.8 million; 24.0 percent of GDP).
    - Bilateral official creditors: 22.6 percent (US$163.4 million; 15.2 percent of GDP).
    - Private creditors: US$43.7 million; 4.1 percent of GDP; 6.0 percent of external debt.
- Central government domestic debt: GMD 28,388 million, equal to 60.0 percent of GDP.
  - Marketable debt: GMD 16,402 million (57.8 percent of total domestic debt; 34.7 percent of GDP).
    - T-bills: GMD 14,195 million (50.0 percent of total domestic debt; 30.0 percent of GDP).
      - held by Banks: GMD 10,840 million (38.2 percent of total domestic debt; 22.9 percent of GDP).
      - held by Non Banks: GMD 3,354 million (11.8 percent of total domestic debt; 7.1 percent of GDP).
  - Non-marketable debt: GMD 11,986 million (42.2 percent of total domestic debt; 25.3 percent of GDP).
    - CBG Bond (30-Year): GMD 10,420 million (36.7 percent of total domestic debt; 22.0 percent of GDP).
- Drivers of 2017 forecast error in public external debt-to-GDP (percent of GDP): Recognition of external private debt: 4.4; Debt recognition with external creditors: 4.0; Faster-than-envisaged project disbursement: 7.9; Others: 2.0; Total: 18.3.
- Pipeline of already-contracted financing at end-2017: US$411.9 million (41 percent of GDP); projected disbursements for 2018-19: US$167.9 million (17 percent of GDP).
- Post-Brussels pledges: financial pledges nearly $1.5 billion; new grant financing exceeded $750 million.
- Creditor engagement and restructuring examples:
  - China agreed to forgive existing debts in late 2017.
  - Saudi Fund for Development restructuring: rescheduling by 15 years on average for principal due in 2018–21; NPV haircut of 8 percent.
- Recommended actions on pipeline:
  - Re-prioritize/cancel projects, seek improved terms to raise grant elements, use additional grants to retire expensive domestic debt, avoid government guarantees in PPPs and PPAs.

### DSA scenarios and Box 1 “Active Plus” illustrative scenario
- Active (baseline) scenario features:
  - Substantial grant-financed investment, minimal new debt contracting, domestic expenditure reform, revenue mobilization, macro-stability, and step-up in private sector growth.
  - Public debt foreseen to gradually decline to about 92 percent of GDP by 2023.
- Passive scenario features:
  - Fiscal dominance re-emerges with higher inflation, higher interest rates, lower revenue, larger fiscal deficits, rapid depletion of reserves, and increased likelihood of external arrears.
  - Continued external debt contracting could lead to faster debt accumulation.
- Box 1 — “Active Plus” scenario (illustrative):
  - Key assumptions:
    - Five-year deferral on principal repayments to plurilateral, bilateral official and private creditors during 2019–23 (add five years to grace and maturity).
    - Improve terms on undisbursed pipeline loans to achieve an average grant element of 50 percent.
  - Projected outcomes:
    - External debt service indicators fall well below thresholds during deferral period and remain below thresholds through projection period.
    - Reduction in short-term domestic debt stock and permanent savings on interest bill.
    - PV of external debt broadly unaffected, but debt sustainability improves via domestic debt reduction and interest savings.
  - Policy implication: debt relief combined with fiscal and debt strategy could restore debt sustainability and create fiscal space for social and development spending.

### Key quantitative indicators and tables (selected numeric highlights preserved)
- Growth and Inflation (annual percent change):
  - Real GDP Growth: 2015: 4.3; 2016: 2.2; 2017: 3.5; 2018 (baseline): 5.4; 2019: 5.4; 2020: 5.2; 2021: 5.0; 2022: 4.8; 2023: 4.8
  - Headline Inflation (average): 2015: 6.8; 2016: 7.2; 2017: 8.0; 2018: 6.1; 2019: 5.1; 2020–23: 4.8
- Fiscal Sector (percent of GDP, baseline):
  - Total Revenue (incl. grants): 2017: 28.1; 2018: 31.8; 2019: 34.0; 2020: 33.7; 2021: 32.8; 2022: 32.7; 2023: 31.6
  - Total Revenue (excl. grants): 2017: 16.7; 2018: 18.4; 2019: 19.4; 2020: 19.9; 2021: 20.5; 2022: 20.9; 2023: 21.0
  - Total Expenditures: 2017: 36.0; 2018: 35.6; 2019: 34.6; 2020: 35.6; 2021: 34.8; 2022: 34.5; 2023: 32.5
  - Investment (of which): 2017: 15.6; 2018: 16.0; 2019: 16.1; 2020: 17.7; 2021: 17.3; 2022: 17.1; 2023: 15.4
  - Net Domestic Borrowing: 2017: -0.4; 2018: -1.1; 2019: 0.7; 2020: 0.2; 2021–22: 0.0; 2023: 0.4
  - Overall Fiscal Balance (incl. grants): 2017: -7.9; 2018: -3.9; 2019: -0.6; 2020: -1.9; 2021: -2.1; 2022: -1.8; 2023: -0.9
  - Primary Balance: 2017: -0.8; 2018: 1.0; 2019: 3.8; 2020: 2.2; 2021: 1.6; 2022: 1.6; 2023: 2.4
- External Sector and Debt (baseline):
  - Current Account Balance (incl budget support): 2017: -19.3; 2018: -19.0; 2019: -20.5; 2020: -21.0; 2021: -21.4; 2022: -20.2; 2023: -17.8
  - Public Debt: 2017: 129.2; 2018: 121.3; 2019: 113.4; 2020: 107.4; 2021: 102.0; 2022: 97.7; 2023: 92.6
  - Gross Official Reserves (months of next year's imports): 2017: 2.8; 2018: 2.9; 2019: 2.8; 2020: 3.3; 2021: 3.6; 2022: 4.2; 2023: 4.8
- Current account and balance of payments levels (selected series, US$ millions):
  - Current-account (excl. budget support) (US$ millions, selected): -151.0; -93.1; -149.9; -196.2; -249.9; -282.6; -298.4; -306.8; -313.3; -306.2; -293.2
  - Gross International Reserves (US$ millions): 76.1; 59.8; 84.8; 143.9; 144.1; 157.4; 165.8; 200.5; 230.0; 276.7; 325.1
  - Months of next year's imports of goods and services (gross reserves): 2.3; 1.4; 2.0; 2.9; 2.8; 2.9; 2.8; 3.3; 3.6; 4.2; 4.8
- Financial Soundness Indicators (banking sector, end-December 2014–2017):
  - Non-Performing Loan Ratio: 7.2 6.5 9.3 7.2 (end-2014 to end-2017 series)
  - Capital Adequacy Ratio: 29.6 33.1 38.2 33.6 (end-2014 to end-2017 series)

### Immediate fiscal measures, PFM, SOE and arrears actions (selected)
- Immediate administrative measures:
  - Three-year hiring freeze for the civil service and security sectors.
  - Adoption of MoFEA’s new Budget Execution Guidelines (January 2018).
  - Revival of the High-level Economic Council (HILEC).
- Revenue measures and expectations:
  - Risk-based compliance and technological measures expected to yield 1.4 percent of GDP in 2018 (tax-to-GDP ratio to 16.4 percent).
  - Administrative and technological enhancements starting in 2018 expected to yield 0.8 percent of GDP in tax revenue.
  - Nontax revenue target: 2 percent of GDP in 2018.
  - Continued strong inflow of foreign grants equivalent to about 13½ percent of GDP in 2018 (compared with 11½ percent of GDP in 2017).
- Expenditure and arrears management:
  - Vehicle fleet reform expected to generate savings of 2 percent of GDP over the next three years; implementation commenced but retrieval suspended through end-June 2018.
  - Settlement of arrears to suppliers about GMD 253 million (about 0.5 percent of GDP).
  - Devise a repayment plan for domestic arrears to be implemented in the second half of 2018.
- SOE oversight and audits:
  - Procurement of audits of six key SOEs to be relaunched by end-July 2018.
  - Validate cross arrears and adopt resolution strategy re-phased to end-June 2018.
  - MoUs with SOEs to resolve cross arrears; compile a database of SOE financial data and domestic debt terms.

*Source: THE GAMBIA — Second Review under the Staff-Monitored Program and IMF staff report content in cr18197.*

### 2018. Gross international reserves increased from 1.4 months of next year’s projected

### cr18197 - 2018. Gross international reserves increased from 1.4 months of next year’s projected

### Recent economic developments and key indicators
- Real GDP growth: 3.5 percent for 2017 compared to 2.2 percent in 2016.
- Gross international reserves cover of next year’s projected imports of goods and services: increased from 1.4 months at end-2016 to about 2.8 months at end-2017.
- Private sector credit:
  - Declined by -1.2 percent (year-on-year) for 2017 as a whole.
  - Grew by 13.8 percent (year-on-year) at end-April 2018, reversing the earlier declining trend.
- Inflation (consumer price inflation, year-on-year): eased from 8.8 percent at end-January 2017 to 6.6 percent at end-April 2018.
- External current account: deficit of $195 million (19.3 percent of GDP) in 2017.
- Overall balance of payments: surplus of about 3 percent of GDP in 2017.
- Fiscal outturn, end-2017:
  - Overall fiscal deficit: 7.9 percent of GDP.
  - Primary deficit: about 1.0 percent of GDP.
  - Financing of overall balance from foreign sources: 7.7 percent of GDP.
- Fiscal deviations (end-2017, percent of GDP):
  - Total Revenue: 2.8
  - Tax: -0.2
  - Non-tax: -1.8
  - Grants: 4.8
  - Total Expenditure: 8.4
  - Primary Expenditure: -2.1
  - Interest: 1.2
  - Net Acquisition of nonfinancial assets: 9.3
  - Total Deviation: -5.6

### Program performance under the Staff Monitored Program (SMP)
- SMP status: Implementation remains broadly satisfactory.
- Quantitative and structural targets:
  - All-but-one indicative quantitative targets through end-March 2018 were met.
  - Most structural benchmarks were implemented; three structural benchmarks needed to be re-phased and redefined.
- Breach: The continuous target on contracting new nonconcessional external debt was breached at end-2017 by a $25 million loan (with grant element of 26 percent). Corrective measures are now in place to prevent a future reoccurrence.
- Program purpose: SMP extended to September 2018 to establish a track record for a possible Extended Credit Facility (ECF) arrangement and to incorporate outcomes of the International Conference for The Gambia.

### Debt vulnerabilities and authorities’ strategy
- Public debt stock: debt-to-GDP ratio reached nearly 130 percent of GDP by end-2017.
- Debt service burden: total debt service-to-revenue (excluding grants) projected to average 53 percent over 2018–20.
- Debt sustainability: Updated debt sustainability analysis shows public debt is now unsustainable, with high external and domestic debt and a large pipeline of already-contracted loans posing solvency risks.
- Authorities’ multi-pronged strategy to restore and maintain debt sustainability:
  1. Measures to boost domestic revenue mobilization.
  2. Re-prioritizing the existing projects pipeline and seeking improvements in the terms of the already-contracted loans to raise their concessionality.
  3. Request for debt relief and restructuring from external creditors.
  4. An NDP financing strategy that emphasizes grant financing and private investment.
- Additional measures: Strengthening investment appraisal and selection processes to boost investment efficiency and productivity.

### Fiscal framework, debt strategy, and public investment
- Authorities are developing and implementing:
  - A medium-term economic and fiscal framework (MTEFF) to help anchor fiscal policy and facilitate policy-driven budget allocations.
  - A medium-term debt strategy (MTDS) that foresees lengthening the maturity of domestic debt to reduce rollover risk; both will be regularly reviewed.
- Public investment financing context (from the International Conference for The Gambia):
  - NDP estimated cost: about $2.4 billion.
  - Current macroeconomic framework for 2018–21 features foreign-financed public investment of $860.6 million (less than pledged at Brussels conference but a substantial scaling up).

### Financial sector, central bank, and governance reforms
- Financial intermediation: subdued amid elevated, albeit declining, non-performing loans (NPL); NPL fell from 9.3 percent of gross loans at end-2016 (text notes decline but does not provide the end-2017 NPL figure in the supplied excerpt).
- Central Bank and supervision:
  - Continued strengthening of risk-based supervision and greater willingness to act on early signs of asset quality problems by the central bank will help underpin financial stability.
  - Authorities are amending the legal framework of the central bank to strengthen its operational autonomy and to support healthy financial intermediation and inclusion.
- State-owned enterprises (SOEs):
  - Risks include lack of control over external debt accumulation by SOEs.
  - Critical SOE reforms recommended to strengthen governance, enhance operational efficiency, and transparency.
  - Completion of the prior action paving the way for commencement of special audits of key SOEs identified as a critical milestone.

### Risks to the outlook
- Primary risks stem from legacy issues:
  - Possible resurgence of political instability.
  - Rising public debt and debt service ratios.
  - Lack of control over external debt accumulation, including by SOEs.
- Mitigating actions: Implementation of the MTEFF and the MTDS, alongside critical SOE reforms, and continued central bank legal reforms.

### Policy recommendations and IMF support
- Fiscal and debt policy:
  - Tighten external debt contracting policy and pursue mainly grant financing while negotiating debt relief where feasible.
  - Implement measures to strengthen domestic revenue mobilization.
  - Re-prioritize projects and seek more concessional terms for already-contracted loans.
- Governance and institutional reforms:
  - Strengthen investment appraisal and selection processes.
  - Implement SOE governance and operational reforms and carry out special audits of key SOEs.
  - Amend legal framework to strengthen Central Bank operational autonomy and banking supervision.
- IMF engagement:
  - IMF staff stands ready to continue policy advice and deliver well-tailored technical assistance to support implementation of the reform agenda as The Gambia aspires to transition to a possible ECF arrangement.
- Staff recommendation: Supports completion of the second review under the SMP and encourages authorities to ensure macroeconomic stability and step up the pace of structural reforms to tackle debt legacy and pave the way for a possible ECF arrangement.

*Source: THE GAMBIA — Second Review under the Staff-Monitored Program, June 18, 2018.*

### 7.2 percent at end-2017, despite the system average being affected by somewhat higher level of

### cr18197 - 7.2 percent at end-2017, despite the system average being affected by somewhat higher level of

### Economic performance (early 2018)
- Return of business confidence, pick-up in private sector credit, and stability of the dalasi amid easing inflation.
- Total revenue, including grants, in the first quarter of 2018 was about 20 percent of the amount projected for 2018.
- Current expenditure in the first quarter ran slightly ahead of projections, heightening domestic financing needs.
- Nearly the entire space (equivalent to 1 percent of GDP) for net domestic borrowing (NDB) was used by end-March 2018.
- T-bill rates rose to 6–9 percent in April, depending on maturity, from the lows of 4–6 percent at end-2017.
- Execution of capital expenditure (mostly externally financed) reached about 23 percent of the projected 2018 level.
- Much of the increase in current expenditure reflected a delay in the implementation of the vehicle reform policy, now expected to be in effect starting in July 2018.

### Program performance (SMP through end-March 2018)
- SMP implementation broadly satisfactory: all but one quantitative target and five out of eight structural benchmarks met.
- Indicative quantitative targets:
  - All indicative quantitative targets for end-December 2017 and end-March 2018 were met, except the continuous target on contracting new nonconcessional external debt (breached due to a $25 million loan with grant element of 26 percent contracted for a broadband (GNBN) project on behalf of GAMTEL).
  - The end-December 2017 ceiling on NDB of the central government, the ceiling on net domestic assets (NDA) of the central bank and the floor for net international reserves (NIR) were all met with sizable margins.
  - Performance at end-March 2018 aligned more closely with program targets, except NDA of the central bank, which was well below the ceiling.
  - The floor on poverty-reducing expenditures was comfortably met.
  - No short-term external borrowing (other than import-related credit) and no evidence of new external arrears through end-March 2018.
- Structural benchmarks (SBs):
  - Two out of three SBs for end-December 2017 met; three out of five SBs for end-March 2018 met.
  - Missed end-2017 benchmark: drafting amendments to the CBG Act (incorporation of IMF safeguards assessment recommendations took longer than expected); related action carried out in March 2018.
  - Submission of amended CBG Act to the National Assembly (missed SB for end-March 2018) re-phased to end-June 2018.
  - Procurement of contracts for a joint audit of the CBG carried out in May 2018.
  - Procurement of audits of six key SOEs (accounting for over 90 percent of SOEs’ assets and liabilities) to be relaunched by end-July 2018 (SB).
  - Inventory of SOE cross arrears compiled; validation and adoption of a resolution strategy re-phased to end-June 2018.
- Safeguards:
  - An update safeguards assessment of the CBG completed in January 2018.
  - Measures to amend the CBG’s legal framework and improve the quality of the CBG’s external audit are incorporated in the program.
  - CBG is taking steps to strengthen its financial position and develop a capacity building plan.

### Economic outlook and risks
- Overall message: initial stabilization efforts are paying off but the public debt burden remains the foremost challenge.
- Active (baseline) scenario aims for sustained growth, gradual decline in inflation, recovery of private credit, and improving fiscal and external balances. Key projections and expectations:
  - Economic growth projected to average about 5.3 percent a year in 2018–21, supported by scaling up public investment and increase in private credit, moderating to around 4.8 percent per year in the remainder of the medium term.
  - Consumer price inflation in 2018–19 projected to drop to an average of 5.6 percent and stabilize at about 5 percent in the remainder of the medium term.
  - Banking system credit to the private sector expected to expand at 12.7percent in 2018 and at 15 percent thereafter.
  - Overall fiscal deficit projected to decline to an average 2.3 percent of GDP in 2018–19, and further down to around 1.7 percent per year in 2020–23.
  - Primary balance would strengthen to a surplus of 2.4 percent of GDP in 2018–19 and stabilize at about 2.0 percent of GDP per year in the remainder of the medium term.
  - External current account deficit would narrow over the medium term with the overall balance remaining stable at 2.8 percent of GDP on average.
  - Gross reserves expected to increase from just under three months of prospective imports at end-2017 to six months by 2023.
  - Public debt foreseen to gradually decline to about 92 percent of GDP by 2023 over improved revenue mobilization and prudent fiscal management.
- Passive scenario (risks if key reforms absent):
  - Fiscal dominance likely to re-emerge, resulting in higher inflation, higher interest rates, lower tax revenue mobilization, larger fiscal deficits, rapid depletion of international reserves, and increased likelihood of external debt arrears.
  - Even with sizable project grants in the passive scenario, continued external debt contracting by authorities could lead to faster debt accumulation.
  - Growth is likely to be lower in the passive scenario, but projections are kept similar across scenarios for illustration of fiscal unsustainability.
- Downside risks and legacy issues:
  - Possible resurgence of political instability, debt overhang, rising public debt and debt service ratios, and lack of control over external debt accumulation, including by SOEs.
  - Considerable upside potential if The Gambia implements needed structural and institutional reforms, improves business climate, plugs infrastructure gaps, and realizes additional financial pledges from the Brussels conference.
  - Even in the upside/ambitious scenario, exceptional financing (debt relief or re-scheduling) would be needed to soften adjustment and reduce domestic debt to enable private sector credit expansion.

### Key quantitative projections and indicators (selected table highlights)
- Growth and Inflation (annual percent change):
  - Real GDP Growth: 2015: 4.3; 2016: 2.2; 2017: 3.5; 2018 (baseline): 5.4; 2019: 5.4; 2020: 5.2; 2021: 5.0; 2022: 4.8; 2023: 4.8
  - Headline Inflation (average): 2015: 6.8; 2016: 7.2; 2017: 8.0; 2018: 6.1; 2019: 5.1; 2020–23: 4.8 (stabilized)
- Fiscal Sector (percent of GDP, baseline):
  - Total Revenue (incl. grants): 2017: 28.1; 2018: 31.8; 2019: 34.0; 2020: 33.7; 2021: 32.8; 2022: 32.7; 2023: 31.6
  - Total Revenue (excl. grants): 2017: 16.7; 2018: 18.4; 2019: 19.4; 2020: 19.9; 2021: 20.5; 2022: 20.9; 2023: 21.0
  - Total Expenditures: 2017: 36.0; 2018: 35.6; 2019: 34.6; 2020: 35.6; 2021: 34.8; 2022: 34.5; 2023: 32.5
  - Of which: Investment: 2017: 15.6; 2018: 16.0; 2019: 16.1; 2020: 17.7; 2021: 17.3; 2022: 17.1; 2023: 15.4
  - Net Domestic Borrowing: 2017: -0.4; 2018: -1.1; 2019: 0.7; 2020: 0.2; 2021–22: 0.0; 2023: 0.4
  - Overall Fiscal Balance (incl. grants): 2017: -7.9; 2018: -3.9; 2019: -0.6; 2020: -1.9; 2021: -2.1; 2022: -1.8; 2023: -0.9
  - Primary Balance: 2017: -0.8; 2018: 1.0; 2019: 3.8; 2020: 2.2; 2021: 1.6; 2022: 1.6; 2023: 2.4
- External Sector and Debt (baseline):
  - Current Account Balance (incl budget support): 2017: -19.3; 2018: -19.0; 2019: -20.5; 2020: -21.0; 2021: -21.4; 2022: -20.2; 2023: -17.8
  - Public Debt: 2017: 129.2; 2018: 121.3; 2019: 113.4; 2020: 107.4; 2021: 102.0; 2022: 97.7; 2023: 92.6
  - Gross Official Reserves (months of next year's imports): 2017: 2.8; 2018: 2.9; 2019: 2.8; 2020: 3.3; 2021: 3.6; 2022: 4.2; 2023: 4.8

### Policy discussions and key policy recommendations
- Consolidate gains in macroeconomic stability and progress on structural agenda to strengthen credibility and pave way for a possible ECF arrangement.
- Policy focus areas:
  - Budget execution and economic governance of SOEs to enhance efficiency of service delivery, contain systemic fiscal risks, and support debt sustainability.
  - Bolstering central bank independence to underpin effective liquidity management.
  - Safeguarding financial sector stability.
  - Improving the quality of economic statistics and timeliness of data dissemination.
- Fiscal policy:
  - Budget limits net domestic borrowing to 1 percent of GDP (main fiscal anchor). Under current projection of foreign-financing inflows, this is consistent with a primary deficit of 0.8 percent of GDP and an overall deficit of 5.8 percent of GDP (MEFP ¶9).
  - With new external debt disbursements limited to existing project pipeline, public debt-to-GDP ratio expected to drop to around 123 percent by year-end.
  - Emphasis on more efficient revenue mobilization, better expenditure prioritization and sequencing, and improvements in business environment for private sector development.
  - Tax policy and administrative reforms in the 2018 budget include a reduction in personal and corporate income tax rates intended to encourage compliance and broaden tax base; expected to be budget-neutral.
  - Sale of land and presidential planes noted as expected yield (text truncated in source).

*Source: IMF staff report content provided in the supplied document.*

### 0.9 percent of GDP) and recovery of stolen assets, should add to the revenue envelope. Further,

### THE GAMBIA

### Revenue Mobilization and Public Financial Management
- Ongoing efforts to implement risk-based compliance management strategies for tax and customs administration and technological measures are expected to yield some 1.4 percent of GDP in 2018, bringing the tax-to-GDP ratio to 16.4 percent of GDP.
- Other revenue-enhancing measures include implementation of Fund TA and recommendations from the recent Fund Tax Administration and Diagnostic Assessment Tool (TADAT) mission, and rigorous application of the fuel price adjustment mechanism to ensure the flow of revenue from petroleum taxation and eschew implicit and explicit subsidies.
- The budget foresees an increase of 1.4 percent of GDP in primary spending after implementation of expenditure adjustments, including from the vehicle reform policy (SB for end-June 2018), and streamlining of embassies and membership in non-financial international organizations.
- The authorities will proceed with the settlement of arrears to suppliers of about GMD 253 million (about 0.5 percent of GDP), validated by the internal audit office.
- Measures to strengthen commitment controls, internal audit and accountability, and improve budget execution include:
  - Enhance liquidity forecasting capabilities: the CBG will adopt a revised liquidity forecasting template (SB for end-September 2018).
  - Establish a cash management committee: new budget implementation guidelines will inform deliberations of weekly cash management committee meetings, supported by enhanced liquidity management.
  - Commence a process for creating a Treasury Single Account (TSA): MoFEA will inform other ministries and the CBG about TSA plans, and the Accountant General will produce an inventory of bank accounts for the TSA (both SBs for end-June 2018). The CBG will separate and ringfence from the TSA its account that also uses T-bills for liquidity management operations (SB for end-September 2018).
  - Enhance credibility of budgeting process: adopt a medium-term economic and fiscal framework (MTEFF) consistent with a medium-term debt strategy (MTDS), including a detailed borrowing plan; MTEFF package to be prepared in close consultation with IMF and World Bank staffs and submitted to cabinet for approval as a basis for the 2019 budget (SB for end-September 2018).
- Planned audits of state-owned enterprises (SOEs) and an SOE reform project (with development partner assistance) aim to restructure debts, reduce administration costs, and reinforce capacity to collect data for management decisions.
  - Authorities plan to expedite special audits of six largest SOEs (Port; Airport; Petroleum Company; utility NAWEC; Social Security and Housing Fund; GAMTEL/GAMCEL) and lay the basis for MoUs with SOEs to resolve cross arrears.

### Debt Sustainability
- An updated debt sustainability analysis indicates that The Gambia is currently in external debt distress, and that public debt is unsustainable.
- Both external and domestic debt are very high, with a large pipeline of already-contracted loans posing solvency risks.
- External debt stock indicators have deteriorated since the March 2018 DSA; all five external debt burden indicators breach their indicative thresholds by large margins and for an extended period in both the passive and the active (baseline) scenario.
- Vulnerabilities:
  - Total public debt expected to remain elevated throughout the projection period.
  - Domestic debt subject to high rollover risks given the preponderance of short-term debt.
  - Contingent liabilities related to SOE debt pose additional risks.
  - Sustained primary surpluses needed to reduce public debt would be politically and socially challenging given substantial development needs.
- A multi-pronged strategy is required to restore and maintain debt sustainability:
  - Government has approached creditors to request debt relief; recent examples by China and the Saudi Fund cited as precedents.
  - Re-prioritize existing project pipeline in the context of the NDP and seek improvements in terms of already-contracted loans to raise their grant element.
  - Use additional grants, including those pledged at the international conference, to retire expensive domestic debt.
  - DSA includes an illustrative “active plus” scenario comprising a deferral of the amortization on plurilateral, official bilateral, and private debt and softening of terms of already contracted but undisbursed project loans, delivering significant improvement in debt burden indicators and placing debt service-to-revenue and debt service-to-exports indicators on a sustainable path.
  - Interest reduction is not included in the “active plus” scenario; for example, a reduction of interest rates on all debt subject to the deferral to an average of 1 percent would generate, in the near term, about 0.3 percent of GDP in interest savings per year.
- Tightening new borrowing policy and improved debt management commitments (MEFP):
  - Authorities commit to refrain from contracting new external debt with grant element below 50 percent and accept loans only for projects with high expected social returns for which grant financing would not be available.
  - Criticality of projects to be determined in consultation with World Bank staff against other NDP priorities and in accordance with a borrowing plan consistent with debt sustainability.
  - Strengthened external debt monitoring, including semi-annual debt reconciliation exercises with external creditors (SB for end-June 2018).
- Project disbursements and investment planning require tightening:
  - Strengthen project selection and procurement practices; set up a project managers’ task force to appraise and prioritize projects.
  - Requested Fund TA in public investment management assessment (PIMA) will guide project planning.
  - Authorities should avoid offering government guarantees in public-private partnerships and power purchasing agreements to curb growth of contingent liabilities.

### Central Bank Reforms, Monetary Policy, and Financial Stability
- Institutional framework of the CBG is being strengthened along with its balance sheet:
  - Proposed amendments to the CBG Act aim to strengthen autonomy and governance, including improved financial reporting and audit processes, strengthened Board governance and oversight duties, and establishment of a Financial Stability Committee.
  - Lending to the central government will be allowable only in very limited circumstances; current statutory limit maintained at 10 percent of previous years’ tax revenue, clarified that market interest rate will be applied.
  - Government’s agreed adherence to the schedule for servicing the 30-year bonds, a planned medium-term recapitalization of the CBG, and realization of the CBG’s share of proceeds from a privatization sale will strengthen the CBG’s balance sheet and allow it to subsequently issue its own short-term instrument for liquidity management (MEFP ¶20).
  - Statutory audit of the CBG (SB for end-September 2018) should help identify modalities for further strengthening operational structure and balance sheet.
- Monetary policy re-orientation toward price stability (MEFP ¶¶21–22):
  - Recent decline in consumer price inflation driven mainly by improved fiscal discipline, external inflows stabilizing the dalasi, and lower food prices.
  - At the CBG’s MPC meeting of May 30, 2018, the policy rate was lowered from 15 percent to 13.5 percent.
  - To establish an interest rate corridor, the CBG announced introduction of standing deposit and lending facilities effective August 30, 2018.
  - CBG is strengthening liquidity forecasting to inform monetary policy operations and is ring-fencing from the TSA the CBG accounts for liquidity management operations in T-bills to increase operational freedom.

*Based on IMF staff report content in cr18197.*

### introduction of CBG bills and an overnight repurchase standing facility.

### introduction of CBG bills and an overnight repurchase standing facility.

### Monetary policy and exchange rate
- The CBG remains committed to a flexible exchange rate policy; the dalasi has been relatively stable since the end of the political impasse in early 2017 (MEFP ¶21).
- The CBG has not intervened in the foreign exchange market since February 2018 and does not intend to do so except to ensure orderly market conditions and to ensure availability of foreign exchange to meet external obligations of the government.
- Staff welcomes the establishment of an interest rate corridor.
- The planned issuance of short-term CBG bills for liquidity management should be executed once the CBG’s balance sheet is strengthened through recapitalization.
- Inflation is projected to decline to the CBG's 5 percent target.

### Financial sector risks and supervision
- Declining yields on government securities and rising private credit pose a challenge to bank profitability and financial sector resilience.
- With Fund TA on risk-based supervision, the CBG is stepping up oversight of banks’ operations, including implementation of the MTDS, sovereign-bank nexus, and SOE debt restructuring.
- Staff considers appropriate the CBG’s plans to upgrade its bank resolution framework and, as its finances allow, to build safety nets for small depositors (MEFP ¶23).
- The CBG remains concerned about the impact of correspondent banking relationships (CBRs) withdrawal; CBRs withdrawal is not currently seen as macro-critical as in most circumstances CBRs have been replaced, but the CBG is monitoring their impact, scope, scale, and nature.
- Tackling NPLs, especially in some smaller banks, and further progress on regulatory reforms are instrumental to foster resilience and strengthen oversight.
- Special vigilance is required to monitor and manage banks’ exposure to SOEs and with regard to CBRs withdrawal; if replacement CBRs were also to be lost and left unaddressed, they could jeopardize financial stability and the economic recovery underway.

### Statistics and data improvements
- There is a need to enhance coverage of high frequency activity indicators, and address inconsistencies between national accounts, fiscal, monetary, and balance of payments data.
- With help from the Fund and other development partners, the central bureau of statistics is enhancing coverage of economic statistics, including a re-basing of the national accounts.
- Supported by IMF TA, the authorities plan to release re-based national accounts in July 2018.
- Progress is being made in adopting new methodologies for monetary and balance of payments statistics, and in enhancing cooperation among official data producers.
- The launch of the National Summary Data Page in May 2018 was an important milestone toward timely dissemination and improved data quality and consistency.

### Structural reforms and business environment
- Improving the business environment for private sector development remains critical (MEFP ¶24).
- Staff supports authorities’ initiatives including:
  - completion of a draft Anti-Corruption Bill in consultation with stakeholders for consideration by the National Assembly by end-September 2018;
  - seeking TA for (a) revising the draft PPP Law, and (b) setting up the institutional framework for the management of natural resource wealth, as prospects for oil discovery have increased.
- Clarifying the regulatory environment, deepening the financial system to strengthen stability and foster access and inclusion, improving ICT accessibility, and ensuring availability of electricity and water supply are necessary.

### Program monitoring, fiscal stance, and debt sustainability
- Reviews of the SMP will be based on indicative quantitative targets and structural benchmarks through September 2018 (MEFP Tables 2, 4).
- The proposed quantitative targets are based on the revised end-2017 outcome and a steeper than previously anticipated adjustment path to put public debt-to-GDP ratio on a downward trajectory.
- Targets are subject to adjustors in the technical memorandum of understanding (TMU); the adjustor to the NCG target has been updated to reflect projected disbursements of budget support in the second and the third quarters of 2018.
- Structural benchmarks include actions essential for tracking progress in implementing a treasury single account, improving liquidity forecasting and domestic debt management, and enhancing medium-term fiscal planning.
- Two additional structural benchmarks for end-June 2018 were added:
  - implementation of the vehicle policy reform; and
  - initiation of semi-annual reconciliation of external debt data with creditors.
- Restoring debt sustainability is paramount: all indicators of debt sustainability are above their applicable thresholds, and amortization and interest payments represent a massive drain on fiscal and foreign exchange resources.
- Staff supports authorities’ efforts to seek debt relief from bilateral and plurilateral creditors, and to strengthen debt and project management.
- Given the unsustainable debt position and history of faster-than-anticipated disbursements of project financing, reprioritization of the project pipeline and ability to control disbursements of already contracted debt would be important for any possible ECF.

### Governance, program performance, and conditionality
- Performance under the SMP through end-March 2018 was broadly satisfactory.
- Staff recognizes mitigating circumstances surrounding the breach of the zero ceiling on contracting nonconcessional debt; the breach was substantial (equivalent to 2½ percent of GDP) and could have been avoided with closer consultation with staff prior to contracting the loan that gave rise to the breach.
- Staff welcomes the authorities’ commitment to raising voluntarily the concessionality threshold to 50 percent and urges them to consult with IMF and World Bank staff before contracting any new external borrowing.
- Authorities should adhere to understandings on a revised timetable for implementing outstanding measures, notably SOE audits and the vehicle policy reform, to demonstrate resolve to implement the program.
- Strengthening public financial management (including implementation of the TSA and restructuring of SOEs with World Bank assistance) and refraining from government guarantees to SOEs remain critical to buttress fiscal discipline.
- Strengthened operational independence of the CBG should enable effective liquidity management focused on achieving the inflation target; the decline in inflation in the context of fiscal adjustment and dalasi stability should provide space for further monetary policy easing, while the CBG should remain vigilant to foster savings and discourage risky lending by banks.

### Staff recommendation
- Staff supports the completion of the second review under the SMP.
- Staff urges authorities to maintain macroeconomic stability with a strengthened focus on debt sustainability and to implement measures agreed with staff to improve public financial management, including of SOEs, to pave the way for a possible ECF arrangement.
- The imprudent debt policy to date and limited progress on SOE audits signal that transition to a possible ECF arrangement may need to take longer than the current SMP.
- Authorities’ efforts to establish a credible and active process to obtain debt relief from bilateral and plurilateral creditors that would make The Gambia’s debt sustainable will be a prerequisite for discussions on a possible ECF arrangement.
- Debt relief is needed to ensure debt sustainability without imposing undue hardship by diverting resources needed for critically important social and development spending.

*Source: cr18197 - introduction of CBG bills and an overnight repurchase standing facility.*

### 1. Current account

### 1. Current account

### A. Goods and services
- Goods and services (levels, US$ millions, annual series shown):
  - -229.5; -172.7; -236.2; -280.1; -333.9; -372.5; -394.0; -407.4; -417.7; -414.0; -409.3
- Goods (net):
  - -261.9; -220.1; -274.8; -318.7; -369.1; -425.5; -458.2; -484.6; -505.9; -519.1; -526.6
- Exports, f.o.b.:
  - 108.3; 106.6; 101.6; 101.6; 71.2; 84.6; 93.8; 102.5; 106.3; 111.8; 121.4
- Imports, f.o.b.:
  - -370.2; -326.7; -376.4; -420.3; -440.3; -510.1; -552.1; -587.1; -612.2; -630.9; -648.0
- Services (net):
  - 32.4; 47.4; 38.6; 38.6; 35.2; 53.0; 64.2; 77.2; 88.1; 105.1; 117.3
- Services exports:
  - 112.1; 124.9; 116.1; 116.1; 112.8; 151.0; 171.9; 193.4; 215.2; 241.3; 257.7
  - Of which: travel income: 63.9; 70.7; 61.9; 61.9; 76.9; 110.8; 127.5; 145.7; 166.1; 188.9; 200.2
- Services imports:
  - -79.7; -77.6; -77.5; -77.5; -77.5; -98.0; -107.7; -116.2; -127.1; -136.3; -140.3
- Current-account (percent of GDP, selected series):
  - Goods and services: -25.7; -17.9; -22.8; -27.8; -33.1; -34.0; -33.9; -33.0; -32.1; -30.2; -28.5
  - Goods (net): -29.4; -22.8; -26.5; -31.6; -36.6; -38.8; -39.4; -39.3; -38.9; -37.9; -36.7
  - Services (net): 3.6; 4.9; 3.7; 3.8; 3.5; 4.8; 5.5; 6.3; 6.8; 7.7; 8.2
  - Services exports: 12.6; 13.0; 11.2; 11.5; 11.2; 13.8; 14.8; 15.7; 16.5; 17.6; 17.9
  - Services imports: -8.9; -8.0; -7.5; -7.7; -7.7; -8.9; -9.3; -9.4; -9.8; -9.9; -9.8

### B. Income (net)
- Income (net, US$ millions):
  - -28.3; -27.5; -28.7; -28.3; -28.3; -29.2; -30.1; -31.1; -32.2; -35.5; -31.4
- Income credits:
  - 2.2; 2.1; 2.2; 2.2; 2.2; 2.3; 2.4; 2.4; 2.5; 2.8; 2.5
- Income debits:
  - -30.5; -29.6; -30.9; -30.5; -30.5; -31.5; -32.5; -33.6; -34.7; -38.3; -33.9
- Income (percent of GDP series):
  - Income (net): -3.2; -2.8; -2.8; -2.8; -2.8; -2.7; -2.6; -2.5; -2.5; -2.6; -2.2
  - Income credits: 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2
  - Income debits: -3.4; -3.1; -3.0; -3.0; -3.0; -2.9; -2.8; -2.7; -2.7; -2.8; -2.4
  - Of which: interest on government debt: 1.0; 0.8; 0.7; 0.7; 0.7; 0.9; 0.9; 0.9; 0.9; 0.8; 0.8

### C. Current transfers
- Current transfers (US$ millions):
  - 123.9; 114.8; 167.8; 164.2; 167.7; 192.9; 185.5; 179.5; 171.4; 173.4; 185.3
- Official transfers:
  - 17.0; 7.7; 52.9; 52.0; 55.4; 73.8; 59.8; 47.8; 34.8; 30.0; 37.8
- Remittances:
  - 93.6; 93.5; 101.1; 98.3; 98.3; 106.9; 113.2; 119.1; 125.7; 132.2; 136.0
- Other transfers:
  - 13.3; 13.6; 13.9; 13.9; 13.9; 12.3; 12.6; 12.6; 10.9; 11.2; 11.5
- Current account balances (US$ millions):
  - Current account (excl. budget support): -151.0; -93.1; -149.9; -196.2; -249.9; -282.6; -298.4; -306.8; -313.3; -306.2; -293.2
  - Current account (incl. budget support): -134.0; -85.4; -97.0; -144.2; -194.5; -208.8; -238.6; -259.0; -278.5; -276.2; -255.4
- Current transfers (percent of GDP series):
  - Current transfers: 13.9; 11.9; 16.2; 16.3; 16.6; 17.6; 16.0; 14.6; 13.2; 12.7; 12.9
  - Official transfers: 1.9; 0.8; 5.1; 5.2; 5.5; 6.7; 5.1; 3.9; 2.7; 2.2; 2.6
  - Remittances: 10.5; 9.7; 9.7; 9.7; 9.7; 9.7; 9.7; 9.7; 9.7; 9.6; 9.5
  - Other transfers: 1.5; 1.4; 1.3; 1.4; 1.4; 1.1; 1.1; 1.0; 0.8; 0.8; 0.8
- Current account (percent of GDP):
  - Current account (excl. budget support): -16.9; -9.7; -14.4; -19.4; -24.8; -25.8; -25.7; -24.9; -24.1; -22.3; -20.4
  - Current account (incl. budget support): -15.0; -8.9; -9.4; -14.3; -19.3; -19.0; -20.5; -21.0; -21.4; -20.2; -17.8

### 2. Capital and financial account

### A. Capital account
- Capital account (US$ millions):
  - 23.2; 16.2; 25.9; 60.0; 60.0; 73.0; 109.5; 122.5; 125.5; 130.5; 122.5
- Capital account (percent of GDP):
  - 2.6; 1.7; 2.5; 5.9; 5.9; 6.7; 9.4; 9.9; 9.6; 9.5; 8.5

### B. Financial account
- Financial account (US$ millions):
  - 72.5; 45.5; 84.5; 159.4; 162.9; 157.0; 144.1; 176.4; 188.2; 196.3; 187.2
- Foreign direct investment:
  - 73.2; 72.7; 83.2; 83.3; 83.3; 96.3; 107.6; 119.8; 131.3; 143.9; 151.1
- Portfolio investment:
  - 2.9; 3.1; 3.8; 3.7; 3.7; 4.1; 3.8; 3.7; 3.6; 3.7; 3.9
- Other investment:
  - -3.5; -30.3; -2.5; 72.3; 75.9; 56.6; 32.8; 52.9; 53.4; 48.7; 32.2
- Capital and financial account (US$ millions):
  - 95.7; 61.6; 110.4; 219.4; 222.9; 230.0; 253.6; 298.9; 313.7; 326.8; 309.7
- Capital and financial account (percent of GDP):
  - 10.7; 6.4; 10.6; 21.7; 22.1; 21.0; 21.8; 24.2; 24.1; 23.9; 21.6

### Errors and overall balance
- Errors and omissions:
  - -3.1; 13.5; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0
- Overall balance (US$ millions):
  - -41.3; -10.3; 13.4; 75.2; 28.4; 21.2; 15.0; 39.9; 35.2; 50.7; 54.3

### Financing and reserves

### Financing flows (US$ millions)
- Net international reserves (increase -):
  - 41.3; 10.3; -13.4; -75.2; -28.4; -21.2; -15.0; -39.9; -35.2; -50.7; -54.3
- Change in gross international reserves:
  - 35.8; 16.3; -25.0; -84.1; -37.3; -13.2; -8.4; -34.7; -29.5; -46.6; -48.4
- Use of IMF resources (net):
  - 5.5; -5.9; 11.7; 8.9; 8.9; -7.9; -6.6; -5.2; -5.7; -4.0; -5.8
  - Disbursements: 10.9; 0.0; 15.7; 16.2; 16.2; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0
  - Repayments: -5.4; -5.9; -4.0; -7.3; -7.3; -7.9; -6.6; -5.2; -5.7; -4.0; -5.8

### Reserves and import coverage (levels and months)
- Exports of goods and services (US$ millions):
  - 220.4; 231.5; 217.7; 217.7; 184.0; 235.6; 265.8; 295.9; 321.6; 353.1; 379.1
- Imports of goods and services (US$ millions):
  - -449.9; -404.2; -453.9; -497.8; -517.8; -608.1; -659.8; -703.3; -739.3; -767.1; -788.3
- GMD per US dollar, period average:
  - 43.2; 43.8; 45.4; 46.8; 46.8; 48.0; 50.1; 52.0; 54.2; 56.4; 59.0
- Gross International Reserves (US$ millions):
  - 76.1; 59.8; 84.8; 143.9; 144.1; 157.4; 165.8; 200.5; 230.0; 276.7; 325.1
- Months of current year's imports of goods and services (gross reserves):
  - 2.0; 1.8; 2.2; 3.5; 3.3; 3.1; 3.0; 3.4; 3.7; 4.3; 4.9
- Months of next year's imports of goods and services (gross reserves):
  - 2.3; 1.4; 2.0; 2.9; 2.8; 2.9; 2.8; 3.3; 3.6; 4.2; 4.8
- Net usable international reserves (US$ millions):
  - 28.9; 19.8; 33.4; 91.2; 91.2; 110.8; 125.8; 165.7; 200.9; 251.6; 305.8
- Months of current year's imports of goods and services (net usable):
  - 0.8; 0.6; 0.9; 2.2; 2.1; 2.2; 2.3; 2.8; 3.3; 3.9; 4.7
- Months of next year's imports of goods and services (net usable):
  - 0.9; 0.5; 0.8; 1.8; 1.8; 2.0; 2.1; 2.7; 3.1; 3.8; 4.5
- Financing gap:
  - 0.0 for all periods shown

### Financial Soundness Indicators (banking sector, end-December 2014–2017)
- Capital Ratios:
  - Capital Adequacy Ratio: 29.6 33.1 38.2 33.6
  - Regulatory Capital Ratio (i.e T1+T2): 30.3 34.8 39.8 35.1
  - Primary Capital Ratio (i.e. T1): 28.8 31.4 35.9 31.9
  - Non-Performing Loans/Primary Capital: 10.6 7.9 9.8 6.8
- Asset Quality Ratios:
  - Non-Performing Loan Ratio: 7.2 6.5 9.3 7.2
  - Aggregate Provision Level: 95.6 82.2 79.1 99.1
  - Loan Loss Reserve Ratio: 4.7 4.6 6.8 6.6
- Earnings Ratios:
  - ROA: 2.9 0.5 0.7 1.6
  - ROE: 19.0 3.5 4.2 11.0
  - Net Interest Margin: 1.7 1.8 1.9 8.1
  - Non-Interest Income Ratio: 38.4 34.0 6.8 3.4
- Liquidity Ratios:
  - Liquid Assets Ratio: 84.8 93.4 101.3 92.9
  - Dalasi Liquid Assets/Dalasi Deposits: -88.4 97.5 89.0
  - Time Deposits/Deposits: 17.7 18.1 16.5 13.8
- Source: Central Bank of The Gambia (end-December series shown)

### Indicative quantitative targets and program performance (selected)
- 2017 monitored ceilings and floors (GMD millions and USD millions where noted) with status:
  - Ceiling on net domestic borrowing of the central government (cumulative flows): targets and actuals include 5459, 43...989 Not Met; 943-7-2,127 Met; 471-153-1,097 Met (presented as in source).
  - Ceiling on the stock of net domestic assets of the central bank: 8,897 9,704 ... 9,497 Met; 10,525 ... 6,170 Met; 9,685 ... 7,104 Met.
  - Floor on the stock of net usable international reserves of the central bank (USD millions): -10.2 -23.9 -39.8 -11.8 Met; 9.9 ... 111.2 Met; -0.1 -7.191.2 Met.
  - Ceiling on new external payments arrears of the central government (USD millions): zero ceilings noted; some periods "Not Met".
  - Ceiling on new nonconcessional external debt contracted or guaranteed by the central government (USD millions): targets listed as 0 0 0 with status "Met" or "Not Met" in specific quarters.
  - Monthly ceiling on central bank credit to the central government at non-market terms (GMD millions): examples include 1,187 943 ... 1,421 Not Met; 946 ... 988 Not Met; 0 ... -413 Met.
  - Floor on poverty-reducing expenditures (cumulative flows, GMD millions): 575 843 ... 1,426 Met; 1,112 ... 2,393 Met; 1,380 ... 3,356 Met.
  - Memorandum item: Budget Support (cumulative flows, GMD millions): 003,455 3,455.
  - TMU Exchange Rate (GMD/USD): examples 45.39 45.39 47.09 45.39 47.28 45.39 47.29 as presented.

- Proposed indicative quantitative targets for 2018 (selected):
  - Ceiling on net domestic borrowing of the central government (GMD millions): -1,097 526 466 Met; 450 450 -2,754 (Proj).
  - Ceiling on the stock of net domestic assets of the central bank (including RCF onlending, GMD millions): 7,104 10,707 6,835 Met; 8,000 8,000 9,265 (Proj).
  - Floor on the stock of net usable international reserves of the central bank (USD millions): 91.2 78.8 112.2 Met; 105 951 113 (Proj).
  - Floor on poverty-reducing expenditures (GMD millions): 3,356 949 992 Met; 2,018 3,163 4,437 (Proj).
  - Memorandum item: Budget Support (cumulative flows, GMD millions): 3,455 033 633 63 3,543.
  - Base Money (GMD millions): 9,796 10,448 10,953 11,531 12,110 (Proj).
  - TMU Exchange Rate (GMD/USD): 47.88 45.39 47.28 45.39 45.39 45.39

### Structural benchmarks (2017–18 and proposed 2018)
- Completed and pending measures (select highlights and statuses):
  - Enhance timely and comprehensive provision and monitoring of debt data by establishing a back-up system: End-March 2018 — Met.
  - Prepare up-to-date position on financial status and contingent liabilities of key SOEs, and regularly monitor SOE operations and fiscal risks: End-December 2017 — Met.
  - Finalize audits of all SOEs and the CBG (with donor support): End-March 2018 — Not met. Observation: Finalization delayed due to unresolved procurement challenges. Re-phased and redefined.
  - Compile an inventory of existing payment arrears, and cross-arrears between government and SOEs; define and approve a strategy for reducing the existing stock, and start implementing it at an appropriate pace (total of the expenditure arrears/3 years): End-March 2018 — Not met. Observation: Inventory of cross arrears completed; validation and implementation ongoing.
  - Establish additional procedures adopted by MoFEA to ensure all government expenditures and revenues are entered through IFMIS: End-December 2017 — Met.
  - Prepare an action plan to restore the Treasury single account: End-March 2018 — Not met. Observation: Implemented with delay; revised Act drafted.
  - Submit draft amendments to the CBG Act to the National Assembly: End-March 2018 — Not met. Observation: Draft under review at Ministry of Justice.

- Proposed structural benchmarks for 2018 (selected, timings):
  - Authorize cancellation of previous (local) tender for special purpose audits of 5 key SOEs and enable appointment of auditor of international renown to perform special purpose audits of 13 SOEs: Prior Action completed.
  - TSA Implementation Committee established and meets monthly: End-June 2018.
  - AGD to produce inventory of bank accounts used for the TSA: End-June 2018.
  - CBG to separate and ringfence from TSA the account for operations in T-bills used for liquidity management: End-September 2018.
  - Adopt improved liquidity templates for liquidity forecasting and use for liquidity absorption/injection operations: End-September 2018.
  - Minister of Finance to institute a semi-annual (June and December) debt reconciliation exercise with external creditors: End-June 2018.
  - Issue tenders for audits of six key SOEs (GAMTEL/GAMCEL, GCAA, GNPC, GPA, NAWEC, and SSHFC): End-July 2018.
  - Validate all cross and payment arrears between government and SOEs by Office of Internal Audit: End-September 2018.
  - Submit draft amendments to the CBG Act in line with safeguards assessment recommendations to the National Assembly: End-June 2018.
  - Finalize the 2017 CBG statutory joint audit: End-September 2018.
  - Implement Vehicle Reform Policy in the 2018 Budget Law: End-June 2018.
  - MoFEA to submit to cabinet an MTEFF consistent with the MTDS, NDP and May donor conference outcomes: End-September 2018.

### Capacity development strategy (Annex I — capacity development priorities for FY 2019)
- Overall assessment:
  - The Gambia is a fragile low-income country with capacity and institution-building challenges; key priorities include enhancing domestic revenue mobilization, improving budget preparation and execution, and strengthening SOE oversight to achieve debt sustainability.
  - TA implementation has had mixed results due to data gaps, poor data management, and concentration of knowledge in key individuals.
- Key past TA achievements:
  - Successful piloting of fiscal stress testing in 2017.
  - Increased capacity to formulate medium-term economic, fiscal, debt and financial policies under the SMP, including macroeconomic forecasts (2017–18).
  - Initiation of reforms to enhance financial reporting and monitoring of SOEs (2017–18).
  - Progress on reforms for customs administration, including risk management (2017–18).
- Forward-looking TA priorities:
  - Public investment management (PIM): streamline to ensure efficiency/transparency in project selection and monitoring.
  - Develop a database on SOE financial (IFRS) reports and debt and contingent liabilities for fiscal risk estimation and fiscal stress tests.
  - Enhance quality of national accounts, CPI, BoP, monetary and fiscal statistics; finalize analysis of the establishment survey and rebase national accounts and CPI.
  - Financial sector TA: develop risk-based (bank and non-bank) supervisory capacity of the Central Bank; closely monitor banks’ exposures to the government and SOEs.
- FY 2019 key priorities and objectives (table-style listing from source):
  - Tax administration: Expand tax base, strengthen enforcement, and reduce tax arrears.
  - Customs administration: Improve management and efficiency to deliver higher customs revenue.
  - Public Financial Management: TSA development and cash flow forecasting, strengthen budget execution and control, improve debt management and SOE oversight.
  - Statistics — National Accounts: Update base year to 2013, generate re-based series to 2017 and the backward series.
  - Dissemination of statistics: Implement e-GDDS (Gambia launched the summary under e-GDDS in June 2018).
  - Financial sector stability: Maintain financial sector stability through prompt, early action.
  - Medium Term Economic and Fiscal Framework (MTEFF): Improve fiscal management, including medium-term forecasts.
- Main risk to capacity development:
  - Weak absorptive capacity; mitigation includes tailoring TA programs to local needs, results-based management, and regular follow-up on implementation.
- Authorities’ views:
  - Authorities agree with the capacity development strategy and consider it appropriately formulated and aligned with the 2018-21 National Development Plan.

*Sources: The Gambian authorities; and Fund staff estimates and projections (tables and text as provided).*

### Annex II. Risk Assessment Matrix

### Annex II. Risk Assessment Matrix

### Spillover Risks
- Structurally weak growth in key advanced economies
  - Relative Likelihood: High
  - Expected Impact: Low
  - Description:
    - "Low productivity growth (United States, the Euro Area, and Japan), a failure to fully address crisis legacies and undertake structural reforms, and persistently low inflation (the Euro Area, and Japan) undermine medium-term growth in advanced economies."
    - "Decline in The Gambia’s exports and tourism receipts."
    - "Employment pressures abroad could reduce the inflow of remittance."
  - Recommendations:
    - "Diversify the tourism base."
    - "Promote regional trade and integration."
    - "Promote private investment and diversify domestic production."

- Reduced financial services by correspondent banks
  - Relative Likelihood: High
  - Expected Impact: High
  - Description:
    - "Significant curtailment of cross-border financial services in emerging and developing economies."
    - "Negative impact on payment services, bank profits, trade, remittances, and investors’ confidence."
  - Recommendations:
    - "Strengthen the AML/CFT framework."
    - "Use alternative methods (regional systems or networks, seek new CBRs, including bank-specific solutions for withdrawal)."

### Domestic/Regional Risks
- Financial Instability
  - Relative Likelihood: Medium
  - Expected Impact: High
  - Description:
    - "Banks’ high exposure to sovereign and SOE debt coupled with debt reprofiling and restructuring and declining interest rates may negatively affect banks."
    - "Reduced profitability and capital adequacy, negatively affecting financial intermediation."
  - Recommendations:
    - "Monitor and mitigate debt risks with debt management strategy, enhance risk-focused supervision, and improve CBG’s independence"
    - "Develop crisis management capacity and improve the bank resolution framework."

- Fiscal policy slippages
  - Relative Likelihood: Medium
  - Expected Impact: High
  - Description:
    - "A looser fiscal policy without effective control of fiscal spending and lack of fiscal reforms."
    - "Fiscal shocks from SOEs."
    - "Increase in NDB and renewed pressure on fiscal and debt sustainability, also undermining the growth outlook."
    - "Pressure on foreign reserves."
    - "Crowding out of private credit."
  - Recommendations:
    - "Implement TA recommendations on PFM, including strengthening cash management, improving budget execution, and avoiding unbudgeted spending."
    - "Implement SOE reforms."

- Political Instability
  - Relative Likelihood: Medium
  - Expected Impact: High
  - Description:
    - "Tribal politics and tensions among the coalition parties supporting President Barrow may lead to government ineffectiveness."
    - "Political uncertainty hurts market confidence and private investment."
    - "Delay or non-implementation of economic and policy reforms, weakened institutions."
  - Recommendation:
    - "Give policy priority to socio-economic stability and development."

- Natural disasters
  - Relative Likelihood: Low
  - Expected Impact: High
  - Description:
    - "Recurring droughts."
    - "Domestic production, especially rain-fed agriculture."
  - Recommendations:
    - "Continue taking out insurance against crop failure."
    - "Build up fiscal and reserve buffer."
    - "Increase economic resilience to droughts and natural disasters."

### RAM Definition and Staff Assessment Notes
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff).
- The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline scenario within the next three years.
  - "Low" is meant to indicate a probability below 10 percent.
  - "Medium" a probability between 10 percent and 30 percent.
  - "High" a probability of 30 percent or more.
- The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities.
- "Non-mutually exclusive risk may interact and materialized jointly."

*Annex II. Risk Assessment Matrix — IMF staff*

### 0.1 percent of GDP.

### cr18197 - 0.1 percent of GDP.

### Key immediate measures and administrative actions
- A three-year hiring freeze for the civil service and security sectors. Based on the ongoing expenditure reviews, we will impose firm staffing limits for all ministries and agencies.
- Adoption of MoFEA’s new Budget Execution Guidelines, issued in January 2018 aiming at strengthening budget controls with a view to preventing the accumulation of spending arrears (¶12).
- Revival of the High-level Economic Council (HILEC) comprised of the Vice President, the Minister of Finance and Economic Affairs, the Minister of Trade, the Governor of the CBG, and the Secretary General and Head of the Civil Service to strengthen monitoring of policy implementation under the SMP and beyond.

### Pending broader reforms and expected fiscal gains
- Implementation of the vehicle fleet reform:
  - Expected to generate savings of 2 percent of GDP over the next three years.
  - Approved by Parliament and factored into the 2018 budget.
  - Implementation commenced but retrieval of vehicles was suspended through end-June 2018 to allow more outreach; transport allowances for lower grades tripled.
  - Savings sources: reduction in fleet, lower fuel and maintenance costs, receipts from sale of redundant vehicles.
  - Risk: budgeted savings could disappoint due to implementation delays and increases in fuel and maintenance costs already in 2018.
- Asset sales:
  - Sale of land and of the presidential planes yielding an estimated 0.9 percent of GDP; delayed due to valuation challenges but now expected to conclude in 2018 following stepped-up marketing efforts.
  - Sale of luxury vehicles from the former administration, with the help of the StAR program (expected to raise less than 0.1 percent of GDP).
- Streamlining of embassies, subvented agencies, and membership in non-financial international organizations (expected to raise less than 0.1 percent of GDP).
- Work on recovery of stolen assets:
  - A commission of inquiry set up investigating financial dealings of the former regime.
  - All Gambian assets of the former President, his family and associates have been frozen.
  - Recovery of assets abroad pursued with support from the StAR Initiative.
- Collecting privatization proceeds, including from the planned sale of Megabank.

### Fiscal policy objectives, targets, and projections
- Fiscal anchor: maintenance of a net domestic borrowing target of 1 percent of GDP.
- Overall fiscal deficit projection: decline from 7.9 percent of GDP in 2017 to about 5.8 percent of GDP in 2018—consistent with a primary deficit of 0.8 percent.
- Assumptions supporting the projection:
  - Revised 2018 collection target for the Gambia Revenue Authority from GMD 8 billion to over GMD 9 billion (of which GMD 8.6 billion or 16.4 percent of GDP in tax revenues).
  - Continued strong inflow of foreign grants equivalent to about 13½ percent of GDP in 2018 (compared with 11½ percent of GDP in 2017).
  - Implementation of fiscal adjustment measures envisaged in the 2018 budget and other measures listed in ¶7.

### Revenue mobilization measures and expectations
- Administrative and technological enhancements starting in 2018 are expected to yield an increase in tax revenue of 0.8 percent of GDP.
- Expected pickup in international gateway receipts to reach 0.3 percent of GDP on a quarterly basis starting from the last quarter of 2018.
- Nontax revenue target: 2 percent of GDP in 2018.
- Revenue measures carried over from prior year: asset sales of land and presidential planes, recovery of stolen assets (domestically and abroad), and sale of Megabank to keep corporate, personal and rental income tax cuts budget-neutral.
- Stand ready to implement IMF TADAT recommendations from April 2018.
- Beyond 2018: additional revenue gains expected from implementing digital taxation.
- Petroleum taxation: regular adjustment of domestic petroleum prices to reflect international fuel costs through the existing fuel price adjustment mechanism administered by MoFEA.

### Expenditure-side reforms and arrears management
- Expenditure reforms aimed at enhancing public efficiency and accountability:
  - Implement vehicle reform policy by end-June 2018 (structural benchmark) and identify measures to offset delays.
  - Streamline ministries and subvented agencies, downsize/rationalize embassies, and streamline memberships in nonfinancial international organizations.
  - Launch a comprehensive reform of the civil service over the medium term following public expenditure reviews (including security sector).
- Arrears management:
  - Audited stock of payment arrears by MDAs to suppliers (currently GMD 252mn).
  - Devise a repayment plan for domestic arrears to be implemented in the second half of 2018 comprising cash settlements for small payments and securitization (e.g., Promissory Notes) for larger amounts.
  - Outstanding arrears to M.A. Kharafi and Sons (originally $50 million) to be re-audited by the National Audit Office; if validated, the liability will be entered into the debt database and serviced accordingly.
- Strengthen internal audit, commitment controls, and accountability of officers for willful breach of appropriated allocations.

### Public financial management (PFM) strengthening actions
- Enhance coordination between MoFEA and the CBG to strengthen liquidity forecasting and projection of government domestic borrowing needs.
- MoFEA’s new Budget Execution Guidelines (January 2018) to strengthen budget controls, increase commitment controls, and hold procurement officers accountable to prevent new domestic arrears; restrictions on ‘imprest’ accounts and virements.
- Cash management enhancements:
  - Establish a Cash Management Unit and regular Cash Management Committee meetings.
  - Establish a Treasury Single Account (TSA); plan to establish a TSA Implementation Committee that meets monthly and produce a complete inventory of bank accounts by end-June 2018 (structural benchmark).
- Accountant General’s Department intention to migrate to EPICOR-10 in early 2019 with World Bank assistance to add HR Module to IFMIS, linking civil service payroll to personnel records to mitigate risk of ghost-workers.
- Develop a medium-term economic and fiscal framework (MTEFF) and secure cabinet adoption by end-September 2018 (structural benchmark), consistent with the medium-term debt strategy (MTDS) and Borrowing Plan.

### Debt sustainability, debt management, and project pipeline oversight
- MTDS and Borrowing Plan to be expedited; revised MTDS to encompass further maturity lengthening of domestic debt and outcomes of discussions with external creditors on possible rescheduling.
- Additional grant financing secured at the international donor conference in May 2018 to support NDP priorities and partly retire expensive domestic debt.
- Regular semi-annual debt reconciliation exercises with external creditors starting in June 2018 (structural benchmark).
- Commitment not to contract additional external debt except a few highly concessional loans (with grant element of at least 50 percent) for projects of special importance, evaluated in consultation with World Bank staff until IMF/WB DSA shows space for less concessional loans.
- Saudi Fund restructuring agreement: four-year extension of both grace and maturity of principal covering January 1, 2018 to December 31, 2021, with principal repayment resuming in 2022.
- Manage large contracted/project pipeline (~$390 million):
  - Convened a Task Force within MoFEA to engage project managers to explore softening project terms, postponing, slowing down, or cancelling projects.
- Oversight of $210 million three-year Islamic Trade Finance Corporation non-concessional credit facility:
  - Limit use to absolutely necessary minimum for NAWEC, GNPC, and the NFSPMC; enforce timely payments to prevent accumulation of arrears.
- Refrain from new large-scale SOE investment projects that would create guarantees/contingent liabilities until special audits clarify SOE financial conditions.
- Requested IMF Public Investment Management Assessment (PIMA) to guide project planning, appraisal, selection, and implementation and to facilitate development of the Borrowing Plan.
- Commit to consult in writing with IMF staff before contracting or guaranteeing any new external loans or entering contingent liabilities (including PPPs or PPAs).

### State-owned enterprises (SOE) reforms and oversight
- Procurement approach for ‘special’ (multiyear) audits redirected to hire an internationally renowned audit firm.
- Procurement contracts for audits of six key SOEs expected to be signed by end-July 2018.
- Auditors requested to share by end-September 2018 any findings on financial leakages exploited by the previous administration and ongoing vulnerabilities.
- MoUs to be concluded with all SOEs on resolution of their cross-arrears and arrears to government; MoFEA’s Office of Internal Audit to validate all cross-arrears between SOEs and government (structural benchmark for end-September 2018).
- Enforce SOE compliance with monthly, quarterly and annual reporting requirements; compile a database of SOE financial data and document terms of all domestic debt issued by SOEs with TA from the IMF and the World Bank; migrate database to be IFRS compliant in due course.
- Based on audit outcomes, devise an overarching strategic plan for SOEs including rightsizing and possible divestment.
- Develop comprehensive strategy to address operational and financial difficulties of NAWEC and GAMTEL/GAMCEL, with World Bank support:
  - Plan to reform NAWEC into an efficient and financially viable utility underpinned by a financial recovery plan.
  - NAWEC has started implementation of actions detailed in an MoU signed with MoFEA in March.

*International Monetary Fund — cr18197 - 0.1 percent of GDP.*

### 2018. The organizational restructuring process is also underway, led by the NAWEC Board and

### The organizational restructuring process is also underway, led by the NAWEC Board and

### Organizational restructuring and SOE reforms
- Ongoing organizational restructuring led by the NAWEC Board and supported by the World Bank financed Service Contractor.
- Plans to implement performance contracts for NAWEC underpinned by a business plan under preparation.
- Agreement with the World Bank to assess and reposition GAMTEL/GAMCEL; a strategic decision to be informed by an Options Study to be conducted in 2018.
- Broadband (GNBN project) contract awarded to HUAWEI in December 2017; financial package included a $25 million loan agreement between the Government of Gambia and China’s Exim-Bank and $3.0 million corresponding to the cancellation of GAMTEL’s liabilities to HUAWEI.
- IMF staff calculations indicate the grant element of the GNBN financial package is 34 percent (one percentage point shy of the 35 percent minimum program requirement); the government hopes this marginal noncompliance could be considered inconsequential.
- Commitment: upon completion of the GNBN project (expected in December 2018), management of the GNBN and related networks such as the ECOWAN will be handed over to a qualified private operator who will become responsible, on behalf of GAMTEL, for ensuring the service of the Exim-Bank loan (in the context of GAMTEL/GAMCEL restructuring).
- Gambia Ports Authority: planning to tender a concession to a private operator to bring private capital for expansion and modernization of the port.
- Considering privatization of the retail fuel distribution network of the Gambia National Petroleum Company, possibly in 2019.

### Monetary and exchange rate policies
- Monetization of government deficits eliminated; top priority: strengthen autonomy and governance of the CBG through parliamentary approval of draft amendments of the Central Bank Act.
- Government commitments:
  - Adhere to a zero limit, monthly, on new credit from the central bank at below-market interest rates.
  - Adhere strictly to the schedule for payments of principal and interest on the CBG-held 30-year bond.
  - Recapitalize the CBG to reach the minimum capital envisaged in the amended Central Bank Act and offset the impact of the 30-year government bond on its balance sheet and provide the CBG with the wherewithal to finance the issuance of separate central bank instruments expressly for monetary purposes.
- Audit commitments: audit of the CBG to be conducted jointly by a local auditor and a large international audit firm with central banking experience, to be completed by end-September 2018 (structural benchmark).
- Exchange rate and monetary framework:
  - Commitment to a flexible exchange rate policy.
  - CBG to refrain from intervening in the foreign exchange market except to ensure orderly market conditions, or purchase foreign exchange to meet its needs for external obligations.
  - Move away from money targeting toward establishing an interest corridor for the policy rate to keep inflation at or below 5 percent.
  - At the May 30, 2018 MPC the CBG lowered the policy rate to 13.5 percent with a stable outlook.
  - CBG announced intention to introduce—effective August 30, 2018—a standing deposit facility, at a rate to be determined based on feedback from recent policy changes.

### Strengthening monetary operations and liquidity management
- CBG intends to improve liquidity forecasting and management capabilities using new liquidity forecasting and monitoring templates developed with Technical Assistance from AFRITAC West 2; creation of requisite databases for liquidity forecasting is a structural benchmark for end-September 2018.
- Structural benchmarks (end-September 2018):
  - Ring-fence from the TSA the account for T-bill operations used for liquidity management.
  - Adopt the new liquidity forecasting templates and use them for monetary operations.
- Post-recapitalization plans: convert the rediscount facility into an overnight repo standing facility; introduce a short-term CBG-bill auction as a regular liquidity absorbing operation, with auction size determined by the short-term liquidity forecast.

### Financial sector stability
- The financial sector remains stable and profitable, but emerging risks require heightened supervision.
- Identified risks:
  - High bank sovereign exposures.
  - Declining interest rates.
  - Prospect of rapid expansion of private sector credit.
- CBG Banking Supervision focus:
  - Assess impact of declining interest rates and lower government borrowing.
  - Monitor spillovers from the implementation of the MTDS, including SOE debt rescheduling.
  - Guided by Fund TA on risk-based supervision to focus resources on high-risk areas.
- Strengthening crisis management and resolution:
  - Strengthen crisis management capacity and upgrade bank resolution framework.
  - Devise strategies to handle possible bank crises and build safety nets (deposit insurance).
  - CBG plans internal restructuring to strengthen operational effectiveness.

### Growth, poverty reduction, and strategic directions
- Commitment to create an enabling environment for private sector-led growth.
- Priority actions:
  - Address sizable energy gap sustainably, adhering to established energy roadmap with World Bank support.
  - Deepen the financial sector while safeguarding stability.
  - Streamline and improve business regulatory environment.
  - Strengthen governance and fight corruption; complete stakeholder consultations on draft amended Anti-Corruption Commission Bill and submit to Cabinet and National Assembly for approval by end-September 2018.
  - Prepare a revised draft PPP Law with TA from Expertise France to establish a transparent institutional framework for private investment.
  - Implement a sound and transparent framework for management of future oil revenues.

### National Development Plan (NDP) 2018–21
- NDP goal: delivery of “good governance and accountability, social cohesion, and national reconciliation and a revitalized and transformed economy.”
- Eight strategic priorities:
  - Restoration of good governance, respect for human rights, the rule of law, decentralization and local governance.
  - Economic stabilization, accelerated growth and structural transformation.
  - Modernization of agriculture and fisheries for growth, food and nutritional security and poverty reduction.
  - Investment in people through improved education and health services, and building a caring society.
  - Development of infrastructure, including restoration of energy services.
  - Promoting inclusive and culture-centered tourism for sustainable growth.
  - Reaping the demographic dividend through youth empowerment.
  - Making the private sector the engine of growth, transformation, and job creation.
- Seven cross-cutting enablers: (i) an efficient and responsive public sector; (ii) women empowerment; (iii) an engaged and participatory Diaspora; (iv) a sustainable environment, climate-resilient communities and appropriate land use; (v) digitalization and information technology development; (vi) an active and participatory civil society; and (vii) evidence-based policy planning and decision-making.

### NDP financing and donor commitments
- NDP funding needs: total budgeted funding need of $2.4 billion; a funding gap of $1.6 billion (after an earlier commitment of $750 million).
- Main cost drivers: infrastructure, primary sectors, and human capital.
- NDP flagships and priority projects: $1.68 billion (of which $284 million already committed), primarily for transport, energy and ICT infrastructure.
- International Conference for The Gambia: financial pledges reached nearly $1.5 billion; more than half of commitments came in the form of grants.
- Government intent: align NDP implementation with medium-term debt strategy and objective of ensuring macroeconomic stability.

### Indicative quantitative targets and selected numerical highlights
- Table 1 (2017) selected items:
  - Ceiling on net domestic borrowing of the central government: program targets and actuals include 545, 943, 989, 471, -153, -1,097 (GMD millions, cumulative).
  - Ceiling on the stock of net domestic assets of the central bank: 8,897; 9,704; 9,497; 10,525; 6,170; 9,685; 7,104 (GMD millions).
  - Floor on the stock of net usable international reserves of the central bank: -10.2; -23.9; -39.8; -11.8; 9.9; 111.2; -0.1; -7.1; 91.2 (USD millions).
  - Monthly ceiling on central bank credit to the central government at non-market terms: 1,187; 943; 1,421; 946; 988; 0; -413 (GMD millions).
  - Floor on poverty-reducing expenditures (cumulative): 575; 843; 1,426; 1,112; 2,393; 1,380; 3,356 (GMD millions).
  - TMU Exchange Rate (GMD/USD) entries: 45.39; 47.09; 47.28; 47.29.
- Table 2 (Proposed 2018) selected items:
  - Ceiling on net domestic borrowing of the central government (cumulative flows): -1,097; 526; 466; Met; 450; 450; -2,754 (GMD millions).
  - Ceiling on the stock of net domestic assets of the central bank: 7,104; 10,707; 6,835; Met; 8,000; 8,000; 9,265 (GMD millions).
  - Floor on the stock of net usable international reserves of the central bank: 91.2; 78.8; 112.2; Met; 105; 95; 113 (USD millions).
  - Monthly ceiling on central bank credit to the central government at non-market terms: -413; 0; -597; Met; 0; 0; 0 (GMD millions).
  - Floor on poverty-reducing expenditures (cumulative): 3,356; 949; 992; Met; 2,018; 3,163; 4,437 (GMD millions).
  - Base Money (GMD millions): 9,796; 10,448; 10,953; 11,531; 12,110.
  - TMU Exchange Rate (GMD/USD): 47.88; 45.39; 47.28; 45.39; 45.39; 45.39.

### Structural benchmarks (selected, 2017–18)
- Completed/Met:
  - Enhance timely provision and monitoring of debt data by establishing a back-up system (End-March 2018).
  - Prepare up-to-date position on financial status and contingent liabilities of key SOEs, and regularly monitor SOE operations and fiscal risks (End-December 2017).
  - Establish additional procedures adopted by MoFEA to ensure all government expenditures and revenues are entered through IFMIS (End-December 2017).
- Not met / In progress:
  - Finalize audits of all SOEs and the CBG (with donor support) (End-March 2018) — Not met; finalization delayed due to unresolved procurement challenges.
  - Compile an inventory of existing payment arrears, and cross-arrears between government and SOEs; define and approve a strategy for reducing the existing stock (End-March 2018) — Not met; inventory and MoUs in progress; some arrears being paid as part of 2018 budget.
  - Prepare an action plan to restore the Treasury single account (End-March 2018) — Not met; implemented with delay; revised Act drafted and delivered by the CBG to MoFEA on March 7, 2018.
  - Submit draft amendments to the CBG Act to the National Assembly (End-March 2018) — Not met; draft submitted by MoFEA to Ministry of Justice and under review.

- Table 4 (2018 structural benchmarks, selected):
  - Prior Action completed: Minister of Finance authorized cancellation of previous (local) tender for special purpose audits of 5 key SOEs to enable appointment of an auditor of international renown for special purpose audits of 13 SOEs.
  - TSA and segregation of accounts: MoFEA to inform Ministries and CBG about establishing TSA Implementation Committee (End-June 2018); TSA Implementation Committee to meet monthly (End-June 2018); AGD to produce inventory of bank accounts used for the TSA (End-June 2018).
  - CBG to separate and ringfence from TSA the account for operations in T-bills used for liquidity management (End-September 2018).
  - Adopt improved liquidity templates for liquidity forecasting and use for liquidity absorption/injection operations (End-September 2018).
  - Minister of Finance to institute semi-annual (June and December) debt reconciliation exercise with external creditors (End-June 2018).
  - Issue tenders for audits of six key SOEs (GAMTEL/GAMCEL, GCAA, GNPC, GPA, NAWEC, and SSHFC) with audit engagement letters signed with a reputable international audit company (End-July 2018).
  - Validate all cross and payment arrears between government and SOEs by Office of Internal Audit (End-September 2018).
  - Submit draft amendments to the CBG Act—in line with safeguards assessment recommendations—to the National Assembly (End-June 2018).
  - Finalize the 2017 CBG statutory joint audit (End-September 2018).
  - Implement Vehicle Reform Policy in the 2018 Budget Law (End-June 2018).
  - MoFEA to submit to cabinet an MTEFF consistent with the MTDS, NDP and May donor conference outcomes (End-September 2018).

*International Monetary Fund — The Gambia: selected sections and tables from the 2018 document*

### Introduction

### Introduction

### Overview
- This memorandum sets out the understandings between the Gambian authorities and the staff of the International Monetary Fund (IMF) regarding:
  - definitions of quantitative indicative targets and structural benchmarks used to monitor the staff monitored program (SMP) covering the period of April 2017 to March 2018;
  - related reporting requirements; and
  - adjusters that will be applied to certain quantitative targets of the program.

### Quantitative targets and definitions
- A. Net Domestic Borrowing (NDB) of the Central Government
  - Definition: change in net claims on the Central Government by the domestic monetary sector (monetary authorities and deposit money banks) plus the change in the discounted value of domestic government securities held by the non-monetary sector. Also covers change in any other net claims on the Central Government by the domestic non-monetary sector, as well as the change in government arrears on domestic debt service obligations. Central Government excludes local and regional governments and public enterprises. In computing NDB, on-lending of the RCF to the budget, as well as changes in the balances of the project accounts listed in Table 1, will be excluded.
  - Adjuster: The NDB targets for end-June and end-September 2018 will be adjusted downward/upward by the excess/shortfall of the dalasi equivalent of the total budget support grants and loans received in that quarter relative to the program forecasts for the quarter as specified in the table below. In the event that budget support is lower than programmed, upward adjustment of the NDB target may not exceed GMD 336 million.
  - Program Forecasts of External Budget Support Grants and Loans in 2018 (Cumulative flow in millions of US dollars):
    - March 2018: 0.0
    - June 2018: 7.0
    - September 2018: 7.0
    - December 2018: 66.8
  - Supporting material: Reporting on net domestic borrowing will form part of the consolidated budget report described in paragraph 25.

- B. Net Domestic Assets (NDA) of the Central Bank (CBG)
  - Definition: NDA of the CBG = reserve money − net foreign assets of the CBG. Reserve money = currency issued by the CBG (currency in circulation) + deposits of commercial banks at the CBG. Net foreign assets = foreign assets − foreign liabilities (claims on nonresidents and liabilities to nonresidents, respectively).
  - For program monitoring: foreign assets and liabilities will be converted at the prevailing end-of-period market exchange rates prevailing at end-March 2017: 45.39 GMD/USD, 1.07 USD/EUR, 1.25 USD/GBP, 1.00 USD/CHF, 1.36 USD/SDR. Foreign assets and liabilities denominated in other currencies will be converted into U.S. dollars at the prevailing end-of-period market exchange rates for March 2017, and then into dalasi at the rate listed above. These are accounting exchange rates only and should not be construed as projections.
  - Supporting material: NDA of the central bank will be transmitted as part of the balance sheet of the CBG (compiled based on the TMU rates) on a monthly basis within four weeks of the end of each month. For analytical purposes, the balance sheet of the CBG compiled on a current-rate basis will also be submitted.

- C. Net Usable International Reserves (NIR) of the CBG
  - Definition: NIR = usable reserve assets − reserve liabilities. Usable reserve assets = readily available claims on nonresidents denominated in convertible foreign currencies and include CBG holdings of SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country’s reserve position at the IMF. Excluded are assets pledged, collateralized, or otherwise encumbered; claims on residents; claims in foreign exchange arising from derivatives in foreign currencies vis-à-vis domestic currency; precious metals; assets in nonconvertible currencies; and illiquid assets (including capital shares in international organizations). Reserve liabilities = all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives and all credit outstanding from the IMF, but excluding any liabilities to the IMF’s SDR Department.
  - For program monitoring: foreign assets and liabilities will be converted at the exchange rates listed in paragraph 5 above.
  - Adjusters:
    - Quarterly NIR targets will be adjusted downward/upward by the US dollar equivalent of the shortfall/excess of total budget support grants and loans received in that quarter relative to the program forecasts for the quarter as specified in the table above.
    - In case of an allocation of SDRs by the IMF, the NIR of the CBG will be adjusted upward by the amount of the SDR allocation.
  - Supporting material: A detailed reserve statement with end-month data on NIR of the CBG will be transmitted within seven days of the end of each month.

- D. New External Payments Arrears of the Central Government
  - Definition: External payment arrears are external payments due but unpaid. Under the program the government agrees not to accumulate external payment arrears on its debt, except arrears arising from obligations being renegotiated with external creditors, including bilateral non-Paris Club creditors. No accumulation of new external arrears by the government is a benchmark, to be observed continuously.
  - Supporting material: An accounting of non-reschedulable external arrears (if any) by creditor countries, with detailed explanations, will be transmitted on a monthly basis within four weeks of the end of each month. This accounting would include, separately, arrears owed by the Central Government and other public sector entities to Paris Club and non-Paris-Club creditors.

- E. New Non-Concessional External Debt Contracted or Guaranteed by the Central Government
  - Definition: Refers to new non-concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian Dalasi. It applies to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt (Decision No. 6230-(79/140), as amended by Decision No. 14415–(09/91)), and to commitments contracted or guaranteed for which value has not been received. Loans or purchases from the IMF and debts with a grant element of at least 35 percent are excluded, as is any debt with maturity of one year or less.
  - Note: To be considered concessional under this arrangement, a loan should have a grant element of at least 35 percent, calculated using the discount rate as 5 percent.
  - This performance criterion will be assessed on a continuous basis.
  - Supporting material: A comprehensive record, including a loan-by-loan accounting of all new concessional and non-concessional debt contracted or guaranteed by the Central Government with detailed explanations, will be transmitted on a quarterly basis within four weeks of the end of each quarter. Non-concessional external debt includes financial leases and other instruments giving rise to external liabilities, contingent or otherwise, on non-concessional terms.

- F. Outstanding Stock of External Public Debt with Original Maturity of One Year or Less
  - Definition: Refers to the stock of outstanding external public debt with original maturity of one year or less, owed or guaranteed by the public sector. Public sector consists of the Central Government and regional governments and other public agencies, including the central bank. Normal trade-related credits are excluded from this target.
  - Supporting material: A comprehensive record of all external debt with original maturity of less than one year owed or contracted by the public sector, with detailed explanations, will be transmitted on a quarterly basis within four weeks of the end of each quarter.

- G. Central Bank Credit to the Central Government at Non-Market Terms
  - Definition: Refers to the consolidated balance on the Treasury Expenditure Account, the Consolidated Revenue Fund, and other revenue accounts. Also covers all gross claims on the Central Government on the balance sheet of the central bank with terms materially different from market terms for Treasury bills and bonds around the time of acquisition. Also covers any overdue payments of principal and interest on Central Government securities held by the central bank. This performance criterion will be assessed at the end of each month.
  - Supporting material: Reporting on new central bank credit to the government at nonmarket terms will form part of the monetary sector data described in paragraphs 27 and 28.

- H. Poverty-Reducing Expenditures
  - Definition: Expenditures financed out of The Gambia Local Fund (GLF) on the following areas: Agriculture and Natural Resources; Education; Health; Nutrition, Population and HIV-AIDS; Infrastructure Programme; Social Fund for Poverty Reduction; Implementation and Monitoring of Poverty Reduction Programmes; Support to Cross-Cutting Programmes; ICT Research and Development; Decentralization and Local Government Capacity Building; Governance and Civil Service Reform Programme.
  - Supporting material: A monthly report on poverty-reducing expenditures will be transmitted within four weeks of the end of each month.

### Other data requirements and reporting standards (by category)
- I. Prices
  - Monthly disaggregated consumer price index, including weights for each major category, with August 2004 = 100, will be transmitted within four weeks of the end of each month.

- J. Government Accounts Data
  - Monthly consolidated Central Government budget report (analytical table) on budget execution for the month and cumulatively from the beginning of the year will be transmitted within four weeks of the end of each month. The report will cover:
    - (i) revenue data by major items;
    - (ii) external grants by type;
    - (iii) details of recurrent expenditure (including goods and services, interest payments, and subsidies and other current transfers);
    - (iv) details of capital expenditure and net lending (including externally financed capital expenditure, expenditure from the Gambia Local Fund, and net lending);
    - (v) the overall balance, the primary and the basic balance; and
    - (vi) details of budget financing (including net domestic and net external borrowing and their components).
  - End-week data on net domestic borrowing (including data on the project accounts listed in Table 1) will be transmitted weekly within five business days of the end of each week.

- K. Monetary Sector Data
  - Balance sheet of the CBG, prepared on the basis of current and program exchange rates, will be transmitted monthly within four weeks of the end of each month and will explicitly identify all claims on, and liabilities to, the government (overdrafts, holdings of treasury bills, government bonds, advances to the government in foreign currency, other claims; liabilities include balances in the treasury expenditure account, the consolidated revenue fund and other revenue accounts, the treasury bill special deposit account, the privatization proceeds account, and other deposit accounts). Transmission will include individual balances on the government accounts listed in Table 1.
  - Consolidated balance sheet of commercial banks and a monetary survey (consolidation of CBG and commercial banks), including foreign currency deposits held by residents with commercial banks, will be transmitted within four weeks of the end of each month.
  - Daily data on reserve money will be transmitted weekly within five business days of the end of each week.

- L. Treasury Bill Market and Interbank Money Market
  - Weekly data on amounts offered and issued, net issuance, over/under subscription, and yields (interest rates) of the various instruments will be transmitted weekly within five business days of the end of each week.
  - Data on treasury bills outstanding (face value and discounted value, including distribution by bank and non-bank holders) will be transmitted monthly within six weeks of the end of each month.
  - Daily data on the interbank money market (interest rates, maturities, volumes) will be transmitted weekly within five business days of the end of each week.

- M. External Sector Data
  - CBG will forward within four weeks of the end of each month data on transactions in official reserves.
  - Daily interbank market exchange rates (simple average of daily weighted average buying and selling rates) transmitted weekly within five business days of the end of the week.
  - Weekly interbank market exchange rates (simple average of weekly weighted average buying and selling rates) transmitted monthly within seven days of the end of the month.
  - CBG’s monthly average and end-month exchange rates, including those for all currencies in which foreign assets and liabilities are denominated, will be transmitted within seven days after the end of each month.
  - Daily data on foreign exchange intervention by the central bank transmitted weekly within five business days of the end of each week.
  - A detailed reserve statement with end-week data on NIR of the CBG transmitted weekly within five business days of the end of each week.
  - CBG will forward monthly data on the volume of transactions (purchases, sales, total) in the foreign exchange market by each major group of participants (CBG, commercial banks, foreign exchange bureaus) in dalasi within seven days of the end of each month.

- N. Public Enterprises’ Data
  - MOFEA will forward within four weeks of the end of each month data on monthly cash flow of NAWEC, GNPC, GAMTEL, GAMCEL, GCAA, SSHFC and NFSPMC.
  - MOFEA will forward within four weeks of the end of each month data on the consolidated Central Government’s stock of payment arrears to NAWEC at the end of each month.

- O. Concessional External Debt Contracted or Guaranteed by the Central Government
  - MOFEA will forward, within four weeks of the Central Government contracting or guaranteeing any new domestic or external loan, the loan’s terms and conditions including disbursement schedule, interest rate, grace period, maturity, interest and principal payment schedule.
  - For existing loans, MOFEA will provide on a loan-by-loan basis, within four weeks of the Board discussion of the SMP, the outstanding disbursed stock, disbursement schedule, and interest and principal payment schedule.

### Project accounts excluded from NDB calculation
- Table 1 lists project accounts at the CBD that are excluded from the calculation of NDB, including account numbers and project names (selected examples from the list):
  - 1101004067 NATIONAL AGRICULTURAL LAND & WATER MANAGEMENT DEV. PROJECT (NEMA)
  - 1103002218 BUILDING RESILIENCE TO RECURRING FOOD INSECURITY IN THE GAMBIA IDB COMPONENT
  - 1101005064 AGRICULTURAL VALUE CHAIN PROJECT (GCAV)
  - 1101004689 BUILDING RESILIENCE AGAINST FOOD & NUTRITION INSECURITY IN THE SAHEL PROJECT.
  - 1101004483 GAMBIA COMMERCIAL AGRICULTURE VALUE CHAIN PROJECT.
  - 1101004201 FOOD & AGRICULTURE SECTOR DEV. PROJECT. FASDEP
  - (Table 1 continues with additional project account numbers and names as listed in the source.)

*cr18197 - Introduction*

### 1.      The Gambia’s public and publicly guaranteed (PPG) external debt level is very high.

### 1.      The Gambia’s public and publicly guaranteed (PPG) external debt level is very high.

### High debt levels and composition
- External debt stood at 69 percent of GDP at end-2017.
- Total external debt: US$685.6 million; Present Value: US$489.3 million (Text Table values).
- Creditor composition (percent of external debt stock at end-2017):
  - Multilateral creditors: 35 percent (US$239.8 million; 24.1 percent of GDP).
    - International Development Association: US$105.1 million; 10.6 percent of GDP; 15.7 percent of external debt.
    - African Development Bank: US$55.4 million; 5.6 percent of GDP; 8.3 percent of external debt.
    - International Monetary Fund: US$51.5 million; 5.2 percent of GDP; 7.7 percent of external debt.
    - International Fund for Agricultural Development: US$27.7 million; 2.8 percent of GDP; 4.1 percent of external debt.
  - Plurilateral creditors: 35 percent (US$238.8 million; 24.0 percent of GDP).
    - Islamic Development Bank: US$141.8 million; 14.3 percent of GDP; 21.2 percent of external debt.
    - Arab Bank for Economic Development in Africa: US$43.4 million; 4.4 percent of GDP; 6.5 percent of external debt.
    - OPEC Fund for International Development: US$34.6 million; 3.5 percent of GDP; 5.2 percent of external debt.
    - ECOWAS: US$18.9 million; 1.9 percent of GDP; 2.8 percent of external debt.
  - Bilateral official creditors: 22.6 percent (US$163.4 million; 15.2 percent of GDP).
    - Paris Club: US$5.6 million; 0.6 percent of GDP; 0.8 percent of external debt.
    - Non-Paris Club: US$157.7 million; 15.9 percent of GDP; 23.5 percent of external debt.
      - Kuwait Fund for Arab Economic Development: US$42.7 million; 4.3 percent of GDP; 6.4 percent of external debt.
      - Saudi Fund for Development: US$30.2 million; 3.0 percent of GDP; 4.5 percent of external debt.
      - Export-Import Bank of India: US$28.0 million; 2.8 percent of GDP; 4.2 percent of external debt.
  - Private creditors: US$43.7 million; 4.1 percent of GDP; 6.0 percent of external debt.
- Central government domestic debt: GMD 28,388 million, equal to 60.0 percent of GDP.
  - Marketable debt: GMD 16,402 million (57.8 percent of total domestic debt; 34.7 percent of GDP).
    - T-bills: GMD 14,195 million (50.0 percent of total domestic debt; 30.0 percent of GDP).
      - held by Banks: GMD 10,840 million (38.2 percent of total domestic debt; 22.9 percent of GDP).
      - held by Non Banks: GMD 3,354 million (11.8 percent of total domestic debt; 7.1 percent of GDP).
    - Bonds: GMD 2,208 million (7.8 percent of total domestic debt; 4.7 percent of GDP).
      - held by Banks: GMD 1,551 million (5.5 percent of total domestic debt; 3.3 percent of GDP).
      - held by Non Banks: GMD 657 million (2.3 percent of total domestic debt; 1.4 percent of GDP).
  - Non-marketable debt: GMD 11,986 million (42.2 percent of total domestic debt; 25.3 percent of GDP).
    - CBG Bond (30-Year): GMD 10,420 million (36.7 percent of total domestic debt; 22.0 percent of GDP).
    - Restructured NAWEC bond: GMD 1,566 million (5.5 percent of total domestic debt; 3.3 percent of GDP).

### Drivers of the 2017 forecast error and recent increases
- End-2017 external debt was 6 percentage points of GDP higher than projected in March 2018 and over 17 percentage points of GDP higher than the June 2017 DSA.
- Determinants of the forecast-error in the public external debt-to-GDP ratio at end-2017 relative to the June 2017 DSA (percent of GDP):
  - Recognition of an external private debt: 4.4
  - Debt recognition with external creditors: 4.0
  - Faster-than-envisaged project disbursement: 7.9
  - Others (including exchange rate changes): 2.0
  - Total: 18.3
- A previously unrecorded substantial external private debt of US$44 million (4.4 percent of GDP at end-2017) was recognized; it had been treated as supplier’s arrears and not captured in the government’s debt database.
- Faster project disbursements accounted for 7.9 percentage points of GDP of the forecast error.
- A debt reconciliation exercise with external creditors contributed 4.0 percentage points of GDP to the forecast error.

### Pipeline of already-contracted and pledged financing
- Pipeline of already-contracted debt at end-2017: US$411.9 million (41 percent of GDP).
  - Disbursement pipeline projected for 2018-19: US$167.9 million (17 percent of GDP).
  - By creditor type (Total undisbursed at end-2017; Projected disbursements for 2018-19):
    - IDA: 58.1 ; 6.0
    - AfDB: 13.0 ; 3.6
    - Other Multilaterals/Plurilaterals: 169.1 ; 84.4
    - Non-Paris Club Bilateral: 171.7 ; 73.8
    - Total: 411.9 ; 167.9
- Pipeline grew to almost $412 million from an estimated $350 million in the previous DSA; just over half of the pipeline is concessional on current terms (grant element of 35 percent or higher).
- Following the International Conference for The Gambia (Brussels, May 22–23, 2018):
  - Pledges of financial support totaled just over $1.5 billion (151 percent of GDP).
  - New grant financing mobilized exceeded $750 million; all expected to be committed to projects/operations during the NDP (2018–21).
  - $700 million in development lending to support the NDP was pledged, at varying levels of concessionality and mostly from plurilateral creditors.
- Pipeline risks and recommended adjustments:
  - The authorities expect $168 million (17 percent of GDP or about 40 percent of the pipeline loans) to disburse over 2018 and 2019.
  - Project loan disbursements are forecast to be 17.4 percent of GDP higher over 2018–23 than in the June 2017 DSA.
  - Recommended actions: carefully review and re-prioritize the existing project pipeline in the context of the National Development Plan (NDP); include cancellation of loans where appropriate; seek improvements in terms to raise grant elements (through replacing loans with grants, reducing interest rates, renewing grace periods, extending maturities); put in place mechanisms to avoid cost over-runs.

### Debt relief and creditor engagements
- China agreed to forgive its existing debts in late 2017.
- Saudi Fund for Development agreed to a debt rescheduling in early 2018:
  - Restructuring involves rescheduling by 15 years, on average, of principal payments falling due in 2018–21 (equivalent to providing new financing with a 36 percent grant element).
  - Applies to $24 million in currently outstanding debt and a further $10 million in undisbursed balances.
  - Represents an NPV haircut of 8 percent on the current stock of debt owed to Saudi Arabia.
- Discussions ongoing with Kuwait Fund and BADEA on possible concessions on pre-existing loans.
- Liabilities to private creditors are being serviced but are subject to validation and could be considered for concessions.
- Authorities met with key plurilateral creditors on the sidelines of the International Conference to discuss the possibility of further debt relief.

### Economic developments and domestic debt market
- Real GDP growth: estimated 3.5 percent for 2017 compared to 2.2 percent in 2016.
- Private sector credit grew by 13.8 percent (year-on-year) as of end-April 2018 compared to -1.2 percent at end-2017.
- Consumer price inflation eased from 8.8 percent (year-on-year) at end-January 2017 to 6.6 percent at end-April 2018.
- Domestic debt market improvements:
  - Average T-bill rates fell from a weighted average of 18.9 percent in October 2016 to an average of 8.6 percent in mid-May 2018.
  - In 2017 the authorities issued 3-year and 5-year domestic bonds for the first time to extend domestic maturities.
  - Government assumed a substantial share (1.9 percent of GDP) of NAWEC’s domestic liabilities in the context of the World-Bank-supported Energy Roadmap, adding to the domestic debt stock.

### Debt coverage, recording, and management capacity
- The updated DSA includes all known public and publicly guaranteed external debt.
- SOEs’ domestic and unguaranteed external debts are not included in the baseline DSA except where already serviced by the government (including NAWEC debts assumed by the government in 2018).
- A tailored contingent liability stress test in the public DSA assumes government responsibility for the entire remaining known stock of SOE debt, estimated at 8.2 percent of 2018 GDP.
- Deficiencies remain in government information on the extent and terms of SOE external debts; the known stock may be revised upward after special audits of SOEs.
- Capacity gaps and planned support:
  - Weak debt management, monitoring, and recording capacity.
  - Structural benchmark under the SMP: introduction of a bi-annual (June and December) reconciliation exercise with external creditors.
  - IMF-World Bank technical assistance in 2017 helped develop a Medium-Term Debt Strategy (MTDS); further TA to update the MTDS and integrate with a Borrowing Plan and Medium-Term Economic and Fiscal Framework.
  - US AID to provide broader TA based on an assessment of regulatory/institutional frameworks and staff capacity related to debt management.
  - Authorities requested World Bank TA to assist in formulating a Debt Management Reform Plan.

### DSA scenarios and key macro-fiscal assumptions
- Two scenarios presented in the DSA: “active” (SMP baseline) and “passive”.
- Core features of the “active” scenario:
  - Substantial grant-financed investment, minimal new debt contracting (only highly-concessional terms), domestic expenditure reform, revenue mobilization, macro-stability, and a step-up in private sector growth.
  - New grants pledged for project support (~$580 million) committed over the NDP period (2018–21); grants not fully disbursed until 2025 due to project timelines and absorption constraints.
  - Budget support grants include €100 million already pledged by the EU for 2018–21, $7 million from the AfDB in 2018, and an assumed $80 million from IDA in 2018–20; budget support mostly used to reduce recourse to domestic borrowing.
  - Disbursements on existing project loans incorporated based on contractual terms; assumed average grant elements: 54 percent from major multilaterals, 29 percent from plurilaterals, 38 percent from bilateral creditors.
  - Re-prioritization of the pipeline implies a more gradual project loan disbursement pattern and extremely limited new debt contracting (about 10 percent of pledges) over the medium term.
  - Government implements short- and medium-term measures to increase public expenditure efficiency; domestic revenue-to-GDP progressively rebounds toward about 20 percent of GDP in the medium term.
  - Stronger real GDP growth in near term; longer-term growth stabilizes at 4.8 percent.
  - Inflation gradually falls back to just below the CBG’s 5 percent target.
  - Domestic interest rates stabilize at an average of 2 percent in real terms over the projection period.
  - Current account deficit remains substantial in the medium term due to high import content of public investment.
- Core features of the “passive” scenario:
  - Government undertakes less domestic fiscal effort and continues contracting external debt at a pace similar to recent years, causing rapid further debt accumulation, increased domestic interest rates and inflation, and weak growth returns to very high public investment.
  - Government disburses an additional $300 million of new moderately concessional (35 percent grant element) loans in 2018–25.
  - New project support grants are assumed to be only 70 percent mobilized relative to the “active” scenario; budget support grants fall by $100 million relative to the “active” scenario over 2018–21.
  - No implementation of measures to boost revenue mobilization and streamline public expenditures; fiscal balance worsens by about 9 percentage points of GDP relative to the “active” scenario in the medium term (about 4 percentage points from higher interest costs; 2½ percentage points from lower grants).
  - Higher public investment rates than baseline but with constraints on absorption capacity and investment efficiency, and crowding out of the private sector, resulting in sharply diminished growth returns.
  - High domestic borrowing contributes to pickup in inflation, increase in domestic interest rates, and depreciation of the dalasi; macro-instability deters private investment and yields marginally lower growth than the “active” scenario.
  - The scenario does not model additional negative growth effects from external arrears or macroeconomic deterioration, but already implies a severe fiscal and balance-of-payments crisis.

- Selected macroeconomic indicator highlights (Current DSA: 'active' vs 'passive' scenarios; annual figures where shown):
  - Real GDP Growth (percent): Current DSA: 'active' scenario 2.2 (2016), 3.5 (2017), 5.4 (2018), 5.4 (2019), 5.2 (2020), 5.0 (2021), 4.8 (2022), 4.8 (2023), 4.6 (15‑year average).
  - Current account deficit (percent of GDP): Current DSA: 'active' scenario 8.9 (2016), 19.3 (2017), 19.0 (2018), 20.5 (2019), 21.0 (2020), 21.4 (2021), 20.2 (2022), 17.8 (2023); 'passive' higher (e.g., 23.0 in 2018).
  - Public investment (percent of GDP): Current DSA: 'active' scenario 6.4 (2016), 15.6 (2017), 16.0 (2018), 16.1 (2019), 17.7 (2020), 17.3 (2021), 17.1 (2022), 15.4 (2023), 9.1 (15‑year average).
  - Overall fiscal deficit: Current DSA: 'active' scenario 9.8 (2016), 7.9 (2017), 3.9 (2018), 0.6 (2019), 1.9 (2020), 2.1 (2021), 1.8 (2022), 0.9 (2023), 0.6 (15‑year average); 'passive' scenario deficits materially worse (e.g., 10.3 in 2018).

### Policy recommendations and priorities
- Carefully review and re-prioritize the existing project pipeline in the context of the NDP.
- Cancel loans where appropriate and seek improvements in terms to raise grant elements (replace loans with grants, reduce interest rates, renew grace periods, extend maturities).
- Implement mechanisms to avoid cost over-runs.
- Limit new debt contracting to highly concessional terms and only for critical projects.
- Strengthen debt management, monitoring, and recording capacity:
  - Implement bi-annual reconciliation with external creditors (June and December) as an SMP structural benchmark.
  - Update the Medium-Term Debt Strategy (MTDS) and integrate with a Borrowing Plan and Medium-Term Economic and Fiscal Framework consistent with restoring and maintaining debt sustainability.
  - Utilize planned IMF-World Bank, US AID, and World Bank technical assistance to reform debt management and build institutional capacity.

*Source: IMF staff report section “1.      The Gambia’s public and publicly guaranteed (PPG) external debt level is very high.”*

### 13.      External debt stock indicators have deteriorated further since the March 2018 DSA,

### 13.      External debt stock indicators have deteriorated further since the March 2018 DSA

### External debt stock deterioration (active/baseline scenario)
- All five external debt burden ratios breach their indicative thresholds in the “active” (baseline) scenario for an extended period.
- With inclusion of payments on newly incorporated external private debt, external public:
  - debt service-to-exports and debt service-to-revenue ratios breach their respective thresholds by about 50 percent in 2018, and stay above them until 2025 and 2028, respectively (with the exception of 2022).
- The PV of PPG external debt-to-GDP:
  - reached 49 percent in 2017, 3 percentage points higher than in the March 2018 DSA, and 19 percentage points above the threshold (an upcoming GDP-rebasing is likely to reduce the size and duration of the breach).
- The PV of debt-to-exports and PV of debt-to-revenue ratios:
  - 271 percent, and 296 percent in 2017, respectively; both well above their indicative thresholds (100 percent and 200 percent, respectively).
- Debt-service hump:
  - “The hump in the profile of debt service ratios in 2023–24 is spread among several creditors.”

### Stress tests and external vulnerability
- Stress test results:
  - All five indicators show very large breaches under the stress tests and remain above threshold levels for most (or all) of the projection period.
  - The combination shock has the biggest effect across all five indicators.
- Exchange rate depreciation sensitivity:
  - A one-time depreciation of the exchange rate by 30 percent in 2019 would deteriorate the PV of debt-to-GDP by more than 20 percent, to reach 116 percent against 95 percent in the baseline scenario.
  - Debt service would increase by 3 percentage points of revenues relative to the baseline scenario.
- Contingent liabilities:
  - Risks from SOE contingent liabilities remain substantial; their materialization would further deteriorate debt burden indicators.

### Public debt, domestic debt risks, and financing needs
- PV of total public debt:
  - increased to 109 percent-of-GDP in 2017 and, despite higher grant inflows, is expected to remain above the benchmark until 2036 in the “active” scenario.
- Gross financing needs:
  - Increased by about 2.3 percentage points of GDP relative to the previous DSA.
  - Amount to 29 percent of GDP in the medium term, mostly driven by rollover of a large short-term domestic debt stock.
- Debt-service to revenue (excluding grants) expectation:
  - expected to average 53 percent over 2018–20 (against 31 percent when grants are included).
- Rollover and interest-rate risk:
  - Short-term maturity of domestic debt implies high rollover risks; minor shocks could push domestic interest rates into double-digit levels and leave The Gambia unable to meet financing requirements.
- Fiscal policy constraints:
  - Decline in PV of total public debt in the “active” scenario depends on the government running substantial primary surpluses in the medium term, which would be socially and politically challenging.
- Borrowing space:
  - Space for new borrowing is very limited; new borrowing would need to be highly concessional and reserved for highest priority projects.
- Recommendation on guarantees:
  - Government should refrain from contracting guarantees that would add to public and publicly guaranteed debt.

### Active vs. Passive scenario outcomes and external arrears risk
- Passive scenario:
  - With continued new debt contracting and more limited budget support grants, The Gambia might rapidly fall into arrears on external debt obligations.
  - PV of external debt-to-GDP continues to increase until 2023, peaking at 55 percent.
  - Gross financing needs average 45 percent in the medium term as composition shifts toward short-term domestic debt.
  - Debt service indicators breach thresholds for most of the projected horizon; reduced budget support grants increase likelihood of difficulties in meeting needs.
  - Incurrence of external arrears could rapidly lead to marked reduction of capital inflows, depreciation of the exchange rate, and a sharp and severe growth slow-down (not incorporated in the scenario).

### External financing assumptions (selected figures, Active and Passive scenarios, Percent of GDP)
- Active Scenario (Total loans / Total grants):
  - Total loans: 2018 = 7.1; 2019 = 4.2; 2020 = 4.9; 2021 = 4.8; 2022 = 4.7; 2023 = 3.9; 2024 = 3.1; 2025-30 = 2.5; 2031-38 = 2.3
  - Total grants: 2018 = 12.6; 2019 = 13.7; 2020 = 13.1; 2021 = 11.7; 2022 = 11.2; 2023 = 10.1; 2024 = 8.5; 2025-30 = 4.0; 2031-38 = 2.8
- Passive Scenario (Total loans / Total grants):
  - Total loans: 2018 = 9.4; 2019 = 5.6; 2020 = 4.2; 2021 = 3.8; 2022 = 3.5; 2023 = 2.8; 2024 = 6.3; 2025-30 = 4.0; 2031-38 = 3.3
  - Total grants: 2018 = 8.5; 2019 = 9.8; 2020 = 10.7; 2021 = 9.4; 2022 = 8.6; 2023 = 7.5; 2024 = 6.3; 2025-30 = 4.0; 2031-38 = 2.9
- Memo: March 2018 DSA (selected):
  - Project loans: 2018 = 7.1; 2019 = 5.1; 2020 = 3.5; 2021 = 2.9; 2022 = 2.6; 2023 = 2.4; 2024 = 1.7; 2025-30 = 1.1; 2031-38 = 1.7

### External debt service needs (2019–2023) and creditor composition (selected figures)
- Total External debt service (2019–23): US$ 685.6 million; Percent of Revenue = 207.1; Percent of Exports = 15.6
- Principal coming due (2019–23) and nominal values by creditor group (US$ millions) (selected entries):
  - Multilateral creditors: 239.8; Percent of Revenue = 54.7; Percent of Exports = 4.1
    - International Development Association: 105.1; Percent of Revenue = 10.7; Percent of Exports = 0.8
    - African Development Bank: 55.4; Percent of Revenue = 8.4; Percent of Exports = 0.6
    - International Monetary Fund: 51.5; Percent of Revenue = 29.3; Percent of Exports = 2.2
  - Plurilateral creditors: 238.8; Percent of Revenue = 81.2; Percent of Exports = 6.1
    - Islamic Development Bank: 141.8; Percent of Revenue = 47.4; Percent of Exports = 3.6
    - Arab Bank for Economic Development in Africa: 43.4; Percent of Revenue = 14.2; Percent of Exports = 1.1
  - Bilateral Official creditors: 163.4; Percent of Revenue = 54.3; Percent of Exports = 4.1
    - Kuwait: 42.7; Percent of Revenue = 11.7; Percent of Exports = 0.9
    - Saudi: 30.2; Percent of Revenue = 2.7; Percent of Exports = 0.2
    - India: 28.0; Percent of Revenue = 10.7; Percent of Exports = 0.8
  - Private creditors: 43.7; Percent of Revenue = 16.8; Percent of Exports = 1.3
- Sources for table: The Gambian authorities, major creditors, and IMF staff calculations.

### Policy recommendations, restructuring options, and simulation results
- Authorities’ actions and options:
  - Government has approached creditors to request debt relief; examples cited include China (debt forgiveness) and the Saudi Fund (extension of the grace period and debt maturity) as precedents.
  - Restructuring or rescheduling of claims could mitigate near-term vulnerabilities; estimated debt service due to plurilateral, bilateral official and private creditors over the next five years is substantial (altogether US$ 180 million).
  - Authorities should re-prioritize the existing project pipeline in the context of the NDP, including cancelling lower-priority projects where appropriate.
  - Seek improvements in terms of already-contracted loans to raise their grant element by: replacing loans with grants, reducing interest rates, renewing grace periods, and extending maturities.
  - Avoid contracting guarantees that would add to existing public debt.
- Simulation/illustrative scenario (Box 1 summary):
  - Five-year deferral of all principal due to plurilateral, official bilateral, and private creditors plus softening terms of contracted but undisbursed project loans, together with implementation of a sound medium-term fiscal framework and debt strategy, could deliver substantial debt relief and restore debt sustainability indicators.
  - Flow relief would reduce domestic borrowing requirement and preserve space for social and development spending.
  - GDP rebase would likely substantially reduce the PV of external and total public and publicly guaranteed debt to GDP.
  - Interest reduction example: reduction of interest rates on all debt subject to this deferral to an average of 1 percent would generate, in the near term, about 0.3 percent of GDP in interest savings per year.
- Near-term priority:
  - Restructuring/rescheduling or provision of new highly concessional financing to cover debt service could immediately mitigate near-term vulnerabilities.

*Source: cr18197 - 13.      External debt stock indicators have deteriorated further since the March 2018 DSA*

### Box 1. Restoring Debt Sustainability in The Gambia: "Active Plus” Scenario

### Box 1. Restoring Debt Sustainability in The Gambia: "Active Plus” Scenario

### Scenario description
- Illustrative “active plus” scenario shows how debt relief combined with an active scenario (implementation of a sound medium-term fiscal framework and debt strategy) could contribute to restoring debt sustainability.
- Time horizon and reference: deferral period during 2019–23; projection period covered in figures and tables through 2038.

### Key assumptions
- A five-year deferral on principal repayments to plurilateral, bilateral official and private creditors during 2019–23.  
  - Implemented by adding five years to the grace and maturity period of all loans (analogous to the Saudi Fund’s debt restructuring operation earlier in 2018).
  - Effect: reduces need for domestic borrowing and allows the government to pay down (expensive) domestic debt.
- Terms on the undisbursed pipeline of loans signed under the previous regime ($343 million) are improved by extending grace periods and maturity and reducing interest rates to achieve an average grant element of 50 percent.

### Projected outcomes and debt indicators
- External debt service indicators:
  - Would fall well-below their thresholds during the deferral period (2019–23).
  - While they rise thereafter, they remain below the thresholds throughout the projection period.
- Present value (PV) of external debt:
  - Would remain broadly unaffected by the restructuring assumptions.
- Overall public debt outlook:
  - Improves through a significant reduction in the stock of short-term domestic debt during the external debt repayment deferral.
  - This reduction translates into permanent savings on the interest bill.
- Graphical indicators referenced (2018–38): Debt accumulation; Grant-equivalent financing (% of GDP); Grant element of new borrowing; PV of debt-to-GDP, debt-to-exports, debt-to-revenue ratios; Debt service-to-exports and debt service-to-revenue ratios; Gross financing needs.
  - (Figures show comparisons across: Restructuring scenario, Active scenario, Thresholds; and stress tests including Combination shock.)

### Policy implications
- Implementing the five-year deferral and improving pipeline loan terms (to average 50 percent grant element) can:
  - Lower short-term domestic debt and expensive domestic borrowing.
  - Create fiscal space to reduce interest costs permanently.
  - Keep external debt service indicators below prudential thresholds through the projection period, supporting debt sustainability under the active scenario.
- Complementary measures implied by the scenario:
  - Maintain a sound medium-term fiscal framework.
  - Pursue a coherent debt strategy to lock in permanent interest savings and prevent reaccumulation of short-term domestic debt.

*Source: Box 1, cr18197.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18197.pdf_