## 1gmbea2020001 ## Source details **Canonical URL:** [1gmbea2020001](https://www.imf.org/-/media/files/publications/cr/2020/english/1gmbea2020001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2020/english/1gmbea2020001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2020/english/1gmbea2020001.pdf.json) --- ### Macroeconomic and program overview - ECF request: thirty-nine-month arrangement in an amount of SDR 35 million (56.3 percent of quota). - Program anchor: 2018–21 National Development Plan (NDP); priorities include strengthening public financial management and domestic revenue mobilization, mitigating fiscal risks from SOEs, expanding fiscal space for infrastructure and social programs, improving business environment, expanding financial inclusion, mainstreaming gender equality, and addressing climate change impacts. - Disbursement profile (millions of SDRs, annual sequence shown): 0.0, 0.0, 0.0, 10.0, 10.0, 10.0, 5.0, 0.0, 0.0. ### Recent economic performance and outlook (highlights) - Real GDP growth: 6.0 percent in 2019 (estimated). - Real GDP growth series (2018–25): 6.5, 5.8, 6.0, 6.3, 5.8, 5.5, 5.2, 5.2, 5.0. - Consumer prices (average, 2018–25): 6.5, 6.1, 7.1, 6.7, 6.0, 5.5, 5.1, 5.0, 5.0. - Banking sector: NPLs at 4.5 percent of gross loans at end-2019; banking system described as well capitalized, liquid and profitable. - Gross official reserves (US$, 2018–25): 157.0, 187.0, 225.0, 268.0, 313.4, 349.5, 382.4, 410.5, 450.1; months of imports: 2.7, 3.0, 3.4, 3.7, 4.1, 4.3, 4.4, 4.4, 4.6. - External public debt (US$, 2018–25): 756.6, 774.5, 796.3, 836.0, 876.7, 915.6, 949.0, 967.7, 979.0. ### Fiscal position and medium-term fiscal strategy - Central government domestic revenue (% of GDP, 2018–25): 12.1, 13.1, 14.4, 13.7, 14.0, 14.3, 14.6, 15.0, 15.2. - Grants (% of GDP, 2018–25): 3.3, 7.7, 7.8, 9.3, 8.5, 7.7, 7.0, 6.3, 6.1. - Total expenditures and net acquisition of financial assets (% of GDP, 2018–25): 21.7, 23.9, 24.4, 24.4, 24.2, 23.4, 22.7, 22.0, 21.7. - Interest (percent of government revenue, 2018–25): 26.1, 24.3, 22.3, 19.9, 18.1, 15.3, 14.9, 13.2, 12.6. - Net lending (+)/borrowing (–) (% of GDP, 2018–25): -6.2, -3.2, -2.6, -1.7, -1.8, -1.4, -1.1, -0.7, -0.4. - Primary balance (% of GDP, 2018–25): -3.0, 0.0, 0.6, 1.0, 0.8, 0.8, 1.1, 1.3, 1.5. - Public debt (% of GDP, 2018–25): 86.6, 81.8, 83.8, 77.9, 72.7, 68.3, 64.3, 60.1, 55.8. - Domestic public debt (% of GDP): 39.2, 37.2, 36.6, 32.9, 29.5, 26.6, 24.2, 22.1, 20.1. - External public debt (% of GDP): 47.4, 44.6, 47.2, 45.0, 43.2, 41.7, 40.1, 38.1, 35.8. ### Structural reform priorities and governance - Key program structural elements: - Modernize tax administration via a multi-year program based on the TADAT roadmap. - Strengthen budget preparation and execution, cash management, debt management, and fiscal reporting. - Improve public investment management (PIMA), procurement, and SOE reform (corporate governance, financial management, reporting). - Broaden reforms for financial inclusion, gender equality, and climate resilience. - Project financing and SOE recommendations: - Major projects to be financed through grants or highly concessional financing. - Strengthen public procurement and project selection. - Improve SOE governance and financial management to reduce fiscal risks. ### Monetary policy and financial sector reforms - Monetary policy recommendations: - Gradually adjust the interest rate corridor. - Enable the SDF rate to anchor the interbank market. - Strengthen the central bank’s balance sheet (target increase of CBG statutory capital to one billion dalasi consistent with CBG Act of 2018; initial debit of 180 million dalasi from Treasury in 2019). - Financial sector measures: - Address vulnerabilities from the 2019 FSSR; develop strategic plan (SB for June 2020). - Software updates for bank data, develop risk-based supervision manual with AFRITAC West2 TA. - Strengthen oversight of deposit-taking non-bank institutions; improve monitoring of mobile banking risks. - Mobile penetration: about 93 percent of households; only 2 percent of adults are registered mobile money users (FinScope Gambia 2019). ### Poverty, social indicators, and human development - Poverty headcount: 48.6 percent (with rural poverty at 69.5 percent). - NDP alignment: planned extension to better align with the SDGs. - Social spending: poverty-reducing spending increased from GMD 4,000,000,000 in 2018 to GMD 5,267,000,000 in 2019 (reported program/actual flows; 2020 planned floor GMD 5,600,000,000). ### Debt relief, restructuring status, and debt sustainability - Total debt service deferred 2020–24: US$158 million (equivalent to 9 percent of 2019 GDP). - DSA outcome: external debt distress risk rating improved from “in debt distress” (April 2019) to “a high risk of debt distress” in current assessment. - Confirmed and pending creditor actions (selected, amounts in US$ millions): - Total outstanding debt end-2019: 494.9. - IsDB: Outstanding Principal 147.8; debt service reduction example entries: 8.2 (2020), 8.7 (2021), 42.5 (2020–24). - BADEA: Outstanding Principal 55.9; debt service reduction 2.3 (2020), 2.1 (2021). - SFD: Outstanding Principal 47.9; debt service reduction 7.2 (2020–24). - KFAED: Outstanding Principal 48.9; debt service reduction 1.0 (2020), 3.1 (2021). - EXIM Bank (India): Outstanding Principal 41.7; debt service reduction 2.5 (2020), 4.8 (2021), 25.2 (2020–24). - ADFD: Outstanding Principal 14.4; debt service reduction 1.3 (2020), 1.3 (2021), 6.4 (2020–24). - Pending offers: OFID (Outstanding Principal 45.2; debt service reduction 5.9 (2020), 6.4 (2021), 29.2 (2020–24); governing body decision expected March 2020); EBID (Outstanding Principal 22.8; debt service reduction 1.9 (2020), 2.1 (2021), 10.5 (2020–24); proposal being finalized). - Technical/disputed claims: Libya, Venezuela, Taiwan Province of China, and private claimant M. A. Kharafi and Sons noted; treatment varies by case. - Impact: debt deferrals reduce external debt service-to-exports and debt service-to-revenue ratios in 2020–24; rebound expected from 2025 as deferrals end. ### Program performance, structural benchmarks, and public investment governance - 2019 SMP performance: strong overall; most quantitative targets met except floor for poverty-reducing spending at end-September 2019 and a breach of continuous zero ceiling on external arrears accumulation through mid-November 2019 (arrears cleared by November 2019). - Structural benchmarks: two SBs missed but subsequently completed (domestic arrears audit and CBG 2018 financial statements publication). - SOE actions: forensic audits completed for all SOEs; E&Y audits and action plans; revision to SOE law progressing in parallel with constitutional revisions. - Public investment: PIMA conducted June 2019; BRP financing revisited to ensure dalasi payments and independent monitoring. ### Medium-term outlook and key projections (selected) - Growth projection: average 5.5 percent in 2020–25. - Inflation: projected to decline to around 6.5 percent by mid-2020 and converge to CBG target of 5 percent. - Current account (percent of GDP, including budget support, 2018–25): -9.7, -10.3, -5.3, -8.7, -9.9, -9.6, -9.0, -9.1, -8.8. - Gross official reserves (US$, 2018–25): 157.0, 187.0, 225.0, 268.0, 313.4, 349.5, 382.4, 410.5, 450.1. - Public debt-to-GDP (selected series, 2018–25): 86.6, 81.4, 75.8, 70.8, 66.6, 62.7, 58.5, 54.4 (alternate projection set) and 86.6, 81.8, 83.8, 77.9, 72.7, 68.3, 64.3, 60.1, 55.8 (other series reported in source). ### Debt sustainability and borrowing strategy - DSA: external debt PV-to-GDP 33.3 percent at end-2019; public DSA overall risk assessed as “High.” - Borrowing limits and commitments: - No new non-concessional external debt (continuous PC). - Limit external concessional debt contracted or guaranteed to US$190 million over 2020–23 (minimum grant element 35 percent). - Limit concessional external debt in 2020 to US$60 million (continuous PC). - Borrowing plan (US$ millions, 2020–23): 60, 40, 40, 50; total 190 (multilateral total 110; bilateral total 80; nonconcessional 0). - Assumed concessional disbursement profile (2020–2026, US$ millions): 15, 20, 25, 25, 25, 30, 50. - Meridian debt recording system implementation underway to improve public debt monitoring. ### Program modalities, financing assurances, access, and reserves objective - Total proposed access: SDR 35 million (56.3 percent of quota) phased in seven disbursements; arrangement length thirty-nine months. - External financing requirement during program period: about US$258.6 million. - Objective to increase official reserves by about US$150 million over the program period; projected official reserves at program end consistent with about 4½ months of import coverage. ### Program monitoring, performance criteria, and structural benchmarks - Semi-annual reviews: first and second review test dates June 30, 2020 and December 31, 2020; program assessed via quantitative performance criteria, indicative targets, and structural benchmarks. - Quantitative performance criteria include ceilings on net domestic borrowing, net domestic assets of the central bank, continuous zero ceilings on new external arrears and on contracting non-concessional external debt, floor on net usable international reserves, and ceilings on short-maturity external public debt. - Indicative floors: poverty-reducing expenditures and tax revenue. - Selected 2020 structural benchmarks (timing): GRA tax registry clean-up (End-June 2020); monthly cashflow plan consistent with 2020 budget (SB for March 2020); update MTDS (SB for September 2020); CBG strategic plan for FSSR recommendations (SB for June 2020); publish annual statement on MDA compliance with internal audit recommendations (SB for December 2020). ### Technical Memorandum of Understanding (TMU) — reporting and adjusters (selected) - Net Domestic Borrowing (NDB): defined as change in net claims on Central Government by domestic monetary sector plus discounted value of domestic government securities held by non-monetary sector; NDB adjuster linked to actual budget support grants/loans with caps on upward adjustment: GMD 1.5 billion at end-June 2020; GMD 1.0 billion at end-September and end-December 2020. - Net Usable International Reserves (NIR) adjuster: quarterly NIR targets adjusted by shortfall/excess of budget support; downward adjustment caps: US$30 million at end-June 2020; US$20 million at end-September and end-December 2020; upward adjustment excludes grants/loans for COVID-19 emergency spending. - Reporting timelines: detailed reserve statement end-month within seven days; CBG balance sheet and NDA monthly within four weeks; many indicators on weekly/monthly schedules as specified in TMU. ### DSA coverage, stress tests, and vulnerabilities - DSA covers all known central government and central government-guaranteed external debt at end-2019; external PPG debt about US$796 million (46 percent of GDP). - Creditor composition (selected, US$ millions): Multilateral US$235.8; Plurilateral US$284.6; Bilateral official US$217.6; Private US$40.8. - Short-term external debt: US$17.4 (ITFC). - Contingent liabilities: SOE unguaranteed external debts at end-2019 estimated 1.1 percent of GDP; SSHFC-linked contingent items noted. - Stress test findings: tailored stress tests show large breaches under shocks; combination shock produces largest deterioration; export shock calibrated at -6.6 percent in 2021–22 produces PV debt-to-export peak at 234 percent in 2022 in that scenario. - Public DSA: PV of total public debt-to-GDP 70 percent at end-2019; projected to fall below 55 percent by 2023 under baseline with debt deferrals and fiscal consolidation; overall public DSA risk rated “High.” ### COVID-19 developments, impact estimates, and program adjustments - As of March 17, 2020: no reported cases; March 23, 2020 update reports 2 confirmed cases and 1 fatality; border closures and quarantine measures implemented. - Authorities’ scenario: tourist arrivals expected to decline by 14 percent relative to 2019 (to a level 28 percent lower than initial 2020 projection); in successful containment scenario, estimated economic impact about 3 percentage points of GDP; authorities project 2020 growth slowing to 3.3 percent (from 6.3 percent earlier). - Cost estimate for immediate preparedness: about 1.5 percent of GDP (about US$30 million); import component US$20 million. - Donor emergency support: World Bank US$5 million increasing to US$10 million; other donor contributions noted (People’s Republic of China, WHO, IOM). - Program TMU modification request (March 17, 2020): ensure additional budget support for COVID-19 response does not trigger downward adjustment of NDB ceilings or upward adjustment of NIR floors for emergency spending. - Authorities requested Rapid Credit Facility (RCF) disbursement of minimum 25 percent of quota (SDR15.55 million) as of March 2020. ### Governance, transparency, and capacity development - Governance actions: White Paper on Janneh Commission; draft new Constitution submitted to National Assembly; anti-corruption bill submitted; Human Rights Commission established; Access to Information Bill under parliamentary consideration. - PFM and procurement: Revised GPPA Act submitted to Cabinet (prior action); adopt E-GP; strengthen GPPA capacity; implement PEFA with development partner support. - Revenue mobilization: TSA operationalization; government payment platform discussions; recovered assets: about 708 million dalasi recovered in 2018–19 and 360 million dalasi recovered in first month of 2020 (noted for victim compensation). - Capacity development risks: staff turnover, inability to hire competent technical staff, lack of IT funding; mitigation via tailored TA, training programs, donor-funded technical support (Meridian debt software, ITAS, GAMTAXNET, ASYCUDA World). ### Staff appraisal — key messages and recommendations - Staff supports the thirty-nine-month ECF arrangement with access equivalent to 56.3 percent of quota. - Key policy emphases: - Consolidate fiscal gains and prioritize revenue mobilization (TADAT roadmap). - Safeguard debt sustainability via strict borrowing limits and reliance on grants/highly concessional financing. - Strengthen CBG balance sheet, narrow interest rate corridor, and use SDF rate to anchor interbank market. - Implement FSSR recommendations to bolster financial sector soundness and supervision. - Deepen SOE reforms, improve procurement and public investment management, and protect poverty-reducing spending. - Success conditions: authorities’ continued resolve to implement institutional reforms, advance capacity development, and mitigate corruption and governance risks. *Source: The Gambian authorities; and IMF staff estimates and projections.* ### 1. The Gambian authorities’ commitment to prudent policies and institutional ### 1. The Gambian authorities’ commitment to prudent policies and institutional ### Macroeconomic and program overview - The authorities request a thirty-nine-month financial arrangement under the Extended Credit Facility (ECF) in an amount of SDR 35 million (56.3 percent of quota). - The ECF-supported program is anchored on the 2018–21 National Development Plan (NDP) and focuses on: - Strengthening public financial management and domestic revenue mobilization. - Mitigating fiscal risks from state-owned enterprises (SOEs). - Expanding fiscal space for infrastructure and social programs. - Improving the business environment, expanding financial inclusion, mainstreaming gender equality, and addressing climate change impacts. - Disbursements under the ECF arrangement (millions of SDRs): 0.0, 0.0, 0.0, 10.0, 10.0, 10.0, 5.0, 0.0, 0.0 (annual sequence as shown). ### Recent economic performance and outlook - Real GDP growth: 6.0 percent in 2019 (estimated), despite a 10–percent decline in agricultural production in 2019. - Real GDP growth series (2018–25): 6.5, 5.8, 6.0, 6.3, 5.8, 5.5, 5.2, 5.2, 5.0. - Consumer prices (average): 6.5, 6.1, 7.1, 6.7, 6.0, 5.5, 5.1, 5.0, 5.0 (2018–25). - Inflation averaged 7.1 percent in 2019, driven mainly by one-off hikes in postal charges; core inflation described as subdued. - Banking sector: non-performing loans at 4.5 percent of gross loans at end-2019; the banking system described as well capitalized, liquid and profitable. - Gross official reserves (millions of US$ and months of next year's imports): 157.0, 187.0, 225.0, 268.0, 313.4, 349.5, 382.4, 410.5, 450.1 (2018–25); months: 2.7, 3.0, 3.4, 3.7, 4.1, 4.3, 4.4, 4.4, 4.6. - External public debt (millions of US$): 756.6, 774.5, 796.3, 836.0, 876.7, 915.6, 949.0, 967.7, 979.0 (2018–25). ### Fiscal position and medium-term fiscal strategy - Central government domestic revenue (percent of GDP): 12.1, 13.1, 14.4, 13.7, 14.0, 14.3, 14.6, 15.0, 15.2 (2018–25). - Grants (percent of GDP): 3.3, 7.7, 7.8, 9.3, 8.5, 7.7, 7.0, 6.3, 6.1 (2018–25). - Total expenditures and net acquisition of financial assets (percent of GDP): 21.7, 23.9, 24.4, 24.4, 24.2, 23.4, 22.7, 22.0, 21.7 (2018–25). - Interest (percent of government revenue): 26.1, 24.3, 22.3, 19.9, 18.1, 15.3, 14.9, 13.2, 12.6 (2018–25). - Net lending (+)/borrowing (–) (percent of GDP): -6.2, -3.2, -2.6, -1.7, -1.8, -1.4, -1.1, -0.7, -0.4 (2018–25). - Net incurrence of liabilities (percent of GDP): 5.6, 3.2, 3.2, 2.0, 1.8, 1.4, 1.1, 0.7, 0.4 (2018–25). - Foreign: 2.6, 1.6, 2.7, 2.0, 1.8, 1.4, 1.1, 0.7, 0.4. - Domestic: 3.0, 1.6, 0.5, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0. - Primary balance (percent of GDP): -3.0, 0.0, 0.6, 1.0, 0.8, 0.8, 1.1, 1.3, 1.5. - Public debt (percent of GDP): 86.6, 81.8, 83.8, 77.9, 72.7, 68.3, 64.3, 60.1, 55.8 (2018–25). - Domestic public debt (percent of GDP): 39.2, 37.2, 36.6, 32.9, 29.5, 26.6, 24.2, 22.1, 20.1. - External public debt (percent of GDP): 47.4, 44.6, 47.2, 45.0, 43.2, 41.7, 40.1, 38.1, 35.8. ### Structural reform priorities and governance - Structural agenda under the ECF-supported program includes: - Bolstering domestic revenue mobilization through a multi-year program of modernizing tax administration based on the TADAT roadmap. - Consolidating gains in fiscal policy formulation and public financial management by strengthening budget preparation and execution, cash management, debt management, and fiscal reporting. - Improving economic governance with emphasis on public investment (drawing on the 2019 PIMA), procurement, and SOE reform including corporate governance, financial management, and reporting. - Broadening reforms to sustain growth and poverty reduction by fostering financial inclusion, building on the 2019 Financial Sector Stability Review, mainstreaming gender equality, and counteracting climate change impacts. - Recommendations on project financing and SOEs: - Major projects should be financed through grants or highly concessional financing. - Public procurement and project selection should be strengthened. - Governance and financial management of SOEs need improvement to reduce fiscal risks and enhance public service delivery efficiency. ### Monetary policy and financial sector issues - Monetary policy recommendations: - Enhance the monetary policy framework by gradually adjusting the interest rate corridor. - Enable the SDF rate to effectively anchor the functioning of the interbank market. - Strengthen the central bank’s balance sheet. - Financial sector recommendations: - Address vulnerabilities identified in the 2019 Financial Sector Stability Assessment to ensure financial sector soundness and improve legal and supervisory frameworks for banking supervision. - Leverage the financial inclusion strategy (including mobile banking), while strengthening oversight of non-banking institutions and monitoring risks in mobile banking. ### Risks, social priorities, and capacity development - Program risks highlighted: - Political tensions in the run-up to presidential elections could lead to expenditure overruns. - Weak management of SOEs, vulnerability to corruption, and political capture of the public investment program. - The ongoing COVID-19 pandemic will challenge efforts to strengthen economic performance and resilience. - Social and governance priorities: - Continued support for social programs and commitment to structural reforms and governance improvements as outlined in the authorities’ National Development Plan are necessary to address social needs, combat corruption and promote private-sector-led inclusive growth. - Development partner role: - Grant financing and technical assistance from development partners will be needed to support reform efforts and the ECF program. *Source: The Gambian authorities; and IMF staff estimates and projections.* ### 48.6 percent (with rural poverty at 69.5 percent) placing it among the poorest and most fragile ### 1gmbea2020001 - 48.6 percent (with rural poverty at 69.5 percent) placing it among the poorest and most fragile ### Poverty, social indicators, and human development - Poverty headcount: 48.6 percent (with rural poverty at 69.5 percent). - World Bank view: "This has hardly changed in the last five years," despite achievements in the 2019 annual performance review (APR) of the 2018–21 National Development Plan (NDP). - NDP extension: Planned extension aims to better align the NDP with the Sustainable Development Goals (SDGs). - Text Figure 1 indicators displayed in source: GDP growth (1980–2019), Poverty Rates (2010 and 2015), Headcount Poverty Gap, UN Human Development Index (2000–18), Gender Inequality Index (2000 and 2018). ### Debt relief, restructuring status, and debt sustainability - Total debt service deferred between 2020 and 2024: US$158 million (equivalent to 9 percent of 2019 GDP). - Debt relief role: Contributes to making the proposed ECF-supported program fully financed and The Gambia’s public debt sustainable on a forward-looking basis. - Credible assurances: Most participating creditors have made binding debt restructuring offers; two offers still being finalized as of source date. - Specific creditor actions and status (Text Table 1, Millions of U.S. dollars; outstanding principal and debt service reduction amounts preserved): - Total outstanding debt end-2019: 494.9 - Total debt service reduction (2020–24): 157.9 - Confirmed offers (examples with figures from Text Table 1): - Islamic Development Bank (IsDB): Outstanding Principal 147.8; Debt service reduction 8.2 (2020), 8.7 (2021), 42.5 (2020–24); Maturity: 5 years; Comments: Principal deferral on all equity-funded loans representing 45 percent of debt service due in 2020–24; maturities of certain market-funded loans extended by up to two years; option of accessing a grant window being explored. - Arab Bank for Economic Development (BADEA): Outstanding Principal 55.9; Debt service reduction 2.3 (2020), 2.1 (2021); Maturities 9.8 5 years. - Saudi Fund for Development (SFD): Outstanding Principal 47.9; Debt service reduction 0.0 (2020), 0.0 (2021), 7.2 (2020–24); Maturities 7 years 4 years. - Kuwait Fund for Arab Economic Development (KFAED): Outstanding Principal 48.9; Debt service reduction 1.0 (2020), 3.1 (2021); Maturities 7.75 to 7 years. - Export-Import Bank of India (EXIM Bank): Outstanding Principal 41.7; Debt service reduction 2.5 (2020), 4.8 (2021), 25.2 (2020–24); Maturities 5 years 5 years; Interest deferral funded by a new interest-bearing loan. - Abu Dhabi Fund for Arab Economic Development (ADFD): Outstanding Principal 14.4; Debt service reduction 1.3 (2020), 1.3 (2021), 6.4 (2020–24); Maturities 5 years; 5 years. - Pending offers: - OPEC Fund for International Development (OFID): Outstanding Principal 45.2; Debt service reduction 5.9 (2020), 6.4 (2021), 29.2 (2020–24); Governing body decision expected in March 2020; Principal and interest expected to be deferred until 2025. - ECOWAS Bank for International Development (EBID): Outstanding Principal 22.8; Debt service reduction 1.9 (2020), 2.1 (2021), 10.5 (2020–24); Proposal to defer principal and interest until 2025 being finalized in consultation with India, a source of funds on-lent by EBID. - Technical issues/disputed claims: - Libya: Outstanding Principal 1; Debt service reduction 4.0 (2020), 0.7 (2021), 0.7 (2020–24), 2.5; Disputed claims, not expected to be serviced. - Venezuela: Outstanding Principal 1; Debt service reduction 15.1 (2020), 1.4 (2021), 1.4 (2020–24), 6.9; Not serviced (international sanctions). - Taiwan Province of China: Outstanding Principal 2; Debt service reduction 14.3 (end-2019); Payments currently being met; Discussions continue. - M. A. Kharafi and Sons: Outstanding Principal 2; Debt service reduction 36.9 (end-2019); Authorities intend to service this debt. - Non-participation caveat: Non-participation of some creditors does not qualitatively affect results of the debt sustainability analysis (DSA). ### Recent macroeconomic performance (2019) and financial sector developments - GDP growth 2019: 6 percent. - Adverse factors: Rainfall deficit with long dry spells reducing agricultural production by 10 percent; financial collapse of Thomas Cook, UK (TCUK) affecting tourism season start. - Growth drivers: More reliable power supply, lower interest rates, continued strong activity in tourism and other services, and public investment program. - Fiscal performance 2019: - Overall fiscal deficit: Declined from 6.2 percent of GDP in 2018 to 2.6 percent of GDP in 2019. - Domestic primary surplus: Increased from 0.6 to 1.8 percent of GDP. - Net domestic borrowing: Declined from 3.3 to 1.2 percent of GDP. - Tax collections: Increased by 0.9 percent of GDP, mostly due to administrative improvements. - Signature bonuses: Nearly 0.9 percent of GDP in nontax revenue from prospecting petroleum companies (BP and FAR Gambia Limited). - Inflation and monetary policy 2019: - Headline inflation: 7.1 percent (average 2019), up from 6.5 percent in 2018. - Core inflation (excluding food, energy, and communication): 5.6 percent. - Dalasi nominal depreciation vs. U.S. dollar in 2019: 3.2 percent (y/y) at year’s end. - Central Bank of The Gambia (CBG) policy rate: Reduced from 13.5 percent to 12.5 percent effective March 2019; deposit facility rate raised from 2 percent to 2.5 percent in August 2019. - Financial intermediation 2019: - Credit to private sector expansion: 35.8 percent (y/y) in 2019. - Average lending rates: Around 21 percent. - Credit-to-GDP ratio: 8.7 percent (1.5-percentage-points increase relative to 2018). - Non-performing loans (NPLs): Increased from 3.3 percent at end-2018 to 4.5 percent at end-2019. - Bank capitalization: Remained high; profitability improved. - External sector and reserves: - Current account deficit 2019: Deficit of 8.5 percent of GDP, more than fully financed by capital and financial inflows. - Gross official reserves at end-2019: US$225 million (3.4 months of prospective imports). - Overall BoP surplus: Exceeded 4 percent of GDP. ### Program performance, structural reforms, and public investment - 2019 SMP performance: Strong overall; all quantitative targets met at all test dates except: - Floor for poverty-reducing spending at end-September 2019 (not met). - Continuous zero ceiling on external arrears accumulation breached through mid-November 2019 (accumulating arrears to Paris Club creditors cleared in November 2019). - Specific program outcomes and margins: - End-December 2019 ceiling on NDB (adjusted): Met with a margin of 1.0 percent of GDP (helped by ringfencing signature bonuses). - End-December 2019 ceiling on CBG net domestic assets and floor for net usable international reserves: Met with margins of 1.5 billion dalasi and US$54 million, respectively. - Zero ceilings met at all test dates for: - New non-concessional external debt contracted or guaranteed. - Outstanding stock of external public debt with original maturity of one year or less. - Central bank credit to central government on non-market terms. - Structural benchmarks (SBs): - Two SBs missed but completed subsequently: (i) Audit of domestic arrears and clearance strategy (due end-June, completed by December 2019 in stages); (ii) Publication of audited 2018 financial statements of the CBG (due end-September, published November 2019). - Management approved completion of the first SMP review (with delay). - SOE reforms and governance: - Forensic audits completed for all SOEs; recommendations forming basis for action plans and broader strategic reforms. - Revision to SOE law: Wholesale revision proceeding in step with constitutional revisions to eliminate executive interference in SOEs and strengthen governance. - Memorandum signed with NAWEC in 2019 to resolve arrears nexus among NAWEC, other SOEs, government, and GRA. - Result: Reduction and more transparent definition of subsidy needs in the 2020 budget. - Public investment management: - Public Investment Management Assessment (PIMA) conducted June 2019. - Banjul Rehabilitation Project (BRP) issues addressed by revisiting financing to ensure payments in dalasi through annual budgets, independent monitoring by consulting company, and revised terms of reference for project appraisal in line with PIMA. - Prior action for ECF request: Revised draft of The Gambia Public Procurement Authority (GPPA) Act submitted to Cabinet; further project selection improvements to be taken in 2020. ### Medium-term outlook and risks (2020–25) - Growth projection: Average 5.5 percent in 2020–25. - Drivers: Strong private sector activity (construction and tourism) supported by improvements in public infrastructure and services. - Inflation projection: Expected to decline to around 6.5 percent by mid-2020 and then gradually converge to the CBG’s target of 5 percent. - Note: Starting in 2020, reported inflation affected by revisions to CPI coverage based on the 2015/16 Integrated Household Survey and methodological revisions (including better treatment of missing values and use of geometric means). - External sector projection: - Gross official reserves projected to increase to the equivalent of 4½ months of prospective imports by 2022. - Current account: Expected to widen with strong import growth to support tourism and private investment; capital and financial account expected to remain strong reflecting public investment disbursements and private capital transfers. - Risks: - Downside risks: Climatic shocks, deterioration in political environment, possible weakening of fiscal discipline (notably in run-up to 2021 elections), weak administrative capacity, vulnerability to corruption, which could undermine program implementation and curtail access to development partner support. - Upside risks: Infrastructure projects ahead of the Organization of Islamic Cooperation (OIC) summit in 2022, and confirmed discovery of economically viable oil reserves. ### Policy framework and ECF request - ECF request: Thirty-nine-month ECF arrangement requested to consolidate SMP gains and advance structural agenda for sustainable and inclusive growth. - Authorities’ commitments under the program: - Expand fiscal space for productive investment and priority social spending. - Maintain debt sustainability through adherence to their medium-term debt strategy (MTDS). - Advance monetary management and healthy financial inclusion. - Strengthen governance and financial management of SOEs for more efficient and reliable public service delivery. - Improve the business environment, including by strengthening governance and combating corruption. - Leverage technical assistance (TA) to enhance institutional capacity and improve the quality and timeliness of economic statistics for program monitoring. *Source: IMF staff; excerpts from the provided PDF content unit.* ### 16. The fiscal position will be strengthened further to support debt sustainability while ### 16. The fiscal position will be strengthened further to support debt sustainability while ### Fiscal outlook and key macro-fiscal projections - Real GDP growth: 6.5, 6.0, 6.3, 5.8, 5.5, 5.2, 5.2, 5.0 (2018–2025 sequence as given). - Headline inflation (average): 6.5, 7.1, 6.7, 6.0, 5.5, 5.1, 5.0, 5.0 (2018–2025). - Total revenue (incl. grants) (% of GDP): 15.4, 22.2, 22.9, 22.5, 22.0, 21.6, 21.3, 21.3 (2018–2025). - Total expenditure (% of GDP): 21.6, 24.8, 24.6, 24.2, 23.4, 22.7, 22.0, 21.7 (2018–2025). - Investment expenditure (% of GDP): 7.6, 9.8, 10.3, 10.2, 9.5, 8.8, 8.1, 8.2 (2018–2025). - Overall fiscal balance (% of GDP): -6.3, -2.6, -1.7, -1.8, -1.4, -1.1, -0.7, -0.4 (2018–2025). - Primary balance (% of GDP): -3.0, 0.6, 1.0, 0.8, 0.8, 1.1, 1.3, 1.5 (2018–2025). - Net domestic borrowing (% of GDP): 3.3, 1.2, 0.5, 0.0, 0.0, 0.0, 0.0, 0.0 (2018–2025). - Current account balance (% of GDP): -9.7, -5.3, -8.7, -9.9, -9.6, -9.0, -9.1, -8.8 (2018–2025). - Public debt (% of GDP): 86.6, 81.4, 75.8, 70.8, 66.6, 62.7, 58.5, 54.4 (2018–2025). - Gross official reserves (months of imports): 2.7, 3.4, 3.7, 4.1, 4.3, 4.4, 4.4, 4.6 (2018–2025). - Program target: gradual increase in the domestic primary surplus to 2.5 percent of GDP by end-2025 to support a reduction in the public debt-to-GDP ratio from over 81 percent in 2019 to below 55 percent in 2025. - Policy supports: TADAT roadmap for revenue collection; tightened PFM; rationalization of subvented agencies; SOE reforms; progressive reallocation from subsidies to social programs and infrastructure maintenance. ### 2020 budget measures and fiscal preservation - Revenue measures estimated to yield about 0.3 percent of GDP: - increases in tobacco-related taxes and excises; - increase in customs processing fees by 0.5 percent to 1.5 percent and extension to previously exempted imports; - increase in the VAT threshold expected to boost medium-term revenues; - potential additional gains from tightening tax exemption policy and monitoring (estimated revenues foregone in 2019 from tax and duty exemptions exceeded 3 percent of GDP). - Expenditure adjustments: - projected decline in current expenses by 0.7 percentage points of GDP, driven by lower interest payments (by 0.5 percent of GDP) and containment of growth in other categories; - compensation of employees to be kept constant in GDP terms; - reclassification of some goods and services spending as transfers and public investment reducing reported goods and services spending. - Protected and priority spending: - safeguard three social initiatives: a pension fund and national health insurance scheme, a program for accelerated community development, and a social safety net project; - a 25-percent increase in subsidies and transfers to education and health to finance recruitment of new teachers and medical officers; - implementation of the BRP. - Arrears management: - progressive reduction of arrears to SOEs; - full clearance of validated arrears to domestic suppliers envisaged in the budget (0.3 percent of GDP); - at least partial clearance of arrears identified in the 2019 audit (less than 0.3 percent of GDP). - Staff assessment: foreign-financed capital spending in the 2020 budget appears overstated relative to historical patterns and implementation capacity. ### Fiscal structural measures (implementation and timing) - Revenue administration measures: - completion of tax registry clean-up at offices in the greater Banjul area that account for over 90 percent of tax revenue (SB for June 2020); - preparation of a tax exemptions policy for Cabinet approval (SB for September 2020) and better monitoring of tax exemptions; - training GRA staff in tax auditing and data matching; building competencies in petroleum taxation. - Public financial management measures: i. Submission to Cabinet of a revised GPPA Act (completed prior action) making GPPA sole institution responsible for public procurement, eliminating executive waivers, and limiting single sourcing; revisiting GPPA financing modalities to strengthen capacity. ii. Developing a monthly cashflow plan consistent with the 2020 budget (SB for March 2020) and monthly updates under the cash management committee. iii. Adopting project selection criteria recommended by PIMA for The Gambia Strategic Review Board (SB for June 2020); MoFEA to test criteria on a representative sample for 2021 budget preparation. iv. Submitting an assessment report on subvented agencies to Cabinet with rationalization proposals (SB for September 2020); publish annual statement of MDAs’ compliance with internal audit recommendations (SB for December 2020); conduct a PEFA with development partner support. ### Debt sustainability and borrowing strategy - DSA outcome: debt distress risk rating improved from “in debt distress” (April 2019) to “a high risk of debt distress” in the current assessment. - Debt-service metrics: - debt service-to-exports ratio remains below indicative thresholds near- and medium-term after deferrals; - external debt service-to-revenue ratio breaches its indicative threshold in 2020 but falls below thereafter. - Drivers of improved debt profile: debt restructuring, reduced non-concessional borrowing, fiscal consolidation, greater grants for budget support, SOE reform. PV of total public debt projected to drop below its threshold in 2023. - Authorities’ commitments to safeguard debt sustainability: i. Not to contract or guarantee non-concessional external debt (continuous PC). ii. Adhere to a borrowing plan limiting external concessional debt (minimum grant element of 35 percent) contracted or guaranteed to US$190 million over 2020–23. iii. Limit concessional external debt contracted or guaranteed in 2020 to US$60 million (continuous PC to be monitored with Fund staff). - Borrowing plan (Text Table 3, summarized): - Concessional debt by year (US$ millions): 60, 40, 40, 50; total 190 (2020–23). - Multilateral debt (US$ millions): 40, 20, 20, 30; total 110. - Bilateral debt (US$ millions): 20, 20, 20, 20; total 80. - Nonconcessional debt: 0,0,0,0. - Use of debt financing: Infrastructure 60, 40, 40, 50; total 190; Budget financing 0,0,0,0. - Assumed disbursement profile (concessional debt, US$ millions across 2020–2026 as given): 15, 20, 25, 25, 25, 30, 50 (for 2020–2026 sequence). - Multilateral disbursement profile (US$ millions): 10, 15, 15, 10, 10, 20, 20. - Bilateral disbursement profile (US$ millions): 5, 5, 10, 15, 15, 10, 30. - Nonconcessional disbursements: 0,0,0,0,0,0,0. - Debt management actions: - MoFEA updating MTDS (SB for September 2020) to reflect debt relief commitments and issuance of domestic instruments with longer maturities to reduce rollover risk. - Strengthening monitoring and controls around SOEs’ use of ITFC trade credit facilities; continuous PC on non-accumulation of new external arrears. - Improving debt monitoring and reporting through quarterly reports on external debt commitments, agreements, disbursements and annual reconciliations of debt stocks with external creditors. - Implementation of the Meridian debt recording system from the Commonwealth Secretariat to improve public debt monitoring and timely debt service payments. ### Monetary policy and financial sector reforms - Monetary policy framework improvements: - CBG to rely on the interest-rate channel for inflation targeting; gradually narrow the interest corridor and raise the SDF rate to anchor interbank money market. - Use of templates developed with AFRITAC West2 for liquidity forecasting; tightened collaboration with GBoS, GRA, and MoFEA for inputs. - Improved CPI tracking expected to better calibrate monetary policy. - Exchange rate policy: - Continued commitment to a flexible exchange rate regime; limiting FX purchases to ensure orderly market operation and making FX available only for financing central government external obligations. - Monthly updates of external cashflow projection to inform intervention decisions. - Strengthening the CBG balance sheet: - Plan to increase CBG statutory capital to one billion dalasi (consistent with CBG Act of 2018) is being implemented. - Interest on consolidated Treasury bonds held by CBG increased and shortfalls paid to align returns with 2017 audit recommendations. - A zero monthly indicative ceiling on CBG’s credit to central government on non-market terms is being observed. - Financial sector supervision measures from 2019 FSSR guidance: - CBG to develop and publish a strategic plan addressing FSSR recommendations (SB for June 2020) to improve legal/regulatory framework, crisis preparedness, and supervision of non-bank financial institutions. - Software updates to improve bank data provision; development of a risk-based supervision manual with AFRITAC West2 TA. - Continuous review of underwriting standards and rigorous application of loan classification regulations in light of rapid private credit growth and a recent uptick in NPLs. - Strengthen oversight of deposit-taking non-bank financial institutions via the National Association of Cooperative Credit Unions. - Work with telecoms to develop mobile banking by addressing regulatory inefficiencies, enhancing oversight and risk monitoring, and fostering consumer awareness and confidence. ### Governance and other structural reforms - Transitional justice and governance actions: - Publication of a White Paper addressing Janneh Commission findings. - Submission of a draft new Constitution to the National Assembly. - Submission of an anti-corruption bill to create an Anti-Corruption Commission. - Establishment of a Human Rights Commission. - Ongoing hearings under the Truth, Reconciliation and Reparations Commission. - Parliamentary consideration of the Access to Information Bill submitted in December 2019. - Strengthening governance in key institutions: - Strengthened financial reporting at the CBG evidenced by an unqualified audit report of 2018 financial statements. - Ongoing measures to strengthen public procurement, project selection, and appraisal. - Improvements in SOE governance and financial management with World Bank TA. ### Growth, social protection, and public investment priorities - NDP (2018–21) priorities: - Infrastructure and energy: reforms at NAWEC to enhance water and electricity reliability; improved business environment to support private sector development. - Investing in people: establishment of PACD (with UNDP support), a universal health insurance scheme, and a pension fund for civil servants; authorities earmarked 0.5 percent of GDP for these initiatives in the 2020 budget. - Social safety net: World Bank–supported project to improve targeting of non-conditional cash transfers, school feeding, and basic health services. - Monitoring: spending under social protection to be monitored in addition to an indicative floor on poverty-reducing spending under the program. ### Data issues and capacity development - Data gaps and needs: - Adequate data provision for monitoring quantitative targets, but urgent need to improve fiscal data quality to enable timely reconciliation of SGO with IFMIS records and CBG net domestic borrowing. - Banking supervision data quality needs enhancement via upgraded electronic data submission. - GBoS requires additional resources to conduct census and surveys to improve national accounts, CPI, and BoP compilation. - Capacity development support: - Ongoing support from STA and AFRITAC West2 critical to improve data quality. - EU-funded resident advisors at MoFEA and GRA to help sharpen institutional capacity and meet program data reporting requirements. ### Program modalities, financing assurances, access, and risks - Role of ECF arrangement: - ECF arrangement to support debt sustainability and catalyze international financial support; budget support from AfDB, EU, and World Bank contingent on a Fund arrangement. - Expected contribution to growth and poverty reduction by creating fiscal space through anchored fiscal discipline and proper use of resources freed by debt deferrals. - Structural reform pillars: i. Multi-year reform program to strengthen domestic revenue mobilization, modernizing revenue administration per TADAT roadmap. ii. Ongoing PFM reforms covering budgeting, expenditure management, cash management, debt management, and fiscal reporting. iii. Multipronged engagement to improve economic governance focusing on public investment processes, procurement (PIMA recommendations), and SOE reform (corporate governance, financial management, reporting). - Access, phasing, and reserves objective: - Total proposed access: SDR 35 million (56.3 percent of quota) phased in seven disbursements. - Arrangement length: thirty-nine months to allow seventh disbursement after sixth and final review. - Proposed access equals 17.3 percent of quota annually (within annual normal access limit of 100 percent of quota for PRGT instruments). - External financing requirement during program period: about US$258.6 million. - By end of program, outstanding Fund credit would reach 75 percent of quota. - Objective to increase official reserves by about US$150 million over the program period to prepare for a sharp rise in medium-term debt service payments and to increase commercial banks’ foreign exchange buffers. - Projected official reserves at program end to be consistent with about 4½ months of import coverage (assessed adequate in the 2017 Article IV consultation). *Source: The Gambian authorities; and IMF staff estimates and projections.* ### 31. Program performance will be assessed through semi-annual reviews, based on ### Program performance will be assessed through semi-annual reviews, based on ### Program reviews and performance criteria - Program performance will be assessed through semi-annual reviews, based on quantitative performance criteria and indicative targets (MEFP Table 2), and structural benchmarks, which have been agreed for the first year of the program (MEFP Table 4). - The first and the second review test dates would be June 30, 2020 and December 31, 2020. - The quantitative performance criteria would include: - (i) a ceiling on net domestic borrowing by the central government; - (ii) a ceiling on net domestic assets of the central bank; - (ii i) a floor on net usable international reserves; - (iv) a continuous zero ceiling on new external payment arrears; - (v) a continuous zero ceiling on contracting or guaranteeing non-concessional external debt; - (vi) a continuous ceiling on outstanding stock of external public debt with original maturity of one year or less; - (vii) a continuous (annual) ceiling on nominal concessional external debt contracted or guaranteed (subject to a minimum grant element of 35 percent). - The program will also feature indicative floors for: - (i) poverty-reducing expenditures, and - (ii) tax revenue; - and an indicative ceiling on CBG lending to central government at non-market terms. - The number of proposed structural benchmarks is limited to four per review, considering The Gambia’s fragile status. - As noted above, two prior actions, on the 2020 budget and the revised GPPA Act, were met (MEFP Table 2). ### Financing assurances - The program is fully financed for its first 12 months, with good prospects for available financing beyond the initial 12-month period. - Budget support for 2020, entirely in the form of grants, has been confirmed by AfDB, the EU, and the World Bank (Table 10). - Debt service deferrals, which the authorities have already obtained or are close to obtaining from relevant external creditors, have also contributed to lowering the financing requirement. - The potential financial pressure due to delays in the finalization of the offers from OFID and EBID remains well within the cash buffers built as a result of better than expected revenue performance in 2019 and is accommodated in the quarterly program. - Staff will discuss with the authorities’ ways to address these pressures if the finalization of the offers from OFID and EBID takes longer than expected. - Budget support from AfDB and World Bank is conditional on the ECF-arrangement being in place. ### Capacity to repay the Fund - The Gambia’s capacity to repay is assessed as adequate, based on the country’s good record of Fund borrowing and repayment. - The CBG is strengthening its financial safeguards (see ¶35), further bolstering the safety of IMF lending to the country. - Debt service to the Fund would decrease from 2.0 percent of exports of goods and services in 2020 to 1.8 percent in 2023 (Table 12). - The updated DSA indicates that the risk of debt distress would decline considerably during the program period in the absence of major shocks. ### Program risks and mitigation measures - Weak institutional capacity could undermine the fiscal strategy and compromise debt sustainability. - Capacity challenges that surfaced during the 2019 SMP resulted in external and domestic arrears as well as weaknesses in debt contracting, project selection, and procurement, calling for continued scrutiny. - A failure to advance efforts to strengthen governance, including at the SOEs, and reduce vulnerability to corruption could undermine the goal of advancing inclusive growth and the efficient use of public resources. - A deterioration in the political situation and related lapses in expenditure control could undermine the macroeconomic gains so far attained. - To mitigate these risks, a well-tailored capacity development is proposed to support program implementation (see Annexes IV and V). - The gradual fiscal adjustment (focusing on growing out of domestic debt rather than its aggressive reduction) and the pursuit of “low hanging fruits” on the reform agenda will help strengthen the political buy-in for the program, as will the new initiatives to protect the vulnerable. ### Safeguards assessment - An update of the safeguards assessment has been initiated and will be completed by the time of the first program review. - The CBG has reappointed the joint auditors for 2019 and took steps to prevent delays encountered during the audit of the 2018 financial statements. - It also implemented most of the recommendations of the 2017 safeguards assessment. - The remaining issues relate to: - establishing a capacity building plan for the risk management function; and - quarterly reporting by the Legal Compliance Unit to the CBG Board on compliance with the 2018 CBG Act. ### Staff appraisal — overview and policy recommendations - The Gambia deserves credit for attaining important milestones since the democratic transition in 2016/17; the authorities have advanced the transitional justice agenda and are pursuing economic policies that have bolstered confidence and helped build external buffers. - Consolidating these achievements will require further measures to strengthen fiscal and monetary management and to advance the structural agenda. - The success of the ECF-supported program will depend on the authorities’ resolve to continue to implement bold institutional reforms, address capacity weaknesses, and tackle vulnerability to corruption. ### Staff appraisal — National Development Plan (NDP) and inclusion - The Gambia’s NDP provides a clear pathway to improving the living conditions of the population. - It identifies key strategic priorities, including investing in people and building a caring society and improvements in infrastructure and the business environment, to support private sector-led inclusive growth. - Further steps are needed to ensure better alignment of the NDP with the SDGs, promote its implementation and help exit fragility. - Improved targeting of social safety nets and increasing support for vulnerable households and unemployed youth would foster inclusion and reduce social tensions. - The authorities are encouraged to address the weaknesses in the implementation of the National Development Plan and strengthen programs in support of agriculture and youth empowerment. - There is also a need to improve the tracking of the social programs that were identified with the assistance of the World Bank as particularly important for protecting the vulnerable and draw lessons from their implementation. ### Staff appraisal — fiscal structural reforms - Steadfast implementation of the fiscal structural reform agenda is essential. - Reforms to strengthen the PFM system are ongoing, but further work is needed including to improve cash and Treasury management. - Increased transparency in budget preparation and execution, with the emphasis on containing the growth of spending by the subvented agencies, will be critical to garner broad support for reforms. - Measures to strengthen the GPPA and enhance value-for-money in public projects will enhance the efficiency of public investment. - The envisaged reforms to further strengthen tax administration will deliver substantial benefits in the medium term, if properly sequenced and implemented, consistent with the TADAT roadmap. ### Staff appraisal — monetary policy and FX operations - Monetary policy needs to leverage recent enhancements to the CBG operational framework. - The CBG should implement the recommendations of related AFRITAC West 2 TA and adjust the interest rate corridor, as needed, to avoid competition between its bills and Treasury bills while helping develop the interbank market. - In the current environment of ample liquidity and rapid credit growth, greater attention should be paid to the SDF rate, which effectively plays the role of a policy rate, with decisions to adjust the SDF contingent on the new inflation data. - The CBG policy guiding FX operations should be strengthened by spelling out the policy objectives, consistent with the exchange regime and monetary policy framework. ### Staff appraisal — financial sector soundness and inclusion - Strengthened vigilance is needed for a healthy financial intermediation and inclusion. - A strong response to the vulnerabilities identified by the IMF FSSR is crucial to ensure the soundness of the financial sector and improve the legal and regulatory framework for banking supervision. - The recent pick-up in NPLs underscores the importance of the measures proposed in the FSSR. - Staff welcomes the CBG’s early action to formulate a strategic plan to implement the FSSR recommendations and encourages the CBG to seek TA for its implementation. - Fostering financial inclusion, which is expected to yield large benefits to the population, especially in the areas where bank presence is weak, will need to be accompanied by stronger oversight of non-bank financial institutions through their apex body, the National Association of Cooperative Credit Unions, as well as by enhancing the monitoring of risks involved in the development of mobile banking. ### Staff appraisal — governance - Governance improvements will help sustain the optimism regarding The Gambia’s economic prospects. - Strengthening fiscal governance, improving the business environment, strengthening the rule of law (including contract enforcement and protection of creditor and investor rights), and expanding access to information will be key steps. *Source: 1gmbea2020001 - 31. Program performance will be assessed through semi-annual reviews, based on* ### 44. Staff supports the authorities’ request for a thirty-nine-month arrangement under the ### 1gmbea2020001 - 44. Staff supports the authorities’ request for a thirty-nine-month arrangement under the ### Program request and staff recommendation - Staff supports the authorities’ request for a thirty-nine-month arrangement under the ECF, with access equivalent to 56.3 percent of quota. ### Recent economic developments (highlights from 2013–19) - Real GDP growth: "Real GDP growth has picked up starting from 2017..." (Figure annotation). - T-bill yields and net domestic borrowing: "T-bill rates declined in 2019 as net domestic borrowing subsided." (Figure annotation). - Gross official reserves and exchange rates: "Import coverage of reserves continued to increase, and the confidence in the dalasi strengthened." (Figure annotation). - Inflation: "Reported inflation picked up in early 2019, mainly due to one-off factors." (Figure annotation). - Fiscal balance and public debt: "Primary balance (including and excluding budget support) and debt indicators improved." (Figure annotation). - Tourism and private credit: "...supported by in expansion in tourism and private credit." (Figure annotation). - Financial sector performance: "Private credit has picked up since 2016, and the performance of bank portfolios improved but NPLs increased in 2019 due to a localized asset deterioration." (Figure annotation). ### Medium-term outlook and projections (selected IMF projections) - Real GDP growth (Table 1 row as printed): GDP at constant prices 6.55.86.06.35.85.55.25.25.0 - GDP deflator: 5.25.66.46.35.54.84.54.44.8 - Consumer prices (average): 6.56.17.16.76.05.55.15.05.0 - Consumer prices (end of period): 6.45.97.76.25.85.25.05.05.0 - External current account balance (percent of GDP): - Excluding budget support -10.7-13.8-8.5-11.9-12.4-11.8-10.9-10.7-10.3 - Including budget support -9.7-10.3-5.3-8.7-9.9-9.6-9.0-9.1-8.8 - Gross official reserves (millions of US$): 157.0187.0225.0268.0313.4349.5382.4410.5450.1 - Reserves (months of next year's imports): 2.73.03.43.74.14.34.44.44.6 - Projection annotation: "Inflation is projected to decline toward the CBG's target of 5 percent." (Figure annotation). - Projection annotation: "Growth is expected to remain strong, supported by public and private investment." (Figure annotation). - Projection annotation: "...the public debt-to-GDP ratio is projected to decline steadily." (Figure annotation). - Projection annotation: "The large external current account deficits are expected to persist reflecting development driven imports." (Figure annotation). ### Fiscal outcomes and projections (selected figures from Tables 1–4) - Revenue and grants (Table 2, annual series headline): Revenue12,13517,87119,69424,47222,95125,17027,19829,40931,80134,923 - Domestic revenue series: Domestic revenue9,50211,41112,76013,63613,68215,63417,66319,90122,37824,982 - Grants: 2,6336,4606,93310,8369,2699,5369,5359,5089,4239,942 - Expenditures headline: Expenditures17,00820,92322,00628,38724,66527,13128,96930,89132,86335,578 - Net lending (+)/borrowing (–): -4,872-3,052-2,312-3,915-1,714-1,961-1,771-1,483-1,062-654 - Net incurrence of liabilities (total): 4,3873,0532,8663,8641,9681,9611,7711,4831,063655 - Domestic: 2,3791,658452-219-50000000 - Foreign: 2,0081,3952,4144,0832,0181,9611,7711,4831,063655 - Primary balance (Table 1 headline series): Primary balance-3.00.00.61.00.80.81.11.31.5 - Public debt (percent of GDP): Public debt86.681.882.576.871.767.563.559.355.0 - Domestic public debt39.237.236.632.929.526.624.222.120.1 - External public debt47.444.645.943.942.340.839.337.235.0 - External public debt (millions of US$)756.6774.5796.3836.0876.7915.6949.0967.7979.0 - Memorandum: Nominal GDP (billions of dalasi)78.6 87.4 88.7100.2111.9123.7136.0149.3164.3 - Government revenue (excluding grants) (Table 2 memo): 9,50210,87612,76013,63613,68215,63417,66319,90122,37824,982 - Interest (percent of government revenue) (Table 2): 26.124.322.319.918.115.314.913.212.6 ### Monetary sector (selected monetary aggregates from Tables 5–7) - Broad money levels (Table 5): Broad money33,74538,88142,87549,53355,209 - Broad money growth rates (Table 6): Broad money20.015.227.115.511.5 - Net foreign assets (levels, Table 5): Net foreign assets10,40713,14816,78420,72825,269 - (in millions of U.S. dollars)211267341394468 - Reserve money (levels, Table 5): Reserve money11,84912,96013,88815,75517,646 - Credit to the private sector (levels, Table 5): Claims on private sector5,6927,0377,7299,18510,320 - Money velocity and multipliers (Table 6): Money velocity (levels)2.32.22.12.02.0; Money multiplier (levels)2.83.03.13.13.1 - Net international reserves (millions of U.S. dollars) (Table 6 memorandum): 125.5150.7188.7220.3259.7 ### Key fiscal and policy implications signaled by the data - Fiscal consolidation and debt dynamics: - Primary balance moves from -3.0 to positive outcomes in projections: Primary balance-3.00.00.61.00.80.81.11.31.5 - Public debt-to-GDP is projected to decline: Public debt86.681.882.576.871.767.563.559.355.0 - External position: - Large external deficits persist: Excluding budget support -10.7-13.8-8.5-11.9-12.4-11.8-10.9-10.7-10.3 - Reserves and import coverage strengthen: Gross official reserves (millions of US$)157.0187.0225.0268.0313.4349.5382.4410.5450.1; months of imports2.73.03.43.74.14.34.44.44.6 - Inflation and monetary conditions: - Inflation is projected to decline toward the CBG's target of 5 percent (Figure annotation). - Broad money growth remains strong in levels but projected to moderate: Broad money20.015.227.115.511.5 *Sources: The Gambian authorities; and IMF staff estimates and projections.* ### 1. Current account ### 1. Current account ### A. Goods and services — levels (US$ millions) - Goods and services (net): -307.2; -348.0; -334.7; -399.4; -426.0; -442.4; -456.3; -482.1; -505.9 - Goods (net): -405.0; -454.1; -451.8; -524.4; -568.8; -601.8; -638.0; -680.0; -720.5 - Exports, f.o.b.: 115.0; 122.8; 144.0; 152.6; 164.7; 176.7; 195.3; 216.1; 237.9 - Imports, f.o.b.: -520.0; -576.9; -595.7; -677.0; -733.5; -778.5; -833.2; -896.1; -958.5 - Services (net): 97.8; 106.2; 117.1; 125.0; 142.8; 159.4; 181.7; 197.9; 214.6 - Services exports: 198.6; 215.3; 227.3; 251.6; 271.8; 293.2; 319.6; 346.6; 373.9 - Of which: Travel income: 153.8; 168.6; 181.3; 203.4; 219.6; 237.3; 256.5; 274.8; 294.3 - Services imports: -100.8; -109.1; -110.3; -126.5; -129.0; -133.8; -137.9; -148.7; -159.3 ### B. Income (net) — levels (US$ millions) - Income (net): -29.2; -30.1; -30.1; -31.0; -32.0; -32.3; -31.2; -32.2; -33.4 - Income credits: 2.3; 2.3; 2.3; 2.4; 2.5; 2.5; 2.4; 2.5; 2.6 - Income debits: -31.4; -32.4; -32.4; -33.4; -34.5; -34.9; -33.6; -34.8; -36.0 ### C. Current transfers — levels (US$ millions) - Current transfers: 178.1; 198.3; 270.5; 262.5; 251.7; 257.7; 266.9; 274.8; 290.6 - Official transfers: 15.0; 61.4; 55.8; 62.1; 52.4; 49.8; 45.6; 40.7; 43.2 - Remittances: 150.8; 124.3; 202.4; 188.1; 186.7; 195.1; 207.1; 219.5; 232.5 - Other transfers: 12.3; 12.6; 12.3; 12.3; 12.6; 12.9; 14.2; 14.6; 14.9 ### Current account balances — levels (US$ millions) - Current account (excl. budget support): -173.3; -241.2; -150.1; -230.1; -258.7; -266.7; -266.1; -280.2; -291.9 - Current account (incl. budget support): -158.3; -179.8; -94.3; -167.9; -206.3; -217.0; -220.5; -239.5; -248.7 ### Key percent-of-GDP indicators (projections) - Goods and services (net): -18.9; -19.9; -19.0; -20.7; -20.3; -19.5; -18.7; -18.4; -17.9 - Goods (net): -24.9; -25.9; -25.6; -27.2; -27.2; -26.5; -26.1; -25.9; -25.5 - Exports, f.o.b.: 7.1; 7.0; 8.2; 7.9; 7.9; 7.8; 8.0; 8.2; 8.4 - Imports, f.o.b.: -32.0; -33.0; -33.8; -35.2; -35.0; -34.3; -34.1; -34.1; -33.9 - Services (net): 6.0; 6.1; 6.6; 6.5; 6.8; 7.0; 7.4; 7.5; 7.6 - Services exports: 12.2; 12.3; 12.9; 13.1; 13.0; 12.9; 13.1; 13.2; 13.2 - Travel: 9.5; 9.6; 10.3; 10.6; 10.5; 10.5; 10.5; 10.5; 10.4 - Services imports: -6.2; -6.2; -6.3; -6.6; -6.2; -5.9; -5.7; -5.7; -5.6 - Income (net): -1.8; -1.7; -1.7; -1.6; -1.5; -1.4; -1.3; -1.2; -1.2 - Income credits: 0.1; 0.1; 0.1; 0.1; 0.1; 0.1; 0.1; 0.1; 0.1 - Income debits: -1.9; -1.9; -1.8; -1.7; -1.6; -1.5; -1.4; -1.3; -1.3 - Of which: Interest on government debt: 0.5; 0.5; 0.6; 0.5; 0.5; 0.5; 0.4; 0.4; 0.5 - Current transfers: 11.0; 11.3; 15.3; 13.6; 12.0; 11.4; 10.9; 10.5; 10.3 - Official transfers: 0.9; 3.5; 3.2; 3.2; 2.5; 2.2; 1.9; 1.6; 1.5 - Remittances: 9.3; 7.1; 11.5; 9.8; 8.9; 8.6; 8.5; 8.4; 8.2 - Current account (excl. budget support): -10.7; -13.8; -8.5; -11.9; -12.4; -11.8; -10.9; -10.7; -10.3 - Current account (incl. budget support): -9.7; -10.3; -5.3; -8.7; -9.9; -9.6; -9.0; -9.1; -8.8 *Sources: The Gambian authorities; and IMF staff estimates and projections.* ### Annex II. Lending into Arrears to Official Bilateral Creditors ### Annex II. Lending into Arrears to Official Bilateral Creditors ### Staff assessment and rationale - Staff assesses that the conditions are met for the Fund to provide financing to The Gambia in line with the policy on arrears to official bilateral creditors, notwithstanding its outstanding arrears to Venezuela. - Prompt financial support from the Fund is considered essential and the member is pursuing appropriate policies. - The Gambia is described as a long-standing fragile state, currently at high risk of debt distress caused by the heavy debt service payments on its external debt. - The ECF arrangement will support the authorities’ efforts to achieve debt sustainability, while catalyzing much needed international financial support. - The Fund-supported program is expected to anchor macroeconomic stability and play a pivotal role in addressing this long-standing issue, building on the improvements in the medium-term debt profile as a result of debt service deferrals. - The Gambia’s policies in the context of the ECF-supported program covering 2020–23 will contribute markedly to growth and poverty reduction, notably by facilitating the creation of the much-needed fiscal space. ### Authorities’ good faith efforts to reach agreement with the creditor - The authorities have been making good faith efforts to reach agreement with the creditor on a contribution consistent with the parameters of the Fund-supported program. - In terms of process, The Gambian authorities have relayed to staff that they had contacted the Venezuelan authorities bilaterally through letters and technical meetings (most recently in October 2019 in Banjul), offering to engage in substantive dialogue and start a collaborative process on resolving the outstanding arrears (which arose due to international sanctions). - Relevant information has been shared with them on a timely basis. - The Gambian authorities are committed to continue making their good faith efforts until all the remaining arrears are resolved. - The terms offered by the Gambian authorities to Venezuela are in line with the financing and debt objectives of the Fund-supported program and imply a contribution that is not disproportionate relative to those sought from other creditors under the official sector involvement. ### Effect on Fund’s ability to mobilize official financing packages - The decision to provide financing despite the arrears is not expected to have an undue negative effect on the Fund's ability to mobilize official financing packages in future cases. - In staff’s view, providing financing to The Gambia despite the arrears is not expected to have an undue negative effect on the Fund's ability to mobilize future financing packages, given strong support from the international community in the context of the Fund-supported program for The Gambia and The Gambian authorities’ efforts to resolve this in a timely manner. *Source: Annex II. Lending into Arrears to Official Bilateral Creditors* ### 6. Key risks that could impact TA implementation stem from: (i) unavailability or loss of key ### 6. Key risks that could impact TA implementation stem from: (i) unavailability or loss of key ### Key risks to technical assistance (TA) implementation - Unavailability or loss of key staff due to absences and turnover. - Inability to hire competent technical staff due to weaker public-sector compensation packages. - Lack of resources for IT system development. ### Mitigation measures and capacity-building priorities - Staff prioritize and carefully design TA programs tailored to the local audience’s needs. - Authorities need to ensure availability of key staff while simultaneously offering a more rigorous program of training for junior officers. - Authorities are following up with development partners on funding for systems development; lack of such funding could limit absorptive capacity and hinder TA implementation. - Recent efforts to improve funding for systems support are described as encouraging. ### Examples of systems development and external support - Work to improve the debt database with a new software, Meridian (supported by The Commonwealth Secretariat). - Implementation of a new Integrated Tax Management System (ITAS) using a Commercial Off-The Shelf (COTS) package (through World Bank support). ### Authorities’ views on the capacity development strategy - The authorities agree with the thrust of the capacity development strategy. - They consider that the strategy and objectives are appropriately formulated for the country and in line with the strategic priorities of the 2018–21 National Development Plan and its planned update. _Italicized source: Excerpt from the IMF document 1gmbea2020001 (section 6 and related text)._ ### 12. The SOE reform is advancing. Most notably, a draft SOE law was prepared to provide an ### 12. The SOE reform is advancing. Most notably, a draft SOE law was prepared to provide an ### State-Owned Enterprise (SOE) reform - Draft SOE law prepared to provide an overarching legal framework for the state enterprises, focusing on addressing executive interference and improving efficiency in service delivery. - Completion contingent on ratification of a new constitution, expected to include several changes regarding governance of state-owned enterprises. - Progress achieved in: - Reform of the telecom sector, critical for securing budget support from the World Bank. - Enhancing the financial management of NAWEC: appointment of a new Board, signing of the arrears clearance agreement to settle its trade credit obligations, and adoption of a performance contract. - MoFEA working with the National Audit Office on an action plan for seven fiscally most important SOEs to address recommendations of the Ernst & Young (E&Y) audit report, which has been approved by Cabinet. - E&Y recently conducted the audit of the remaining seven SOEs; this phase includes the GGC, characterized as of systemic importance to agriculture and representing a drag on fiscal resources and economic growth. ### Civil service reform - Progress was demanding with specific challenges: - Slow progress on reducing expenses of the Ministry of Foreign Affairs: termination of appointments of five embassy staff and delay of closure of two embassies to mid-2020. - Follow-up action plan for redeployment of embassy staff expected to be finalized in 2020. - MoFEA and the Personnel Management Office (PMO) working on financing arrangement for implementation of the first phase of the civil service reform strategy. - IMF TA-supported study on wages, salaries and pensions of public servants conducted. - Vehicle policy articulation delayed, but measures taken: - Ban on use of V8 SUVs by managing directors of parastatals. - Provision of vehicle expenses reduced by about 20 percent in the 2020 budget compared to the 2019 budget allocations. - Auction of more than 700 vehicles conducted, yielding 27 million dalasi in 2019; additional auctions scheduled in 2020. ### Implementation challenges of the SMP and procurement/governance issues - Banjul Rehabilitation Project (BRP): - Dollar-denominated financing arrangement signed to improve sanitation and traffic congestion in Banjul. - Procurement did not follow standard process due to emergency nature; IMF staff consultation recognized inconsistency with zero ceiling on new non-concessional external debt and concerns over single-sourcing and value for money. - Financing arrangement revisited to eliminate debt creation; payments to be made in dalasi in step with project implementation, drawing on allocations in annual budgets. - Implementation being monitored by a consulting company (STUDI International) appointed based on international reputation to ensure value-for-money. - Follow-up reforms planned: - Improve project appraisal and selection. - Tighten legal framework for public procurement. - Increase capacity of The Gambia Public Procurement Authority (GPPA). - Trade credit facility monitoring: - Early 2019 required heightened attention to clear arrears of US$6.9 million accrued by the GGC and to avoid recurrence. - Pressures reduced relative to 2018 but remained a challenge. ### The National Development Plan (NDP) and progress - NDP adopted in 2017 as reference framework for 2018–21; overarching goal to “de liver good governance and accountability, social cohesion, national reconciliation, and a revitalized and transformed economy for the wellbeing of all Gambians.” - Underpinned by eight strategic priorities and seven critical enablers. - Strategic priorities listed verbatim in source (abbreviated here to preserve structure): (i) restoring good governance..., (ii) stabilizing our economy..., (iii) modernizing our agriculture and fisheries..., (iv) investing in our people..., (v) building our infrastructure and restoring energy services..., (vi) promoting an inclusive and culture-centered tourism..., (vii) reaping the demographic dividend..., and (viii) making the private sector the engine of growth... - Annual Progress Report (APR) initiated in 2019 found: - At end-2018, out of 61 outcomes of the NDP: 49 percent registered some progress (albeit constrained), 48 percent were on track, 3 percent showed limited or no progress. - Strategic priority progress: tourism (100 percent on track), governance (50 percent), private sector (60 percent), infrastructure and energy supply (60 percent). - Average progress: human capital (45 percent), macro-economy (50 percent). - Slowest progress: agriculture and fisheries (33 percent), youth empowerment (25 percent). - Donor conference in Brussels in 2018: around US$1.5 billion pledged in grants for budget support, and grants and loans for public investment and social projects. - In 2018, about US$180 million (nearly 12 percent of GDP) disbursed for NDP implementation. - Government refining strategic priorities to align with the SDGs; preparing a new strategic vision and, in 2021, a new 5-year successor plan to the current NDP. ### Macroeconomic framework and outlook - Growth and inflation projections: - Economic growth projected to reach 6.3 percent in 2020 and average about 5½ percent per year in 2020–25. - Inflation projected to moderate from an average of 7.1 percent in 2019 to the CBG’s medium-term target of 5 percent by 2023 or earlier. - Growth drivers: strong tourist arrivals, expansion in private sector activity, foreign exchange inflows, prudent economic policies, increased foreign-financed public investment, improvements in water and electricity provision, strong growth in credit to private sector enabled by reduction in government’s recourse to domestic borrowing. - Infrastructure support: Organization of Islamic Cooperation (OIC) summit, now slated for 2022, expected to help address infrastructure gaps; recently inaugurated state of the art conference center funded by the People’s Republic of China could help The Gambia become an international conference hub. - Reserves and external position: - Gross official reserves projected to reach 4½ months of next year’s imports by 2023, based on continued budget support and strong foreign exchange inflows from private sources. - Reserve cover intended to meet external debt service needs expected to rise in 4–5 years as debt service deferrals end, and to reduce vulnerability to exogenous shocks. - Risks to outlook: - External: slowdown of global demand (especially Europe) impacting tourism and remittances; increases in international oil prices potentially reigniting inflation. - Climate: exposure to climate change risks, erratic rain patterns affecting agriculture. - Domestic: increased political volatility and implementation challenges of difficult reforms affecting fiscal discipline. - Upside risks: synergies between public investment and private sector activity from strategic projects in energy and infrastructure, higher-than-anticipated development partners’ support, and a confirmed discovery of economically viable oil reserves. ### Fiscal policy and medium-term fiscal profile - Fiscal consolidation aim: improve the primary balance by 1-1½ percent of GDP between 2019 and 2025 to accommodate rising amortization of external debt starting 2025. - Revenue targets: - Gradual increase in domestic revenue to around 15.2 percent of GDP by end-2025. - Bulk of expected increase from taxes on income and corporate profits, and domestic taxes on goods and services. - MoFEA to create a Tax Advisory Committee in 2020 composed of professionals in tax, economic policy, and finance. - Expenditure management: - Improved expenditure prioritization and public financial management to contain growth in spending on goods and services and transfers to subvented agencies. - Compensation of employees expected to grow in line with GDP. - Plan to reduce subsidies to SOEs as they strengthen corporate governance and improve financial balance sheets. - Debt service deferrals: - Expected to reduce external amortization by over 1 percent of GDP per year over the medium term, creating space for development and social spending. - Other fiscal priorities: - Build buffers against fiscal shocks. - Increase reliance on domestically financed capital expenditure to preserve debt sustainability. - MTEFF and budget process: - Revisions will inform extension of the MTEFF to 2023; draft MTEFF to be submitted to Cabinet by July 2020. - Coordination with NDP progress report and MTDS to ensure alignment with government priorities and SDGs. ### 2020 Budget specifics - Revenue side: - Revenue objective: increase tax revenue by 0.3 percent of GDP in the 2020 budget. - Tax policy measures expected to yield about 0.2 percent of GDP, including: (a) an increase in tobacco-related tax and excises; (b) an increase in customs processing fees from 1–1.5 percent and its extension to formerly exempt imports. - Increase of the VAT threshold from 1 to 2 million dalasi expected to yield additional revenue over the medium term. - Administrative measures: GRA to strengthen audit capacity through hiring, staff training, and coverage; perform joint staff post-clearance audits; intensify data matching; implement GRA’s Fourth Corporate Strategic Plan 2020–24. - Grants: - Expecting budget grant support equivalent of about 3 percent of GDP from the World Bank, the European Union (EU), and the African Development Bank (AfDB). - At least twice this amount in grant for project support from multiple sources for public investment program. - Spending side: - 2020 budget registered a 25 percent growth in subsidies and transfers to cater for additional teachers and medical personnel. - Review by end September 2020 of aims, objectives and funding models for subvented agencies to rationalize those with expired mandates or overlapping roles. - Increased subvention earmarked for the GRA in 2020 with resource availability linked to monthly collection performance. - New social initiatives to be financed in 2020: (a) a pension fund and National Health Insurance Scheme initially covering civil servants; (b) Program for Accelerated Community Development (PACD) with UNDP support; (c) the BRP; (d) a social safety net project for cash transfers to the most vulnerable. - Domestic financing: - Budget provision for domestic amortization in the amount of 2.8 billion dalasi, including a rollover of three-year maturity bonds totaling 2.2 billion dalasi maturing in 2020 and 0.3 billion reflecting settlement of arrears owed to suppliers and vendors by various MDAs. - Updated domestic debt management strategy being prepared. - 0.5 billion dalasi to be drawn from savings in the petroleum account in 2019 to finance the PACD and provide seed capital for the pension fund and the health insurance scheme. ### Public debt and sustainability - Public debt developments: - Public debt decreased from 87 percent of GDP at end-2018 to 81 percent of GDP at end-2019 and is projected to decrease to just below 76 percent of GDP by end-2020. - Domestic public debt carried an average interest of about 7.5 percent and constituted about 45 percent of overall public debt at end-2019. - Debt service and fiscal space: - Reduction in debt service spending by about 2 percent of GDP between 2018 and 2020 due to drop in domestic interest rates and deferrals of external debt service (mostly amortization), increasing resources for development and social spending. - Acknowledgement that debt service deferrals do not reduce the debt stock; fiscal position needs progressive strengthening to accommodate steeper amortization after deferrals end. - Vulnerabilities and targets: - Debt vulnerabilities remain high due to fragile economic condition and exposure to shocks. - Aim to bring public debt-to-GDP ratio below 60 percent by 2024 through prudent external debt contracting policy and fiscal policy aimed at stabilizing domestic public debt in nominal terms. - Achievement requires strong fiscal discipline and sustained financial assistance from development partners in grants for budget support and public investment program. *Source: 1gmbea2020001 - 12. The SOE reform is advancing. Most notably, a draft SOE law was prepared to provide an — International Monetary Fund* ### 27. To reach our debt reduction targets we will favor grant financing for public ### 27. To reach our debt reduction targets we will favor grant financing for public ### Debt policy and borrowing limits - Favor grant financing for public investment projects and refrain from contracting non-concessional debt. - Commit not to contract loans with a grant element below 35 percent. - Limit concessional external public debt contracted or guaranteed during 2020–23 to US$190 million, of which no more than US$60 million in 2020 (PC, Table 2). - Frontloading of the borrowing plan reflects public investment needs associated with the preparation of the OIC summit. - Will consult with IMF staff in writing before contracting or guaranteeing any external loans or undertaking contingent liability arrangements such as Public-Private Partnerships (PPPs) and Power Purchase Agreements (PPAs). ### Debt management strategy, recording, and reporting - Update medium-term debt management strategy (MTDS) with focus on managing rollover risk of the domestic debt portfolio. - Draft and publish a new MTDS (SB Sep-2020) envisaging increased use of longer-maturity instruments to lengthen domestic debt maturity and manage rollover risk. - Publish annual borrowing plan for each year of the program. - Use any additional budget support and excess revenue to reduce domestic debt and arrears in the medium term. - Migrate to Meridian debt management software with technical support from the Commonwealth Secretariat. - Use Meridian to produce the annual report on public debt at end-2019 (by end-March 2020) and subsequent quarterly bulletins. - Continue to produce and publish on the MoFEA website quarterly reports on debt contracted, debt disbursed, debt outstanding, and debt service paid and projected. - Strengthen recording and reporting of project grants disbursements to track public investment and inform choices between grant- and debt-financed projects. ### Project appraisal, selection, and public investment governance - Expand mandate of The Gambia Strategic Review Board (GSRB) to appraise all public projects (domestic and foreign-financed), including all proposals for grant-financed projects and projects involving direct government borrowing, government-guaranteed debt, and PPPs, prior to Cabinet approval. - Refine project selection criteria drawing on proposals in Annex III of the PIMA report of July 2019 and PIMA follow-up discussions. - GSRB to use selection criteria in recommendations for Cabinet approval (SB June 2020). - Ensure projects are consistent with debt sustainability and the borrowing plan agreed with the IMF. - As part of the benchmark, GSRB will apply selection criteria to a representative sample of ten existing domestic and foreign-financed projects ahead of the preparation of the 2021 budget. - MoFEA to consolidate project data and create a comprehensive database of public investment projects to inform appraisal and selection. ### Control of trade credit facilities and SOE contingent liabilities - Strengthen control over trade credit facilities contracted with ITFC on behalf of SOEs to avoid undermining debt service deferral relief. - Include arrears to ITFC as part of the continuous PC on non-accumulation of new external arrears. - Agreement with ITFC signed in 2019 was US$50 million, lower than 2018 agreement of US$70 million. - Avoid arrears to ITFC by closely monitoring SOEs’ financial situation and timely provision of subsidies. - Expect continued improvement in NAWEC servicing of ITFC obligations in 2019; continue to improve GGC management and explore alternative strategies for the groundnut sector. ### Strengthening SOE financial oversight and governance - Key reform actions: - Clearly define commercial and socio-economic objective of each SOE; - Establish effective governance and leadership structure and limit government interference; - Establish effective accounting functions and clear accounting policies; - Ensure SOEs have complete and exclusive control of their financial resources and bank accounts; - Monitor large procurement contracts and ensure compliance with GPPA regulations; - Sign and enforce Performance Contracts and encourage open comments on SOEs’ performance. - Performance contract between NAWEC and the Government was signed in November 2019. - As of end-January 2020, cross-arrear settlement agreements have been signed among seven SOEs; negotiations ongoing for remaining SOEs. - MoFEA to monitor these agreements on a semi-annual basis. ### Financial support to SOEs and utility payments - 2020 budget includes subsidies: - 350 million dalasi for GGC; - 300 million dalasi for NAWEC. - Establish a system to prioritize payment of utilities by all MDAs from monthly cash allocations. - Encourage installation of prepaid meters by NAWEC to all other public entities. - Timely government utility bill payments will be integral to SOE and subvented agency performance assessments. ### Monetary policy and Central Bank governance - Strengthen balance sheet and governance of the Central Bank of The Gambia (CBG). - Commit to meeting IMF Safeguards Assessment Policy requirements and implementing assessment update recommendations. - CBG completed audit of 2018 financial statements using a joint international and domestic audit firm; results published on CBG website. - Continue joint audit arrangement for 2019 financial statements. - Pursuant to section 30 of 2018 CBG Act, authorized share capital of the Central Bank shall be one billion dalasi, to be fully subscribed and paid-up exclusively by the Government; prior authorized capital was 100 million dalasi. - To initiate increase of share capital, 180 million dalasi was debited from the Treasury in 2019. - Observe a zero ceiling on CBG credit to government on non-market terms as an indicative target under the ECF (Table 2). - CBG reviewing governance structure including financial stability and macroprudential frameworks, informed by IMF’s 2019 Financial Sector Stability Review (FSSR) recommendations. ### Monetary operations, liquidity management, and reserves - Maintain interest rate-based monetary policy framework and use short-term CBG bills and quarterly MPC meetings. - Pursue narrowing of the interest rate corridor depending on liquidity conditions and inflation dynamics vis-à-vis CBG’s inflation target of 5 percent. - Use prudential measures, including shifts in required reserves ratio and its composition as necessary. - Enhance liquidity forecasting and management capabilities with AFRITAC West II technical support; develop templates and identify stakeholders for inputs: - Treasury (expenditure forecasts); - GRA (revenue forecasts); - Economic and Research Department of the CBG (projections of currency in circulation); - Financial Supervision Department of the CBG (projections of banks’ required reserves and cash holdings); - Foreign Department of the CBG (foreign exchange interventions). - Set a ceiling on the stock of net domestic assets of the CBG as a quantitative performance criterion under the program (Table 2). - Flexible exchange rate regime maintained; allow exchange rate to adjust to market fundamentals and limit interventions to market demand and liquidity management. - Finance Department of the CBG prepared monthly external cashflow projections for 2020 to inform FX intervention and liquidity forecasting. - FX intervention policy premised on continued strong FX inflows from tourism and remittances, and inflows of grants and project loans. - Target accumulation of about US$43 million in gross official reserves to bring gross official reserves to US$268 million (equivalent to 3.8 months of next year’s imports) and net useable component to US$220 million (Tables 2). ### Financial supervision and inclusion - Transition to risk-based supervision with IMF TA to focus on highly risk-prone areas. - CBG to develop and publish a strategic plan addressing key FSSR recommendations (SB for June 2020), including: - Legal and regulatory framework for banking supervision; - Crisis preparedness and management mechanisms, including a deposit insurance scheme; - Supervision of non-bank financial institutions, including credit unions through the National Association of Cooperative Credit Unions. - Champion formulation and implementation of the National Financial Inclusion Strategy (NFIS) based on three pillars: - Financial Innovation; - Consumer Protection and Empowerment; - Financial Education and Literacy. - CBG joined the Alliance for Financial Inclusion; technical assistance from UNCDF and the World Bank. - Focus on mobile and agency banking and fintech to fast-track inclusion. - Mobile penetration: about 93 percent of households have access to mobile phone; only 2 percent of adults are registered mobile money users (The FinScope Gambia 2019). - Key challenges: regulatory inefficiencies, lack of interoperability, lack of consumer awareness and confidence, and high cost of services. - Need to enhance oversight of mobile money providers to prevent build-up of risks. ### Domestic revenue mobilization and tax administration - Reforms at GRA with TADAT roadmap and Fund TA yielding results: - Building tax audit capacity with AfDB support (procurement of IDEA software) and AFRITAC West II telecom audit training increased revenues through self-correcting measures. - Improved data matching increased revenue contribution of existing taxpayers and registered new taxpayers. - Risk-based post import clearances audit indicates potential revenue gains. - December 2018 IMF TA mission on petroleum taxation; follow-up mission planned for 2020. - GRA actions based on TADAT recommendations: - Clean tax registry in greater Banjul area (over 90 percent of domestic tax collection); completed for Large Taxpayers Office, Banjul, Kanifing, Brusubi, Tallingding, Wellingara; to be completed by end-June for remaining offices in greater Banjul (Serekunda and Brikama) (SB for June 2020) before proceeding to provincial offices. - Completion of rehabilitation of GAMTAXNET with core modules ready by end-March 2020 to enable cleansing of taxpayer ledger. - Address tax exemptions amounting to about 3 percent of GDP in 2019; MoFEA and GRA to submit new tax exemption policy to cabinet by end-September 2019 (SB September 2020). - Explore tax-inclusive budgeting for projects in agreement with donor community; findings from World Bank tax incidence analysis to inform initiative. - Reactivate tax exemption committee and conduct regular on-site verification of tax-exempt projects to limit fraud. - Modernization and technology initiatives: - World Bank support under Fiscal Management Development project to replace GAMTAXNET over the medium term with an automated system for filing, payment, registration, tax arrears management, and other processes following Business Process Reengineering, and train audit staff. - AfDB and UNCTAD support to migrate ASYCUDA++ to ASYCUDA World to improve customs valuation transparency and reduce clearance time. - Seeking support for Electronic Cargo Tracking System (ECTS) and Road Cargo Tracking System (RCTS) for transit trade to reduce port congestion, boost reexport trade, and ensure smooth transit consistent with ECOWAS protocol. *THE GAMBIA INTERNATIONAL MONETARY FUND* ### 42. We will strengthen tax and non-tax revenue collection and ensure their timely ### 1gmbea2020001 - 42. We will strengthen tax and non-tax revenue collection and ensure their timely ### Revenue mobilization and government receipts - All government services and collections of revenue will take place through commercial banks or appropriate payment platforms once the TSA is fully effective. - Government payment platform discussions initiated to enable electronic government revenue collections through online, mobile payments or direct bank wires. - Signed agreements to clear SOEs’ tax arrears and ensure SOEs regularly fulfill their tax obligations. - Reinforce control over SOEs and government participation in private companies to optimize payment of dividends. - Sale of President Jammeh’s assets and recovery of stolen assets identified in the White Paper of the Janneh Commission cited as an important source of revenue. - About 708 million dalasi has been recovered in 2018–19 and 360 million dalasi revered in the first month of 2020; part to be used to compensate victims of human right abuse in line with the TRRC recommendations. - Reinforce collection of broadband fees (including the international gateway fee) with 30 percent of receipts to be allocated to the youth and sport development fund and the remainder servicing the debt accrued in the broadband construction. ### Public Financial Management (PFM) reforms and cash management - PMO to step up implementation of the 2018–27 civil service reform strategy; introduce an Electronic Records Management Strategy and a human resource management module on IFMIS; introduce new pension act and a pension directorate under PMO in 2020 (informed by IMF TA on wages and pensions). - Cash Management Committee (CMC) meeting monthly to determine Government’s cash allocation to MDAs; supported by Liquidity Management Committee (LMC) and Cash Management Unit (CMU) under AGD. - Developed monthly cashflow plan consistent with the 2020 budget (SB for March 2020); plan to be extended to include annual procurement plans for the 2021 budget. - Prepared government securities issuance calendar for rollovers and new financing; will announce quarterly updated weekly issuance calendar. - Continue to prepare and submit to the IMF monthly minutes/reports of CMC meetings based on TA template; minutes coverage to be expanded to include: - (i) weekly securities issuance calendar updates comparing actual with projections; - (ii) outcomes of implementation of the cashflow plan in the previous month; - (iii) updates of the cashflow plan (including revenue and expenditure and financing flows); - (iv) attainment of quarterly net domestic borrowing targets. - AGD to finalize the 2019 account for submission to NAO by end-March 2020 (i.e., within the first quarter of the year, as required by the 2014 Public Finance Act). - Engage National Assembly for prompt review of 2016 and 2017 audited accounts; work with NAO to ensure 2018 accounts audited by end-June. - Publish on website an annual statement on MDA’s compliance with internal audit recommendations (SB for end-December 2020). - Review the Public Finance Act (and supporting documents) starting in 2020; conduct a PEFA with development partners to set basis for new PFM reform strategy. ### Expenditure control, subvented agencies, and procurement - Streamline subvented agencies, harmonize agencies’ pay scale with government, and consider realized end-year savings when deciding subsidies allocations. - Conduct and submit to cabinet by end-September 2020 a thorough assessment of all subvented agencies (SB for September 2020) including review of: - (i) social function; - (ii) staffing levels and conditions of employment; - (iii) financial situation for 2017–19 (including revenue, sources of income, expenditures, account payables, account receivables, and balances of bank accounts). - Revised GPPA Act submitted to Cabinet (prior action) to clarify and tighten emergency procedures; radically reduce use of single-sourcing and eliminate it for large-scale investment projects; preclude recourse to executive waivers to circumvent standard procurement rules. - Strengthen technical capacity of GPPA with development partner support. - Introduce Electronic Government Procurement (E-GP) system in all MDAs and SOEs; operationalize Commodity Price Reference Index to foster transparency and competitiveness and facilitate detection of irregularities and corruption. ### Governance, AML/CFT, audit function, and trafficking in persons (TIP) - Continue progress in transitional justice; human rights commission established; asset recovery efforts underway per Janneh Commission recommendations. - Draft constitution released by CRC includes measures to strengthen legislative oversight, rebalance executive powers, ensure independence of central bank, create and empower anti-corruption commission, and make mandatory asset declarations for senior and elected officials. - Anti-corruption commission bill submitted to National Assembly in December 2019 along with other bills (access to information, sexual offences, women’s (amendment of discrimination laws), mutual legal assistance in criminal cases). - Strengthening of Financial Intelligence Unit (FIU) to implement recommendations from 2019 GIABA workshops; CBG and FIU conducted on-site examinations of nine commercial banks in 2019 to assess AML/CFT frameworks; program to continue covering all financial institutions in 2020 and to conduct GIABA assessment. - Strengthen audit function in all MDAs, SOEs, and public entities; SOE audit capacity to build on recommendations of special audits by E&Y at MoFEA’s request; IMF technical support to train SOE management in IFRS. - Zero-tolerance policy to TIP; NAATIP actions include: - (i) assigning more investigators to fast track investigations; - (ii) creating NAATIP focal points at major border entry and exit points; - (iii) strengthening documentation of TIP cases to support prosecutions; - (iv) improving safety at Bakoteh shelter; - (v) setting up government hotline to facilitate TIP reporting. - Resources needed to strengthen investigative capabilities of NAATIP, victim protection, cross-border cooperation, illicit financing investigations, and extradition. ### Business climate and private sector measures - Aim to improve World Bank Ease of Doing Business ranking (dropped from 145 in 2016 to 155 in 2019). - Set up Business Incubation Center under Ministry of Trade and Regional Integration, GIEPA, and Chamber of Commerce. - Improvements to legal framework for private sector: preparation of a PPP Law to be sent to National Assembly in 2020; consultant firm recruited to identify strategic PPP partner for the Gambia Port Authority with AfDB Legal Facility support. - Port congestion since late 2019 delaying docking of vessels by up to 6 days, leading to additional costs; shipping companies charging about US$300 additional fees per container coming to The Gambia. - Introduce cargo tracking systems and road cargo tracking to improve efficiency and boost re-exports. - Strengthen energy supply and public service delivery: - Launching of the 20 MW Brikama power plant in 2020; extension of national grid and connection to regional grids. - Liberalization of international voice gateway; licenses granted to private telecom operators. - Work to attract private partners for wholesale broadband network (GNBN), GAMTEL and GAMCEL. - Ongoing renovation of Banjul airport. - Modernize budget execution, procurement and tax payment systems via upgrades to IFMIS, GAMTAXNET, and ASYCUDA. - Implement regional and continental trade initiatives; deeper regional integration and ratification of AfCFTA; work with UNDESA to support MSMEs to harness AfCFTA benefits. - With development partners, carry out assessment of economic potential of Senegambia bridge and role of special economic zones. - Facilitation of mining: align mining legal framework to ECOWAS Model Mining and Mineral Development Act (EMMDA) with ECOWAS support. ### Social spending, poverty reduction, and social programs - Poverty-reducing spending increased from 4 billion dalasi in 2018 to 5.3 billion dalasi in 2019 and planned to increase to 5.6 billion dalasi in 2020; spending subject to a floor as an indicative target under the program (Table 2). - Other poverty-reducing outlays include subsidies to NAWEC, crop financing and fertilizer subsidy to GGC. - 2020 budget incorporates social programs financed with savings from debt service deferrals and petroleum fund savings: - PACD to be implemented by UNDP to accelerate rural infrastructure development; - Setup of a universal health insurance scheme; - A pension fund for civil servants. - Collaborate with Office of the Vice-President to improve targeting and tracking of pro-poor spending, including beneficiaries of the World Bank Social Safety Net Project. - Women and youth priorities: - Established Ministry of Women’s Affairs, Children and Social Welfare. - Women Entrepreneurship Fund established with EU support. - Progressive incorporation of gender budgeting in annual budgets with IMF TA. - Support youth entrepreneurship and skills development; reintegration of returnees with IOM and EU support. ### Climate change, renewable energy, and environmental measures - Climate change treated as macro-critical priority: noted decreased precipitation over past 50 years and increased frequency of droughts and floods; low topography and dependence on rain-fed agriculture increase vulnerability. - Banned use of plastic bags; subscribed to limit temperature increases below 1.5 degrees Celsius by the end of the 21st Century. - Build on Renewable Energy Law; increase budgetary funding for renewable infrastructure, and research and development. - Donor support needed to strengthen renewable energy production beyond projects expected in 2021: - Opening of a solar photovoltaic plant with capacity of 20 MW with 10 MW storage capacity (being built with World Bank support). - EU and EIB support to equip 1100 schools, hospitals, and health centers with solar panels. - Donor support required to restore 10,000 hectares of forests, mangroves, and the savanna belt. ### Data quality, dissemination, and program monitoring - Strengthen and expand role of program monitoring committee (GRA, AGD, key directorates in MoFEA, CBG, GBoS); committee to meet in the last week of each month to: - (i) reconcile SGO of the previous month with its source data and CBG data on NDB to avoid discrepancies; - (ii) ensure timely reporting of data for program monitoring consistent with timelines in Table 2 of the attached TMU. - National accounts and price data: - Published GDP expenditure estimates for 2004–18 (first time) with AFRITAC West II TA; confirmed close comparability with GDP by production estimates. - GBoS to secure funding to rebased national accounts with 2018 as new base year and support an economic census to produce quarterly GDP data. - CPI expenditure weights and item basket updated from 2003/04 to 2015/16 with IMF STA support; new index to be spliced on 2019 data so full effect reflected in 2020 inflation data. - Fiscal and debt statistics: - Aid Coordination and Directorate of Loan and Debt Management (DLDM) to expand information in debt bulletin and follow-up regularly with donors for accurate and timely disbursement and debt service data. - Continue to audit budget execution of all government spending agencies annually (by mid-year) including taking stock of arrears to suppliers. - AGD will prepare and communicate monthly to IMF the stock of floats to help reconcile cash and budgetary operations. - Monetary statistics and financial soundness indicators: - IMF 2019 FSSR identified gaps in quality and management of financial sector data and key financial soundness indicators. - CBG to work with subsequent TA programs, including AFRITAC West II, to address shortcomings and strengthen financial sector risk monitoring and supervision. *Source: Excerpt from the IMF document 1gmbea2020001 (section 42 onward).* ### 51. The government will take all measures needed to meet quantitative targets and ### 1gmbea2020001 - 51. The government will take all measures needed to meet quantitative targets and ### Program reviews and monitoring - The program will be subject to semiannual reviews and performance criteria, indicative targets and structural benchmarks as set out in Tables 2 and 4 and defined in the attached Technical Memorandum of Understanding (TMU). - The first program review will be based on end-June 2020 targets and benchmarks and is expected to be completed on or after September 15, 2020. - The second review will be based on end-December 2020 targets and is expected to be completed on or after March 15, 2021. ### Key quantitative targets and indicative figures (selected from Tables 1 and 2) - Net domestic borrowing of the central government (cumulative flows from the beginning of the calendar year, GMD millions): - 2019 actuals and program status include values such as 1,063 (Dec. 2019, Program/Actual Status entries). - 2020 proposed performance criteria (ceilings): March 1,063; June 1,650; Sept. 550; Dec. 750; (another column) 500. - Stock of net domestic assets of the central bank (GMD millions, ceilings): - 2019 and program entries include values such as 5,696 (Dec. 2019). - 2020 proposed performance criteria: March 5,696; June 6,843; Sept. 5,593; Dec. 5,615; (another column) 5,672. - Stock of net usable international reserves of the central bank (floor, US$ millions): - 2019 figures include 189 (Dec. 2019). - 2020 proposed floors (US$ million): March 189; June 170; Sept. 195; Dec. 200; (another column) 220. - Poverty-reducing expenditure (floor, cumulative flows, GMD millions): - 2019: program/actual figures include 5,267 and 3,678 (status Not Met in one entry). - 2020 proposed floors: March 5,267; June 1,300; Sept. 2,700; Dec. 4,000; (another column) 5,600. - Total domestic tax revenue (floor, GMD millions, Table 2): - 2020 proposed indicative targets (cumulative): March 9,986; June 2,500; Sept. 5,500; Dec. 8,250; (annual) 11,000. - Budget support (memorandum item, cumulative flows): - 2019 entries include GMD values such as 3,038 and 2,788. - Program forecasts of external budget support grants in 2020 (Text Table 1, cumulative flow in millions of US dollars): March 0.0; June 40.0; September 46.9; December 62.1. - Base Money (GMD millions) and Nominal Exchange Rate (GMD/US$) examples: - Base Money entries include 13,888 (Dec. 2019) and program projections such as 15,755. - Nominal Exchange Rate: 51.10 (end-December 2019 TMU rate used for program monitoring and in Table 2 consistent across quarters). ### Structural benchmarks and prior actions (selected) - Prior actions (met prior to IMF Board discussion of program request): - Appoint an international audit firm to conduct jointly with a local firm an audit of the 2018 financial statements of the CBG. — Met. - Sign letters of engagement with financial and legal advisors to assist in creditor discussions on debt relief. — Met. - Establish end-December 2017 external debt data reconciled with external creditors, indicating exceptions. — Met. - Selected 2019 structural benchmarks (Table 3) with timing and status: - Verify and update all large taxpayer data on the tax registry; End-June 2019. — Met. - Institute monthly cash management committee meetings and report to IMF staff; End-April 2019 and monthly thereafter. — Met. - Publish the audited 2018 financial statements of the CBG; End-September 2019. — Not met. Implemented in November 2019. - Reconcile end-December 2018 debt data with external creditors; End-June 2019. — Met. 97 percent of external debt stock reconciled. Pending: Taiwan Province of China and Libya. - Proposed 2020 structural benchmarks (Table 4) with timing: - Cabinet to approve and submit the draft 2020 budget consistent with program objectives. — Prior to the IMF Board discussion of program request. — Met. - Submit to Cabinet a revised draft of The Gambia Public Procurement Authority Act, restricting the use of executive waivers. — Prior to the IMF Board discussion of program request. — Met. - GRA to complete tax registry clean-up at tax offices in the greater Banjul area (collecting over 90 percent of tax revenue). — End-June 2020. - Develop a monthly cashflow plan for the whole year, consistent with the 2020 Budget. — End-March 2020. - Update the MTDS and publish a new domestic debt management strategy document. — End-September 2020. - Develop and publish a strategic plan addressing the key recommendations of the 2019 Financial Sector Stability Review. — End-June 2020. - Publish an annual statement on MDAs’ compliance with internal audit recommendations. — End-December 2020. ### Technical Memorandum of Understanding — Definitions and adjusters (selected) - Net Domestic Borrowing (NDB) of the Central Government — definition highlights: - Change in net claims on the Central Government by the domestic monetary sector plus change in the discounted value of domestic government securities held by the non-monetary sector. - Covers change in any other net claims on the Central Government by the domestic non-monetary sector and change in government arrears on domestic debt service obligations. - Exclusions in computing NDB: (i) on-lending of the RCF to the budget, (ii) changes in the balances of the project accounts listed in Table 1, and (iii) the face value of government securities issued to increase the CBG’s capital to the value mandated in the 2018 CBG Act. - NDB adjuster: - NDB targets (ceilings) will be adjusted downward/upward by the excess/shortfall of the dalasi equivalent of total budget support grants and loans received in that period relative to program forecasts. - The upward adjustment to compensate for shortfall in budget support disbursements may not exceed GMD 1.5 billion at end-June 2020 and GMD 1.0 billion at end-September and end-December 2020. - The downward adjustment will not apply to budget support grants and loans provided to The Gambia for spending needs arising from the COVID-19 emergency to the extent the latter raise the total amount above program forecasts. - Program forecasts of external budget support grants in 2020 (Text Table 1, cumulative flow in millions of US dollars): March 0.0; June 40.0; September 46.9; December 62.1. - Net Domestic Assets (NDA) of the Central Bank — definition and conversion: - NDA defined as reserve money minus the net foreign assets of the CBG; reserve money = currency in circulation + deposits of commercial banks at the CBG. - For program monitoring, foreign assets and liabilities will be converted at the prevailing end-of-period market exchange rates at end-December 2019: 51.10 GMD/USD, 1.12 USD/EUR, 1.31 USD/GBP, 0.97 CHF/USD, 1.38 USD/SDR, 109.12 JPY/USD. - Net domestic assets of the central bank will be transmitted as part of the balance sheet of the CBG on a monthly basis within four weeks of the end of each month; a current-rate basis balance sheet will also be submitted for analytical purposes. - Net Usable International Reserves (NIR) — definition and adjusters: - NIR defined as usable reserve assets minus reserve liabilities. Usable reserve assets include holdings of SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country’s reserve position at the IMF. Excluded are pledged/encumbered assets, claims on residents, derivatives vis-à-vis domestic currency, precious metals, assets in nonconvertible currencies, and illiquid assets. - For program monitoring, foreign assets and liabilities will be converted at the exchange rates listed for NDA (see above). - NIR quarterly 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 program forecasts. - The downward adjustment to the NIR targets will be capped at US$30 million at end-June 2020 and at US$20 million at end-September and end-December 2020. - The upward adjustment will not apply to budget support grants and loans provided for COVID-19 emergency spending to the extent they raise total amounts above program forecasts. - 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. *Source: 1gmbea2020001 - 51. The government will take all measures needed to meet quantitative targets and (Technical Memorandum of Understanding and Tables as provided).* ### 11. Supporting material: A detailed reserve statement with end-month data on net usable ### 11. Supporting material: A detailed reserve statement with end-month data on net usable international reserves of the CBG ### Monthly reporting of reserves and reserve-related data - A detailed reserve statement with end-month data on net usable international reserves of the CBG will be transmitted within seven days of the end of each month. - The CBG will forward within four weeks of the end of each month, data on transactions in official reserves. - A detailed reserve statement with end-week data on net usable international reserves of the CBG will be transmitted weekly within five business days of the end of each week. - Daily data on foreign exchange intervention by the central bank will be transmitted weekly within five business days of the end of each week. - Daily interbank market exchange rates (simple average of the daily weighted average buying and selling rates) will be transmitted on a weekly basis within five business days of the end of the week. - Weekly interbank market exchange rates (simple average of the weekly weighted average buying and selling rates) will be transmitted on a monthly basis within seven days of the end of the month. - The 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. - The CBG will forward monthly data on the volume of transactions (purchases, sales, and total) in the foreign exchange market by each major group of participants (CBG, commercial banks, and foreign exchange bureaus) in dalasi within seven days of the end of each month. ### D. New External Debt Payment Arrears of the Central Government - Definition: External debt payment arrears are defined as external debt obligations of the central government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods). - Exclusions for program purposes: - (i) financial obligations of the government for which the creditor has accepted in writing to negotiate alternative payment schedules before the relevant payment; - (ii) arrears on claims which the government has represented as being disputed; - (iii) arrears on claims that cannot be settled due to international sanctions; and - (iv) arrears on trade credits, with the exception of arrears on payments due to the International Islamic Trade Finance Corporation (ITFC). - Non-accumulation of new external debt payment arrears by the central government is a target, 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, non-Paris-Club, private, pluri-lateral and multilateral 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. Applies to debt as defined in ¶8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014, and to commitments contracted or guaranteed for which value has not been received. - Guarantees: Arise from any explicit legal or contractual obligation of the central government to service a debt owed by a third-party debtor (involving payments in cash or in kind). - A debt will be considered contracted when conditions for its entrance into effect have been met, including approval by the National Assembly. - Exclusions: Loans or purchases from the IMF and concessional debts as defined below, and any debt with maturity of one year or less. - Assessment: 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. - MoFEA will forward, within four weeks of the Central Government contracting or guaranteeing any new external loan, the loan’s terms and conditions including interest rate, grace period, maturity, interest, fees, and principal payment schedule with all annexes. ### F. New Concessional External Debt Contracted or Guaranteed by the Central Government - Definition: Refers to new concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian dalasi. Concessionality is defined in ¶16. - Concessionality criterion (¶16): For program purposes, a debt is concessional if it includes a grant element of at least 35 percent, calculated as the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt. - The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt. - For debts carrying a variable interest rate in the form of a benchmark interest rate plus a fixed spread, the PV of the debt would be calculated using a program reference rate plus the fixed spread (in basis points) specified in the debt contract. - The program reference rate for the six-month USD LIBOR is 2.42 percent and will remain fixed for the duration of the program. - The spread of six-month EURIBOR over six-month USD LIBOR is -250 basis points. - The spread of six-month JPY LIBOR over six-month USD LIBOR is -250 basis points. - The spread of six-month GBP LIBOR over six-month USD LIBOR is -150 basis points. - For debts with a grant element equal or below zero, the PV will be set equal to the nominal value of the debt. - The discount rate used for this purpose is the unified discount rate of 5 percent set forth in Executive Board Decision No. 15248-(13/97). - For borrowing packages comprising both loan and grant components to meet the concessionality requirement (grant element of 35 percent), only the loan components will count toward the borrowing limit. - Supporting material and data provision: Refer to ¶17 and ¶18. ### G. 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. Trade credits are excluded from this target including the ITFC credits. - 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. ### H. Tax Revenue - Definition: Indicative target refers to taxes and duties collected by the Domestic Taxes Department and Customs and Excises Department of the Gambia Revenue Authority (GRA). Tax revenue is the sum of revenues collected against all the tax codes outlined in Text Table 2. Nontax revenue, such as licensing fees, fines, and levies collected by the GRA are excluded from this target. Levies collected by the GRA on behalf of other organizations are also excluded (National Education & Technology Training Levy, AU Levy, ECOWAS Levy). - Supporting material: A monthly report on revenue collected by the GRA will be transmitted within four weeks of the end of each month. ### I. Central Bank Credit to the Central Government at Non-Market Terms - Definition: Refers to the consolidated balance on the Treasury Main Account, the Consolidated Revenue Fund, and other revenue accounts. It also covers all gross claims on the Central Government on the balance sheet of the central bank, with terms (including maturity and yield) materially different from the ones prevailing in the market for Treasury bills and bonds around the time of acquisition of these claims. The target 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 ¶34 and ¶35 below. ### J. Poverty-Reducing Expenditures - Definition: Poverty-reducing expenditures consist of 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 (selected) - Prices: The monthly disaggregated consumer price index, including weights for each major category, with January 2020 = 100, will be transmitted within four weeks of the end of each month. - Government accounts data: - A monthly consolidated Central Government budget report on budget execution will be transmitted to the IMF within four weeks of the end of each month, covering revenue by major items, external grants by type, recurrent expenditure details, capital expenditure and net lending details, the overall balance/primary/basic balance, and details of budget financing. - 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. - Monetary sector data: - The balance sheet of the CBG, prepared on the basis of current and program exchange rates, will be transmitted on a monthly basis within four weeks of the end of each month and will explicitly identify all claims on, and liabilities to, the government, including individual balances on the government accounts listed in Table 1. - The consolidated balance sheet of the commercial banks and a monetary survey 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. - Treasury bill market and interbank money market: - Weekly data on the amounts offered and issued, net issuance, over/under subscription, and yields will be transmitted weekly within five business days of the end of each week. - Data on treasury bills and CBG bills outstanding will be transmitted on a monthly basis within six weeks of the end of each month. - Daily data on the interbank money market will be transmitted weekly within five business days of the end of each week. - Public enterprises’ data: - MoFEA will forward within eight weeks of the end of each quarter, data on monthly cash flow of NAWEC, GNPC, GAMTEL, GAMCEL, GCAA, SSHFC, and NFSPMC. - MoFEA will forward within eight weeks of the end of each quarter, data on the stock of consolidated Central Government’s stock of payment arrears to NAWEC at the end of each month. ### Data reporting requirements (selected timelines from Table 2) - T-bills auction data, Inter-banks rates & other accompanying data & tables: Weekly; 7 days after week-end. - Project accounts data: Weekly; 7 days after week-end. - International reserves and Foreign & Domestic Assets data (NIR, NFA & NDA): Weekly; 7 days after week-end. - Commercial banks' balance sheets: Monthly; 30 days after month-end. - CBG balance sheet (including NDA): Monthly; 30 days after month-end. - CBG reserves statement/report: Monthly; 30 days after month-end. - Statement/report on CBG credit to Gov. at non-market interest rates; and Gov.'s overdue payments to CBG: Monthly; 30 days after month-end. - Statement/report of transactions in official reserves: Monthly; 30 days after month-end. - Financial Soundness Indicators: Monthly; 30 days after month-end. - Balance of payments (BOP): Quarterly; 30 days after quarter-end. - Stock of outstanding public debt of maturity not exceeding 1 year: Quarterly; 30 days after quarter-end. - Statement/report on concessional & non-concessional debts contracted or guaranteed by government: Quarterly; 30 days after quarter-end. - Statement of Government Operations (SGO): Monthly; 30 days after month-end. - Poverty-reducing expenditure data: Monthly; 30 days after month-end. - Consolidated Central Gov. budget execution: Monthly; 30 days after month-end. - External debt reports: Monthly; 30 days after month-end. - Statement of external payment arrears by Central Government & SOEs: Monthly; 30 days after month-end. - Monthly Revenue Report: Monthly; 30 days after month-end. - Consumer price index (CPI): Monthly; 30 days after month-end. - Gross domestic product (GDP): Quarterly; 90 days after year-end. *Source: 1gmbea2020001 - 11. Supporting material: A detailed reserve statement with end-month data on net usable international reserves of the CBG.* ### 1. The DSA covers all known central government and central government-guaranteed ### 1gmbea2020001 - 1. The DSA covers all known central government and central government-guaranteed ### Coverage and contingent liability (CL) stress test - The DSA covers all known central government and central government-guaranteed (PPG) external debt at end-2019. - External debt is treated on a currency basis. - The government’s external debt stock includes a portion of short-term trade credit owed by SOEs to the International Islamic Trade Financing Corporation (ITFC); the portion reflected in external PPG debt corresponds to government’s potential servicing obligations to ITFC based on the recent track record. - SOEs’ domestic and unguaranteed external debt is not included in the DSA baseline, except where the government has already agreed to service the debt (e.g., NAWEC). - All known SOE debt not guaranteed by the government is included in the contingent liability (CL) stress test. - SOEs (unguaranteed) external debts at end-2019 are estimated at 1.1 percent of GDP, with a further 0.7 percent owed to non-public sector domestic entities. - Contingent liabilities relating to the Social Security and Housing Finance Corporation (SSHFC) include: - debts owed by other SOEs estimated at 0.8 percent of GDP; and - the actuarial financing gap most recently estimated at 0.6 percent of GDP. - Expected improvement in data reliability on non-guaranteed external SOE debt with the introduction of the Meridian debt management system. ### Public- and publicly-guaranteed (PPG) external debt stock and structure (end-2019) - External PPG debt stood at about US$796 million at end-2019 (46 percent of GDP). - Medium- and long-term (MLT) external debt: US$778.8 million (44.9 percent of GDP), representing 97.8 percent of total external debt. - Creditor composition (MLT external debt): - Multilateral creditors: US$235.8 million (13.6 percent of GDP; 29.6 percent of MLT debt). - International Development Association: US$115.6 million (6.7 percent of GDP; 14.5 percent). - African Development Bank Group: US$55.7 million (3.2 percent of GDP; 7.0 percent). - International Monetary Fund: US$36.0 million (2.1 percent of GDP; 4.5 percent). - International Fund for Agricultural Development: US$28.5 million (1.6 percent of GDP; 3.6 percent). - Plurilateral creditors: US$284.6 million (16.4 percent of GDP; 35.7 percent of MLT debt). - Islamic Development Bank: US$152.4 million (8.8 percent of GDP; 19.1 percent). - Arab Bank for Economic Development in Africa: US$55.9 million (3.2 percent of GDP; 7.0 percent). - OPEC Fund for International Development: US$53.5 million (3.1 percent of GDP; 6.7 percent). - ECOWAS Bank for International Development: US$22.8 million (1.3 percent of GDP; 2.9 percent). - Bilateral official creditors: US$217.6 million (12.5 percent of GDP; 27.3 percent of MLT debt). - Paris Club: US$1.1 million (0.1 percent of GDP; 0.1 percent). - Non-Paris Club: US$216.6 million (12.5 percent of GDP; 27.2 percent). - Kuwait Fund for Arab Economic Development: US$50.8 million (2.9 percent of GDP; 6.4 percent). - Saudi Fund for Development: US$52.3 million (3.0 percent of GDP; 6.6 percent). - Export-Import Bank of India: US$41.7 million (2.4 percent of GDP; 5.2 percent). - Private creditors: US$40.8 million (2.4 percent of GDP; 5.1 percent of MLT debt). - Short-term (ST) external debt: US$17.4 million (1.0 percent of GDP; 2.2 percent of total external debt). - Of which: Islamic Trade Financing Corporation (ITFC): US$17.4 million (1.0 percent of GDP; 2.2 percent). - The remainder of the MLT debt (5 percent of total external debt) is mostly owed to one external private creditor, M.A. Kharafi and Sons. - Paris Club debt represents 0.1 percent of The Gambia’s external debt and will be amortized in full by end-2020. ### Central government domestic debt (end-2019) - Total domestic debt: GMD 32,453 million (100.0; 36.6 percent of GDP). - Marketable debt: GMD 20,909 million (64.4; 23.6 percent of GDP). - T-bills: GMD 17,978 million (55.4; 20.3 percent of GDP). - Bonds: GMD 2,930 million (9.0; 3.3 percent of GDP). - Non-marketable debt: GMD 11,544 million (35.6; 13.0 percent of GDP). - CBG Bond (30-Year): GMD 9,701 million (29.9; 10.9 percent of GDP). - Restructured NAWEC bond: GMD 1,084 million (3.3; 1.2 percent of GDP). - SSHFC Loan (from NAWEC): GMD 758 million (2.3; 0.9 percent of GDP). - More than 60 percent of domestic debt is marketable; more than half of domestic debt is in T-bills with maturity of one year or less, creating substantial rollover and interest rate risk. - Average T-bill rates fell from a peak of 18.9 percent (weighted average across maturities) in October 2016 to 6.2 percent in December 2019. - Authorities issued 3-year and 5-year domestic bonds in 2017; a 2-year domestic bond was issued in November 2019. - DSA assumes T-bills constitute around 85 percent of (gross) domestic debt issuance over 2020–25; share of T-bills projected to fall to two-thirds over 2026–30 with limited issuance of new seven-year bonds. - Real interest rate on T-bills stabilizes at 2 percent, with term-spreads of 2–4 percent incorporated on three-, five- and seven-year bonds. - Net domestic borrowing in 2020 will be contained at 0.5 percent. ### Progress on external debt restructuring and near-term relief - Significant progress on restructuring since April 2019 roundtable. - Credible and specific commitments to alleviate debt service burden achieved through deferrals on debt service payments falling within 5–7 years to IsDB, BADEA, SFD, KFAED, EXIM Bank, and ADFD. - OFID and EBID expressed willingness to offer similar deferrals pending governing body approval. - Impact of secured debt service deferrals: US$158 million reduction in debt service falling due between 2020 and 2024 — equivalent to nearly 75 percent of the eligible debt service and 9 percent of 2019 GDP. ### Debt management, monitoring, and recording - Debt management, monitoring, and recording capacity are weak. - 2019 Staff-Monitored Program included structural benchmarks for timely reconciliation of debt data with external creditors and quarterly reports on external debt commitments, agreements, and disbursements; these practices are now established. - Authorities received technical assistance from the Commonwealth Secretariat to support migration to the Meridian debt management system, being implemented on a pilot basis. - Operationalizing Meridian is important due to enhanced data reporting requirement under a prospective ECF arrangement. ### Pipeline of already-contracted debt and projected disbursements (end-2019) - Contracted but not yet disbursed debt at end-2019: US$301 million (17 percent of GDP). - Around half of the pipeline has a grant element of 35 percent or higher; around 18 percent has a grant element of 50 percent or higher. - Non-concessional component mainly from plurilateral and bilateral creditors. - Under the prospective ECF arrangement, authorities commit to not contracting any new non-concessional external debt. - Sectoral focus of pipeline: electricity generation and distribution, education, agriculture, and roads. - About 70 percent of projected external disbursements during 2020–21, estimated at US$155 million, would come from this pipeline. - Text Table 4 (total undisbursed at end-2019 and projected disbursements for 2020–21, Millions of U.S. dollars): - Multilateral and plurilateral creditors: Total undisbursed 182.7; Projected disbursements 72.8. - International Development Association: 41.1; 11.2. - African Development Bank Group: 11.9; 2.9. - International Fund for Agricultural Development: 4.1; 1.4. - Islamic Development Bank: 30.7; 16.2. - Arab Bank for Economic Development in Africa: 14.3; 4.7. - OPEC Fund for International Development: 19.0; 12.0. - ECOWAS Bank for International Development: 0.4; 0.4. - European Investment Bank: 61.2; 24.0. - Bilateral Official creditors: Total undisbursed 105.2; Projected disbursements 41.7. - Abu Dhabi Fund for Arab Economic Development: 3.1; 3.1. - Kuwait Fund for Arab Economic Development: 47.7; 16.1. - Export Import Bank for India: 30.9; 11.2. - Saudi Fund for Development: 23.6; 11.3. - Export Import Bank of China: 0.0; 0.0. - Total: 287.9 undisbursed; 114.5 projected disbursements for 2020–21. ### Macro-fiscal assumptions underpinning the DSA baseline - Baseline scenario from IMF staff report for first review of the 2019 Staff-Monitored Program (SMP) and request for an ECF-supported program. - Key assumptions: - Increased grant-financed public investment and a pick-up in private credit underpin near-term real GDP growth; strong tourism growth complements public investment. - Real GDP growth: rebounded from 1.9 percent in 2016 to an estimated 6.0 percent in 2019. Real GDP growth is expected to moderate to 4.8 percent in the long-term. - Private sector credit expanded by 35 percent in 2019. - Inflation in 2019 slightly exceeded 7.0 percent due to one-off factors; expected to resume downward trend in 2020 toward CBG medium-term objective of 5 percent. - Gross official reserves increased by US$68 million to US$225 million at year’s end, equivalent to 3.4 months of prospective imports. - Current account deficit expected to remain substantial over the medium term due to high import content of public investment financed largely by capital grants; improves in the longer-term as public investment rates decline and exports (notably tourism) grow. - Primary surplus projected to increase from 0.6 percent of GDP in 2019 to 1.8 percent of GDP in 2026, mainly via stepped-up domestic revenue mobilization. - Public Expenditure Review finds a structural tax gap of 5–7 percent of GDP; projection closes nearly half of this gap over 2019–25 through improved compliance and reduced tax exemptions. - Domestic revenue-to-GDP ratio increases from 13.7 percent in 2020 to about 15.2 percent by 2025. - Overall fiscal deficit narrows from 1.7 percent of GDP in 2020 to 0.4 percent of GDP in 2025; beyond the medium term, the fiscal deficit is projected to widen as debt servicing pressures subside. ### External financing assumptions and total financing envelope - External financing assumptions incorporate the pipeline loans and pledges made at the 2018 International Conference; annual envelopes adapted to absorption capacity. - Project grants: - 2018 Brussels pledges: US$580 million in project support over NDP period (2018–21); disbursements spread over 2019–25 due to absorption constraints. - Project grants projected to taper from around 6 percent of GDP during 2020–21 to around 2 percent of GDP by end of projection horizon. - External budget support: - EU pledged €100 million for 2018–21. - World Bank planning US$30 million of budget support grants in 2020, and US$20 million per year for 2021 and 2022, conditional on adequate macro framework and reform progress. - AfDB pledged SDR 5 million each year from 2020 until 2022. - Budget support grants expected to be phased out over time. - External project lending: - Execution of pipeline loans expected to continue in 2020–21 with US$114 million forecast to be disbursed over this period and 80 percent of the pipeline expected to be disbursed by 2024. - Disbursements incorporated based on contractual terms: average grant element of 43 percent from multilateral creditors, 21 percent from plurilateral creditors, and 33 percent from bilateral creditors. - Additional medium-term contracting limited to minimum indispensable for high-priority projects (including EIB energy sector loan and OIC Summit-related infrastructure). - Trade credit: - Government projected obligations related to ITFC facility diminished in 2020 relative to 2019; assumed to reach zero by end-2022 through SOE reform, explicit budgeting of SOE subsidies, and changes in contracting/servicing modalities. - Total external loan disbursements (project and budget support) over 2020–25 expected to be 19 percent of GDP. - Near-term average grant element of new disbursements expected to be relatively low before gradually rising to over 35 percent over the medium term as the program requires all new external borrowing to be on concessional terms. ### Selected macroeconomic projections (excerpt) - Real GDP Growth (percent) — Current DSA: 2018: 6.5; 2019: 6.0; 2020: 6.3; 2021: 5.8; 2022: 5.5; 2023: 5.2; 2024: 5.2; 2025: 5.0; Long-term: 4.8. - Exports of goods and services growth (percent) — Current DSA: 2018: 26.3; 2019: 18.4; 2020: 8.8; 2021: 8.0; 2022: 7.7; 2023: 9.6; 2024: 9.3; 2025: 8.7; Long-term: 8.6. - Imports of goods and services growth (percent) — Current DSA: 2018: 12.1; 2019: 13.7; 2020: 13.8; 2021: 7.3; 2022: 5.8; 2023: 6.5; 2024: 7.6; 2025: 7.0; Long-term: 7.1. - Current account deficit (percent of GDP) — Current DSA: 2018: 9.7; 2019: 5.3; 2020: 8.7; 2021: 9.9; 2022: 9.6; 2023: 9.0; 2024: 9.1; 2025: 8.8; Long-term: 5.8. - Public investment (percent of GDP) — Current DSA: 2018: 7.6; 2019: 9.8; 2020: 10.3; 2021: 10.2; 2022: 9.5; 2023: 8.8; 2024: 8.1; 2025: 8.2; Long-term: 7.9. - Overall fiscal deficit (percent of GDP) — Current DSA: 2018: 6.2; 2019: 2.6; 2020: 1.7; 2021: 1.8; 2022: 1.4; 2023: 1.1; 2024: 0.7; 2025: 0.4; Long-term: 1.5. *Italic: IMF staff report content (excerpts) contained in content unit 1gmbea2020001.* ### 13. The medium-term outlook is subject to downside and upside risks. Downside risks ### 13. The medium-term outlook is subject to downside and upside risks. Downside risks ### Risks to the outlook - Downside risks: - Political environment, fiscal discipline and tax administration, and climatic shocks (already felt in the increasingly erratic rainfall pattern) could destabilize the economy and weaken the balance of payments. - If project grants incorporated in the baseline do not materialize or are delayed, downside implications for growth could be significant. - Upside risks: - Higher than expected private inflows of foreign exchange on account of tourism and related foreign investment. - Official inflows (project grants and grants for social programs) could exceed current projections in the context of the requested ECF-supported program. ### Realism assessment of the baseline (realism tools and growth-investment tool) - Overall realism tools indicate risks to the baseline scenario to be low. - Public debt dynamics and contributing factors: - Baseline implies an improvement in public debt dynamics relative to the recent past. - External and total public debt developments over the past five years were substantially worse than forecast in the 2013 DSA due to weak GDP growth outturns, loose fiscal policy, and external and domestic debt accumulation by SOEs, much of which has subsequently been assumed by the government (reflected in large residuals). - Under a combination of debt restructuring, government fiscal consolidation, project grants pledged at the May 2018 International Donor Conference for The Gambia, and the authorities’ reform agenda, the DSA baseline projects a turnaround. - Growth acceleration, tighter fiscal policies, and transparent budgeting of SOE subsidies (rather than government bailouts of their debt) would put external and domestic debt on a downward trajectory. - Fiscal balance realism: - A slight reduction in the primary balance of 0.2 percent of GDP over 2020–22 (the first three projection years) is below the median of the LICs that have requested Fund programs, indicating its realism. - This reflects increased grants (+0.4 percent of GDP) and domestic revenue (+0.5 percent of GDP) covering most of the increases in primary spending (+1.1 percent of GDP), mostly driven by higher outlays on public investment and social sectors. - Improvement in the domestic primary balance of 0.6 percent of GDP (defined as the difference between domestic revenue and domestically financed primary spending), which captures the fiscal policy effort during 2020–24, also appears realistic. - Fiscal multipliers: - Due to the muted fiscal adjustment path, a mechanical application of fiscal multipliers does not modify the projected growth path. - Growth-investment tool: - Assuming constant investment efficiency, the scaling-up of public investment would imply a growth acceleration of 0.3 percent relative to the recent past. - The remaining growth pick-up (0.6 percent) is explained by other factors, notably the strong rebound in private sector activity. - A possible improvement in growth returns to public investment (improved governance and completion of key infrastructure such as the Senegambia bridge and electricity sector upgrades) is an upside risk. ### Debt carrying capacity and classification - The Gambia’s debt carrying capacity is assessed as “medium.” - CI Score details: - Overall CI Score: 2.71, just above the cutoff level for “weak” debt bearing capacity (2.69). - The CI Score remains unchanged relative to the April 2019 DSA. - Stronger remittances offset the decline in the 10-year average import coverage of reserves. - Reserve accumulation in 2019 was significantly higher than anticipated; projected buildup of official reserves to 4½ months of imports by 2023. - Tailored stress tests: - None of the tailored stress tests (natural disasters, commodity prices and market financing) are triggered. ### DSA: external debt stock and service indicators - External debt stock indicators at end-2019: - PV of debt-to-GDP: 33.3 percent at end-2019 (against 32.8 percent projected in the April 2019 DSA). - PV of debt-to-exports: 158.3 percent at end-2019 (against 169.7 percent projected in the April 2019 DSA). - Both ratios expected to remain below their thresholds throughout the projection period under the baseline. - External debt distress rating: - Following debt restructuring, external debt service indicators improved markedly relative to the April 2019 DSA. - Change in external debt distress risk rating from “In debt distress” to “High.” - In the baseline (including confirmed and pending restructuring offers): - External debt service-to-exports ratio drops and stays below the 15 percent sustainability threshold both in the near and medium term. - External debt service-to-revenue ratio drops but marginally breaches the 18 percent threshold in 2020; drops below 18 percent in 2021 and stays below thereafter. - In 2025, debt service increases as deferral periods end; debt service-to-revenue ratio rises close to the applicable threshold but remains below it. - Staff judgment: given large stock of undisbursed semi-concessional debt, SOE exposures, and elevated probability of external arrears re-emerging on debt contracted by the government on SOEs’ behalf, The Gambia’s risk of debt distress is assessed as “high.” ### Stress test results and vulnerabilities - Stress test outcomes underscore high vulnerability to external shocks; all four indicators show large breaches under stress tests and remain above thresholds for parts of the projection period. - Export shock (calibrated shock: -6.6 percent in 2021–22): - Biggest effect on PV of external public debt-to-exports and debt service-to-exports. - Under this scenario, PV of debt-to-export would peak at 234 percent in 2022 and debt service-to-export at 19 percent in 2026. - Combination shock: - Biggest impact on debt service-to-revenue and PV of debt-to-GDP, peaking at 26 percent in 2026 and 48 percent in 2022, respectively. - Key vulnerability drivers: - Low export and domestic revenue bases, and reliance on foreign aid flows which have been historically volatile. ### Public DSA and sustainability - Public DSA overall risk: “High.” - Reflects breach of benchmark for PV of total public debt-to-GDP ratio under the baseline. - PV of total public debt-to-GDP: - Stood at 70 percent at end-2019. - Under baseline, declines over projection period to fall below benchmark of 55 percent by 2023 (three years sooner than April 2019 DSA). - Improvement primarily from external debt service deferrals and increased availability of grants for budget support, reducing net domestic borrowing needs to zero during 2020–25. - PV of debt-to-revenue ratio: - Averaging 227 percent over the next ten years (compared with 302 percent in the April 2019 DSA). - Public debt service and financing needs: - High public debt-service to revenue ratio including grants: averaging 87 percent over 2020–25 (includes rollover of short-term domestic debt in debt service which averages 75 percent of revenue over 2020–25). - Gross financing needs projected to average 18 percent of GDP over 2020–25, above the 14-percent benchmark of market financing pressures for LICs with market access. - This is an improvement from an average gross financing need of 24 percent of GDP over the same period prior to debt restructuring. ### Sensitivity to shocks and contingent liabilities - Public debt ratios are sensitive to all stress tests, particularly GDP growth shock: - Real GDP growth shock scenario: economy contracts by 1.7 percent in 2021 and 2022 (against average growth of 5.7 percent in the baseline). - Under this shock, by 2030: - PV of public debt-to-GDP, PV of public debt-to-revenue, and debt service-to-revenue ratios reach nearly 80 percent, 361 percent, and 133 percent, respectively. - Materialization of contingent liabilities (including SOE debt) would deteriorate indicators further: - PV of public debt-to-GDP rising to 70 percent in 2021 and debt service-to-revenue reaching 108 percent by 2022, before declining thereafter. - Weakening fiscal discipline or lack of SOE reform would rapidly undermine government’s financial position. ### Conclusions on sustainability and borrowing space - Public debt position, while challenging, is sustainable with the help of debt restructuring, combined with debt service deferrals, fiscal consolidation, and increased budget support under the proposed ECF-supported program. - Remaining vulnerabilities: - High level and short maturity of domestic debt. - Need to strengthen repayment capacity during the deferral period before resumption of repayments on treated loans. - Borrowing space: - Very limited; any new borrowing must be on highly concessional terms and reserved for highest priority projects for which grant-financing is not available. - Government should avoid compounding fiscal risks and refrain from contracting guarantees that would add to public debt. - Large pre-existing pipeline of loans should be reviewed and re-prioritized before contracting new debts. - Mechanisms to avoid project cost over-runs should be put in place. ### Authorities’ position and commitments - Authorities agree with staff’s assessment of “High” external and overall debt distress ratings. - Recognize debt vulnerabilities remain high despite creditors’ generous deferrals. - Commitments: - Implement existing pipeline of loans and seek primarily grant financing to meet urgent development needs. - Contracting and guaranteeing of concessional debt will be subject to a strict borrowing plan under the requested ECF-supported program. - Improve transparency in public debt recording and reporting standards. - Authorities hope rating will be reviewed favorably with continued progress. ### Box 1 — Downward revision of ITFC trade credits in the DSA (summary) - ITFC debt included in external PPG stock revised from US$31.8 million at end-2018 (April 2019 DSA) to US$17.4 million at end-2019 after review of SOEs’ servicing track record in 2019. - ITFC facility users: GNPC, NAWEC, NFSPMC. - Treatment in DSA: - GNPC: exclude up to US$10 million (historically serviced directly; profitable; no recent arrears). - NAWEC: include US$7 million in external PPG debt stock for 2020 (of total 2020 ITFC debt service ~US$12 million; over US$4 million already placed in escrow). - NFSPMC (GGC): fully include its ITFC debt (needs to effect US$12 million in 2020) due to weak financial position and dependence on government support. - Result: total debt servicing due to ITFC in 2020 revised down to US$19 million (of which US$17.4 representing principal) from previously projected US$32 million. - DSA assumption: ITFC portion included in external PPG debt will decline to US$10 million in 2021, US$5 million in 2022, and be excluded from PPG debt from 2022 onwards. ### Box 2 — Status of debt restructuring discussions (summary) - Confirmed offers (examples and terms): - ADFAED: Principal will be deferred until 2025. - BADEA: Principal will be deferred until 2024. - EXIM Bank (India): Principal will be deferred until 2025; interest payments deferred by issuing a new instrument aggregating interest due over deferral period. - IsDB: For equity-funded loans, principal deferred until 2025 via new instrument aggregating principal payments; for market-funded loans, gestation period extensions up to two years; IsDB offered to explore grant access from other windows. - KFAED: Principal deferral of 5 years to 7 years. - SFD: Principal will be deferred until 2025. - Pending offers: - EBID: finalizing proposal for deferral of both principal and interest until 2025 (in consultation with India). - OFID: proposal to defer both principal and interest until 2025 undergoing final review and expected to be confirmed in March 2020. - Other cases: - Libya: Disputed claims, not expected to be serviced until differences resolved. - Taiwan Province of China: Discussions delayed pending Ministry of Justice opinion; expected to resume seeking deferral until 2025. - Venezuela: Not serviced (international sanctions); technical discussions with BANDES seeking deferral until 2025. - Authorities not pursuing agreement with a private claimant (M. A. Kharafi and Sons), recognizing that this debt originates from an earlier rescheduling to a domestic subsidiary of an international construction company. *Source: IMF staff report excerpt (The Gambia).* ### Box 3. The Gambia’s Debt Restructuring ### Box 3. The Gambia’s Debt Restructuring ### Impact on external debt service indicators - Debt service deferrals during 2020–24 reduce external debt service-to-exports and external debt service-to-revenue ratios in the DSA. - Beginning in 2025, marking the conclusion of the deferral period, there is a rebound in the external debt service indicators. - The external debt service-to-exports ratio stays well below its threshold throughout the projection period. - The external debt service-to-revenue ratio rises very close to the applicable (18-percent) threshold during 2025–27, before resuming a downward trend. - The dashed red lines in the charts isolate the impact of debt deferrals from the impact of the improved macroeconomic outlook in the current scenario (including higher domestic revenue, higher exports, and lower reliance of SOEs on government subsidies to service the ITFC debt). ### PV of overall debt-to-GDP and financing implications - The profile of the PV of overall debt-to-GDP improves markedly due to a combined effect of debt deferrals and other changes to the macroeconomic framework. - In the current DSA, the PV of overall debt-to-GDP goes below its threshold of 55 percent by 2023, which is 3 years earlier than in the DSA of April 2019. - Key contributors to the improvement: - Contribution of debt deferrals. - Improved domestic revenue (building on current strong performance). - Increased availability of grants for budget support to closing the financing gap. - The financing gap is closed without issuance of additional domestic debt, translating into: - Permanent savings on the interest bill. - A marked reduction in government’s gross financing needs. ### Stress tests and scenario signals (figures) - Figures present indicators of Public- and Publicly Guaranteed External Debt and Public Debt under the Baseline and Alternative Scenarios, 2020–30. - Stress test notes: - "The most extreme stress test is the test that yields the highest ratio in or before 2030." - Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. - Commodity price shock magnitudes are based on the commodity prices outlook prepared by the IMF research department. - Labels in the charts identify that: - The most extreme shock for debt service-to-revenue is "Combination". - The most extreme shock for PV of debt-to-exports is "Exports". - The most extreme shock for PV of debt-to-GDP is "Combination". - The most extreme shock for several public-debt indicators is "Growth". ### Drivers of debt dynamics and realism tools (figures) - Figures document: - Drivers of debt dynamics under the baseline scenario, including debt-creating flows and unexpected changes in debt. - Contributions to debt changes from real GDP growth, real interest rate, nominal interest rate, current account + FDI, price and exchange rate effects, and primary deficit. - Realism tools comparing Government and Private Investment rates across previous and current DSA vintages and contributions to real GDP growth. - Charts indicate distributional comparisons across LICs for historical and projected 5-year changes and contributions, and present projected fiscal adjustment paths and possible real GDP growth paths under different fiscal multipliers. *Source: Box 3. The Gambia’s Debt Restructuring (figures and text as presented).* ### 2.5 percentage points of GDP in ### 2.5 percentage points of GDP in ### External Debt Sustainability — Baseline Scenario (2017–40) - External debt (nominal) by year (Percent of GDP): 2017 48.5, 2018 49.3, 2019 46.0, 2020 44.2, 2021 42.7, 2022 41.1, 2023 39.5, 2024 37.4, 2025 35.1, 2030 24.4, 2040 17.9, (additional year) 38.8, 34.6 - Of which: public and publicly guaranteed (PPG) (Percent of GDP): 2017 46.5, 2018 47.4, 2019 45.9, 2020 43.9, 2021 42.3, 2022 40.8, 2023 39.3, 2024 37.2, 2025 35.0, 2030 24.3, 2040 17.8, (additional) 36.9, 34.4 - Change in external debt (percentage points of GDP): 2017 5.7, 2018 0.7, 2019 -3.3, 2020 -1.8, 2021 -1.5, 2022 -1.6, 2023 -1.7, 2024 -2.1, 2025 -2.3, 2030 -1.6, 2040 -0.3 - Identified net debt-creating flows (percentage points of GDP): 2017 1.0, 2018 0.4, 2019 -3.8, 2020 1.0, 2021 2.5, 2022 2.5, 2023 2.2, 2024 2.3, 2025 2.2, 2030 -1.0, 2040 0.6, (additional) 1.2, 1.2 - Non-interest current account deficit (Percent of GDP): 2017 6.9, 2018 9.3, 2019 4.6, 2020 8.2, 2021 9.4, 2022 9.1, 2023 8.6, 2024 8.7, 2025 8.3, 2030 4.4, 2040 5.8, (additional) 7.2, 7.4 - Deficit in balance of goods and services (Percent of GDP): 2017 20.4, 2018 18.9, 2019 19.0, 2020 20.7, 2021 20.3, 2022 19.5, 2023 18.7, 2024 18.4, 2025 17.9, 2030 13.5, 2040 13.8, (additional) 14.0, 17.4 - Exports (Percent of GDP): 2017 16.6, 2018 19.3, 2019 21.1, 2020 21.0, 2021 20.9, 2022 20.7, 2023 21.1, 2024 21.4, 2025 21.6, 2030 23.0, 2040 28.8 - Imports (Percent of GDP): 2017 37.0, 2018 38.2, 2019 40.0, 2020 41.7, 2021 41.2, 2022 40.2, 2023 39.8, 2024 39.8, 2025 39.5, 2030 36.5, 2040 42.6 - Net current transfers (negative = inflow) (Percent of GDP): 2017 -14.9, 2018 -11.0, 2019 -15.3, 2020 -13.6, 2021 -12.0, 2022 -11.4, 2023 -10.9, 2024 -10.5, 2025 -10.3, 2030 -9.7, 2040 -8.5, (additional) -8.1, -10.7 - Of which: official (Percent of GDP): 2017 -3.7, 2018 -0.9, 2019 -3.2, 2020 -3.2, 2021 -2.5, 2022 -2.2, 2023 -1.9, 2024 -1.6, 2025 -1.5, 2030 -1.5, 2040 -0.8 - Net FDI (negative = inflow) (Percent of GDP): 2017 -5.6, 2018 -5.6, 2019 -5.3, 2020 -5.1, 2021 -5.0, 2022 -4.9, 2023 -4.9, 2024 -5.0, 2025 -4.9, 2030 -4.6, 2040 -4.6, (additional) -5.6, -4.8 - Endogenous debt dynamics (Percent of GDP): 2017 -0.3, 2018 -3.3, 2019 -3.2, 2020 -2.1, 2021 -1.9, 2022 -1.7, 2023 -1.6, 2024 -1.5, 2025 -1.2, 2030 -0.8, 2040 -0.6 - Contribution from nominal interest rate (Percent of GDP): 2017 0.5, 2018 0.5, 2019 0.7, 2020 0.5, 2021 0.5, 2022 0.5, 2023 0.4, 2024 0.4, 2025 0.5, 2030 0.4, 2040 0.2 - Contribution from real GDP growth (Percent of GDP): 2017 -2.0, 2018 -2.9, 2019 -2.7, 2020 -2.6, 2021 -2.4, 2022 -2.2, 2023 -2.0, 2024 -1.9, 2025 -1.7, 2030 -1.2, 2040 -0.8 - Contribution from price and exchange rate changes (Percent of GDP): 2017 1.2, 2018 -0.9, 2019 -1.2, 2020 … (ellipsis in source) - Residual (Percent of GDP) 1/ : 2017 4.7, 2018 0.3, 2019 0.6, 2020 -2.8, 2021 -4.0, 2022 -4.0, 2023 -3.8, 2024 -4.4, 2025 -4.4, 2030 -0.6, 2040 -0.9, (additional) 0.7, -3.2 - Of which: exceptional financing: 0.0 for all reported years - Sustainability indicators: - PV of PPG external debt-to-GDP ratio (Percent of GDP): …, 33.3, 32.4, 31.7, 30.9, 30.2, 29.0, 27.2, 25.2, 23.2, 21.4, 19.9, 18.5, 13.1 - PV of PPG external debt-to-exports ratio (Percent): …, 158.3, 154.3, 151.9, 149.1, 143.1, 135.3, 125.9, 115.0, 105.0, 95.9, 87.8, 80.4, 45.3 - PPG debt service-to-exports ratio (Percent): 31.2, 26.2, 14.1, 12.9, 10.0, 8.7, 7.7, 8.3, 12.1, 10.0, 3.9 - PPG debt service-to-revenue ratio (Percent): 44.8, 41.8, 20.7, 19.8, 14.9, 12.6, 11.1, 11.9, 17.2, 14.5, 6.2 - Gross external financing need (Million of U.S. dollars): 98.1, 142.0, 70.4, 113.8, 142.5, 144.2, 137.4, 149.9, 173.9, 84.8, 169.6 - Key macroeconomic assumptions: - Real GDP growth (in percent): 4.8, 6.5, 6.0, 6.3, 5.8, 5.5, 5.2, 5.2, 5.0, 4.7, 4.7, 2.8, 5.2 - GDP deflator in US dollar terms (change in percent): -2.8, 1.8, 2.4, 2.7, 2.7, 2.7, 2.3, 2.3, 2.6, 2.0, 1.5, -0.6, 2.4 - Effective interest rate (percent) 4/: 1.1, 1.1, 1.6, 1.3, 1.2, 1.2, 1.2, 1.2, 1.5, 1.5, 1.4, 1.5, 1.4 - Growth of exports of G&S (US dollar terms, in percent): 2.9, 26.3, 18.4, 8.8, 8.0, 7.7, 9.6, 9.3, 8.7, 8.4, 8.9, 5.6, 8.6 - Growth of imports of G&S (US dollar terms, in percent): 19.2, 12.1, 13.7, 13.8, 7.3, 5.8, 6.5, 7.6, 7.0, 5.8, 8.1, 6.8, 6.8 - Grant element of new public sector borrowing (in percent): …, 28.1, 30.0, 34.5, 34.8, 36.2, 36.1, 36.8, 35.7, …, 34.7 - Government revenues (excluding grants, in percent of GDP): 11.6, 12.1, 14.4, 13.7, 14.0, 14.3, 14.6, 15.0, 15.2, 15.9, 17.9, 11.6, 15.0 - Aid flows (in Million of US dollars) 5/: 115.4, 54.4, 137.9, 189.8, 189.7, 186.0, 179.0, 174.0, 178.7, 202.0, 237.3 - Grant-equivalent financing (in percent of GDP) 6/: …, 10.4, 9.6, 8.8, 7.9, 7.1, 7.0, 5.6, 3.8, …, 7.3 - Grant-equivalent financing (in percent of external financing) 6/: …, 77.5, 79.5, 81.4, 82.6, 84.3, 81.4, 81.9, 78.0, …, 81.8 - Nominal GDP (Million of US dollars): 1,498; 1,625; 1,764; 1,925; 2,093; 2,267; 2,441; 2,627; 2,829; 3,987; 7,348 - Nominal dollar GDP growth (percent): 1.9, 8.4, 8.6, 9.2, 8.7, 8.3, 7.7, 7.6, 7.7, 6.8, 3.2, 2.2, 7.7 - Memorandum items: - PV of external debt (Percent of GDP): …, 33.5, 32.7, 32.1, 31.2, 30.4, 29.1, 27.3, 18.5, 13.2 - In percent of exports: …, 158.9, 156.0, 154.0, 150.6, 144.1, 136.0, 126.4, 80.5, 45.7 - Total external debt service-to-exports ratio (Percent): 31.2, 26.2, 22.2, 13.4, 11.6, 10.7, 9.0, 9.2, 12.7, 10.1, 3.9 - PV of PPG external debt (in Million of US dollars): 587.9, 623.6, 663.2, 700.8, 736.8, 761.4, 770.5, 738.1, 959.1 - (PVt-PVt-1)/GDPt-1 (in percent): 2.0, 2.1, 1.8, 1.6, 1.0, 0.3, -0.1, 0.6 - Non-interest current account deficit that stabilizes debt ratio (Percent of GDP): 1.2, 8.6, 7.9, 9.9, 10.9, 10.7, 10.3, 10.8, 10.5, 6.1, 6.1 ### Public Sector Debt Sustainability — Baseline Scenario (2017–40) - Public sector debt (Percent of GDP): 2017 87.0, 2018 86.6, 2019 82.5, 2020 76.8, 2021 71.8, 2022 67.5, 2023 62.4, 2024 58.4, 2025 54.4, 2030 45.3, 2040 51.1, (additional) 67.7, 56.9 - Of which: external debt (Percent of GDP): 2017 46.5, 2018 47.4, 2019 45.9, 2020 43.9, 2021 42.3, 2022 40.8, 2023 39.3, 2024 37.2, 2025 35.0, 2030 24.3, 2040 17.8, (additional) 36.9, 34.4 - Change in public sector debt (percentage points of GDP): 2017 6.1, 2018 -0.4, 2019 -4.1, 2020 -5.7, 2021 -5.0, 2022 -4.2, 2023 -5.1, 2024 -4.0, 2025 -4.0, 2030 0.2, 2040 0.8 - Identified debt-creating flows (percentage points of GDP): 2017 1.6, 2018 -1.8, 2019 -5.4, 2020 -5.4, 2021 -4.8, 2022 -4.1, 2023 -5.1, 2024 -4.0, 2025 -4.0, 2030 0.2, 2040 0.8, (additional) 1.2, -3.3 - Primary deficit (Percent of GDP): 2017 0.2, 2018 3.0, 2019 -0.6, 2020 -1.0, 2021 -0.8, 2022 -0.8, 2023 -1.1, 2024 -1.3, 2025 -1.5, 2030 0.1, 2040 0.6, (additional) 1.0, -0.9 - Revenue and grants (Percent of GDP): 2017 19.3, 2018 15.4, 2019 22.2, 2020 22.9, 2021 22.5, 2022 22.0, 2023 21.6, 2024 21.3, 2025 21.3, 2030 20.8, 2040 21.0, (additional) 15.3, 21.5 - Of which: grants (Percent of GDP): 2017 7.7, 2018 3.3, 2019 7.8, 2020 9.3, 2021 8.5, 2022 7.7, 2023 7.0, 2024 6.3, 2025 6.1, 2030 4.9, 2040 3.2 - Primary (noninterest) expenditure (Percent of GDP): 2017 19.4, 2018 18.5, 2019 21.6, 2020 21.9, 2021 21.7, 2022 21.2, 2023 20.5, 2024 20.0, 2025 19.7, 2030 20.9, 2040 21.7, (additional) 16.3, 20.6 - Automatic debt dynamics (Percent of GDP): 2017 1.5, 2018 -4.8, 2019 -4.8, 2020 -5.2, 2021 -4.4, 2022 -3.3, 2023 -3.0, 2024 -2.7, 2025 -2.4, 2030 -1.3, 2040 -0.7 - Contribution from interest rate/growth differential: -0.7, -4.6, -4.5, -4.8, -4.1, -3.0, -2.8, -2.5, -2.2, -1.3, -0.8 - Contribution from average real interest rate (Percent of GDP): 3.0, 0.7, 0.4, 0.0, 0.1, 0.7, 0.6, 0.5, 0.6, 0.8, 1.5 - Contribution from real GDP growth (Percent of GDP): -3.7, -5.3, -4.9, -4.9, -4.2, -3.7, -3.4, -3.1, -2.8, -2.0, -2.3 - Contribution from real exchange rate depreciation (Percent of GDP): 2.1, -0.2, -0.3, … (ellipsis in source) - Other identified debt-creating flows (Percent of GDP): 0.0, 0.0, 0.0, 0.8, 0.4, -0.1, -1.0, 0.0, -0.1, 1.3, 0.8, 0.0, 0.2 - Residual (Percent of GDP): 4.4, 1.4, 1.3, -0.7, -0.5, -0.4, -0.3, -0.2, -0.2, 0.0, 0.1, 3.1, -0.2 - Sustainability indicators: - PV of public debt-to-GDP ratio (Percent of GDP): …, 70.5, 65.6, 61.5, 58.0, 53.6, 50.5, 46.9, 43.0, 41.1, 40.2, 39.4, 39.7, 46.5 - PV of public debt-to-revenue and grants ratio: …, 317.3, 286.5, 273.3, 263.6, 248.0, 237.0, 220.8, 203.3, 194.5, 191.5, 189.5, 191.1, 221.4 - Debt service-to-revenue and grants ratio (Percent): 151.1, 154.7, 110.9, 113.4, 96.2, 82.7, 82.4, 72.1, 72.8, 73.8, 60.4, 56.1, 62.6, 61.5 - Gross financing need (Percent of GDP): 29.3, 26.9, 24.0, 25.8, 21.2, 17.4, 15.7, 14.1, 13.8, 14.3, 14.2 - Key macroeconomic and fiscal assumptions (selected): - Real GDP growth (in percent): 4.8, 6.5, 6.0, 6.3, 5.8, 5.5, 5.2, 5.2, 5.0, 4.7, 4.7, 2.8, 5.2 - Average nominal interest rate on external debt (in percent): 1.2, 1.1, 1.7, 1.3, 1.2, 1.2, 1.2, 1.2, 1.5, 1.5, 1.4, 1.6, 1.4 - Average real interest rate on domestic debt (in percent): 7.8, 1.9, 1.3, 1.3, 1.5, 3.4, 3.3, 3.5, 3.5, 4.7, 5.2, 5.9, 3.4 - Real exchange rate depreciation (in percent): 5.5, -0.6, -0.7, … (ellipsis in source) - Inflation rate (GDP deflator, in percent): 3.9, 5.2, 6.4, 6.3, 5.5, 4.8, 4.5, 4.4, 4.8, 4.8, 4.8, 5.8, 4.9 - Growth of real primary spending (deflated by GDP deflator, in percent): 40.6, 1.4, 23.9, 7.7, 5.0, 3.1, 1.8, 2.6, 3.4, 7.7, 5.8, 9.3, 4.9 - Primary deficit that stabilizes the debt-to-GDP ratio (Percent of GDP): -5.9, 3.5, 3.5, 4.7, 4.2, 3.5, 4.1, 2.7, 2.5, 0.0, -0.1, 0.4, 2.5 - PV of contingent liabilities (not included in public sector debt): 0.00 for reported years ### Sensitivity Analysis for PPG External Debt (2020–30) — Key Outcomes - Baseline PV of debt-to-GDP ratio (Percent): 2020 32.4, 2021 31.7, 2022 30.9, 2023 30.2, 2024 29.0, 2025 27.2, 2026 25.2, 2027 23.2, 2028 21.4, 2029 19.9, 2030 18.5 - Selected bound tests (PV of debt-to-GDP ratio under scenarios): - B1. Real GDP growth: peaks at 42.9 and remains elevated in certain years (examples: 2021 35.7, 2022 39.0, 2023 38.1, 2024 36.6) - B5. One-time 30 percent nominal depreciation: 2020 32.4, 2021 39.8, 2022 33.9, 2023 33.1, 2024 31.7, 2025 29.7, 2026 27.5, 2027 25.4, 2028 23.5, 2029 21.9, 2030 20.5 - B6. Combination of B1-B5: shows higher peaks (examples: 2022 42.9, 2023 47.6, 2024 46.4, 2025 44.7) - Debt service-to-exports ratio (baseline and scenario ranges, Percent): baseline values include 154.3, 151.9, 149.1, 143.1, 135.3, 125.9, 115.0, 105.0, 95.9, 87.8, 80.4 - Debt service-to-revenue ratio (baseline and scenarios, Percent): baseline 12.9, 10.0, 8.7, 7.7, 8.3, 12.1, 12.3, 12.3, 11.6, 10.7, 10.0 - Tailored tests include C1 Combined contingent liabilities and others marked n.a. where not applicable in the source. ### Sensitivity Analysis for Public Debt (2020–30) — Key Outcomes - Baseline PV of Debt-to-GDP ratio (Percent): 2020 65.6, 2021 61.5, 2022 58.0, 2023 53.6, 2024 50.5, 2025 46.9, 2026 43.0, 2027 41.1, 2028 40.2, 2029 39.4, 2030 39.7 - Public debt benchmark: 55 (threshold used across years) - Selected scenario outcomes: - B1. Real GDP growth: values shown widely above baseline in some years (examples include 71, 78, 76) - B5. One-time 30 percent nominal depreciation: elevated public debt ratios in several years (examples: 66, 67, 62, 57, 53, 48, 43, 40, 38, 37, 36) - PV of Debt-to-Revenue Ratio and Debt Service-to-Revenue Ratio reported with baseline and scenario ranges (specific year-by-year values available in source tables). ### COVID-19 Supplement — March 2020 Staff Note (Selected Points) - As of March 17, 2020, The Gambia had no reported cases of COVID-19. - The COVID-19 pandemic will weaken the macroeconomic outlook for 2020 and risks to the program have increased. - Key vulnerabilities noted: high dependence on tourism for income and imports for government revenue. - The supplement provides: - A preliminary update on shifting economic conditions and initial assessment of pandemic impact on near-term outlook. - Reporting on mitigating steps taken by authorities using own resources and additional donor support. - A proposal to modify adjusters for net domestic borrowing and net usable international reserves to accommodate expenditure of additional budget support expected for emergency budget spending needs (as requested by the authorities in the supplementary letter of intent and reflected in the revised TMU). - Purpose of modification: to ensure the program facilitates mobilization of resources to address the pandemic and to catalyze financial assistance from development partners while supporting medium-term program objectives. - The supplement does not alter the thrust of the staff appraisal, which focuses mostly on the structural agenda and medium-term reforms. - Prepared by African Department; date: March 18 2020. *Prepared from IMF staff tables and supplementary note in the source document.* ### 1. Economic performance and program implementation thus far have been strong. ### 1. Economic performance and program implementation thus far have been strong. ### Macro performance and fiscal implementation - Tourist arrivals and private FX inflows in January and February 2020 reached record levels (i.e., before the COVID-19 outbreak in Europe). - Net usable international reserves decreased from US$189 million at end-2019 to US$178 million as of March 6, 2020 (compared to the proposed end-March floor of US$170 million). - The dalasi remained stable relative to the US dollar. - Consumer price index increased from 7.7 percent at end-2019 to 7.8 percent at end-February 2020. - The Gambia Revenue Authority met monthly revenue targets in January and February. - Tax revenue through February increased by 23 percent compared to the level registered in the first two months of 2019. - The proposed indicative end-March floor for tax revenue is described as well within reach. - Net domestic borrowing by the government up to March 10 reached 520 million dalasi, within the proposed end-March program ceiling of 1.65 billion dalasi. - Status of the debt deferral remains as described in the staff report; offers by OFID and EBID are yet to be finalized. ### Local financial conditions - T-bill rates increased since end–2019 at all maturities as authorities build buffers: - 91–day: from 2.24 to 3.89 percent. - 182–day: from 4.98 to 5.35 percent. - 364–day: from 7.39 to 10.23 percent as of March 11, 2020. - Expectation: financial conditions will ease with the disbursement of budget support in Q2, as projected under the program. ### The Gambia’s vulnerability to COVID-19 and scenario estimates - As of the report, no COVID-19 cases had been reported in The Gambia; neighboring Guinea and Senegal had cases. - Elevated travel risks with thousands intending to travel to religious festivals in March and April; Gambian and Senegalese authorities banned all public gatherings for 30 days in mid-March. - Hotels report a slowdown in new bookings and cancellations attributable to the global COVID-19 outbreak. - Authorities’ estimates and scenario assumptions: - Tourist arrivals expected to decline by 14 percent relative to 2019 (to a level that is 28 percent lower than initially projected for 2020). - Trade disruptions and lower private FX inflows will cause delays in project implementation and construction. - In a scenario assuming successful containment of COVID-19 in The Gambia, estimated potential economic impact on account of lower tourism and trade disruptions is about 3 percentage points of GDP. - Authorities project growth in 2020 to slow to 3.3 percent (from 6.3 percent projected earlier). - Estimated government revenue loss of 0.7 percent of GDP. - Cost estimates for immediate preparedness measures: - About 1.5 percent of GDP (about US$30 million) total cost. - Estimated import component of US$20 million. ### Authorities’ public health and support measures - Monetary policy actions: - On February 27, central bank reduced the monetary policy rate by 50 basis points (to 12 percent) and increased the deposit facility rate by 50 basis points (to 3 percent). - Border and public-health measures: - Late January: temperature screening at Banjul Airport; progressive tightening of land border controls; more rigorous screening and sanitation procedures. - Hotels, restaurants, cafes and bars required to provide sanitizers, tissue dispensers, covered dustbins, and ensure hand disinfection by entrants/exitors. - Suspension of all international travel by public officials and suspension of all public gatherings for 30 days. - COVID-19 action plan and donor support: - Government prepared a US$9 million COVID-19 action plan (equip testing facilities, quarantine and medical confinement arrangements, train medical and border staff); seeking donor support. - Donor responses to date: - World Bank: US$5 million in emergency financial support from the COVID-19 fast track facility. - People’s Republic of China: mobilized a medical team and offered two ambulances and medical supplies. - WHO: donated medical and personal protective equipment. - International Office of Migration: stepped up support for border patrol agents to help screen travelers. - Ongoing discussions on mobilizing support from other donors, including possible EU resources for the WHO global plan and strengthening African countries’ capacity. ### Role of the ECF Arrangement and program adjustments - Authorities actions: - Redirecting domestic spending to the COVID-19 action plan. - Requesting grants from development partners to support emergency spending, including social protection programs for the most vulnerable affected by tourism income loss. - Considering mitigation of anticipated tax revenue loss via lower international oil prices and reduced NAWEC subsidy needs. - IMF staff position: - The macroeconomic baseline for 2020 has shifted; staff not yet in a position to accurately reassess and formulate a credible new scenario. - Staff continue to assess that meeting program conditionality is achievable in the near-term. - Staff support the authorities’ request that downward adjustment to net domestic borrowing (TMU, ¶2) and upward adjustment to net usable international reserves (TMU, ¶9) would not apply to budget support grants and loans provided to cover COVID-19 emergency spending to the extent they raise total budget support and loans above the program baseline. - Staff will be ready to propose further program adjustments once a common view crystallizes on impact severity, transmission, policy response, and potential additional Fund resources, including possible emergency financing. - The ECF-supported program is considered essential to help develop and implement effective policy responses and to catalyze financial assistance from other development partners equivalent to at least 2 percent of GDP (disbursement described as indispensable and urgent). - Staff strongly support the authorities’ mitigation actions and endorse approval of the ECF arrangement. ### Supplementary Letter of Intent (key commitments) - Modification request (March 17, 2020): enable use of additional budget support from development partners for COVID-19 response without triggering: - (i) downward adjustment of quarterly ceilings for net domestic borrowing of the central government; and - (ii) upward adjustment of quarterly floors for net usable international reserves of the CBG. - Authorities’ commitments to safeguard macro stability: - (i) contain revenue loss from lower imports and activity, including by adjusting the domestic petroleum pricing formula; - (ii) reallocate budgetary resources toward COVID-19 priorities from lower priority spending or savings (e.g., suspension of travel by public officials, lower electricity subsidy needs due to lower oil prices); - (iii) adhere to the borrowing plan under the program and the minimum grant element requirement for newly contracted government and government-guaranteed debt. ### Revised TMU — selected quantitative-target definitions and adjusters - Net Domestic Borrowing (NDB) of the Central Government: - Definition: change in net claims on the Central Government by the domestic monetary sector plus change in discounted value of domestic government securities held by non-monetary sector; covers other net claims and change in government arrears on domestic debt service obligations. Excludes on-lending of the RCF to the budget, changes in balances of project accounts listed in Table 1, and face value of government securities issued to increase CBG capital under the 2018 CBG Act. - Adjuster: NDB targets (ceilings) will be adjusted downward/upward by the excess/shortfall of the dalasi equivalent of total budget support grants and loans received relative to program forecasts. Upward adjustment to compensate for shortfall in budget support disbursements may not exceed: - GMD 1.5 billion at end-June 2020; - GMD 1.0 billion at end-September 2020 and end-December 2020. - The downward adjustment will not apply to budget support grants and loans provided for COVID-19 emergency spending to the extent they raise total budget support and loans above program forecasts. - Program forecasts of external budget support grants in 2020 (Cumulative flow in millions of US dollars): - March 2020: 0.0 - June 2020: 40.0 - September 2020: 46.9 - December 2020: 62.1 - (Assumes disbursements of: US$ 30 million from the World Bank and € 9 million from the EU in Q2; SDR 5 million from AfDB in Q3; and € 13.5 million from the EU in Q4.) - Net Domestic Assets (NDA) of the CBG: - Definition: difference between reserve money and net foreign assets of the CBG. Reserve money = currency issued + deposits of commercial banks at CBG. Net foreign assets = foreign assets minus foreign liabilities. - For program monitoring, foreign assets/liabilities converted at end-December 2019 TMU rates: - 51.10 GMD/USD - 1.12 USD/EUR - 1.31 USD/GBP - 0.97 CHF/USD - 1.38 USD/SDR - 109.12 JPY/USD - Net Usable International Reserves (NIR) of the CBG: - Definition: usable reserve assets minus reserve liabilities. Usable assets include SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country’s reserve position at the IMF. Exclusions listed in TMU. - Adjuster: Quarterly NIR targets will be adjusted downward/upward by the US dollar equivalent of the shortfall/excess of total budget support grants and loans relative to program forecasts. Downward adjustment to NIR targets capped at: - US$30 million at end-June 2020; - US$20 million at end-September 2020 and end-December 2020. - The upward adjustment will not apply to budget support grants and loans provided for COVID-19 emergency spending to the extent they raise total budget support and loans above program forecasts. - In case of an allocation of SDRs by the IMF, NIR of the CBG will be adjusted upward by the amount of the SDR allocation. - New external debt payment arrears and reporting requirements: - External debt payment arrears: external obligations not paid when due per contractual terms. - External arrears exclusions and monthly reporting requirements are specified; non-accumulation of new external debt payment arrears by the central government is a continuous target. - Reporting timetables and supporting material: - Detailed reserve statement with end-month NIR transmitted within seven days of end of each month. - Net domestic assets and balance sheet of CBG transmitted monthly within four weeks of end of each month; current-rate balance sheet also to be submitted for analytical purposes. - Reporting on NDB forms part of consolidated budget report. *Source: 1gmbea2020001 - 1. Economic performance and program implementation thus far have been strong.* ### 15. Definition: This target refers to new non-concessional external debt contracted or ### 15. Definition: New Non-Concessional External Debt Contracted or Guaranteed by the Central Government ### Definition and scope - Refers to new non-concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian dalasi. - Applies to debt as defined in ¶8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014, and to commitments contracted or guaranteed for which value has not been received. - For program purposes, a guarantee arises from any explicit legal or contractual obligation of the central government to service a debt owed by a third-party debtor (involving payments in cash or in kind). - A debt is considered contracted when conditions for its entrance into effect have been met, including approval by the National Assembly. - Exclusions: - Loans or purchases from the IMF. - Concessional debts as defined in ¶16. - Any debt with maturity of one year or less. - Assessment: This performance criterion will be assessed on a continuous basis. ### Reporting and 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 (¶17). - MoFEA will forward, within four weeks of the Central Government contracting or guaranteeing any new external loan, the loan’s terms and conditions including interest rate, grace period, maturity, interest, fees, and principal payment schedule with all annexes (¶18). --- ### Concessionality of Debt (¶16) — Definition and Discounting Method ### Concessionality threshold - For program purposes, a debt is concessional if it includes a grant element of at least 35 percent. ### Grant element calculation - Grant element = difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt. - PV of debt at the time of contracting is calculated by discounting the future stream of payments of debt service due on the debt. ### Variable-rate debt treatment - For debts carrying a variable interest rate in the form of a benchmark interest rate plus a fixed spread, the PV is calculated using a program reference rate plus the fixed spread (in basis points) specified in the debt contract. ### Program reference rates and spreads - The program reference rate for the six-month USD LIBOR is 2.42 percent and will remain fixed for the duration of the program. - The spread of six-month EURIBOR over six-month USD LIBOR is -250 basis points. - The spread of six-month JPY LIBOR over six-month USD LIBOR is -250 basis points. - The spread of six-month GBP LIBOR over six-month USD LIBOR is -150 basis points. ### Special cases and discount rate - For debts with a grant element equal or below zero, the PV will be set equal to the nominal value of the debt. - The discount rate used is the unified discount rate of 5 percent set forth in Executive Board Decision No. 15248-(13/97). --- ### F. New Concessional External Debt Contracted or Guaranteed by the Central Government ### Definition and scope - Refers to new concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian dalasi. - Applies to debt as defined in ¶15. Concessionality is as defined in ¶16. ### Treatment of mixed loan/grant packages - For borrowing packages comprising both loan and grant components to meet the concessionality requirement (grant element of 35 percent), only the loan components will count toward the borrowing limit. ### Supporting material - Refer to ¶17 and ¶18 for reporting and documentation requirements. --- ### G. 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. - Trade credits are excluded from this target including the ITFC credits. ### 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 (¶23). --- ### H. Tax Revenue (Indicative Target) ### Definition - Tax revenue refers to taxes and duties collected by the Domestic Taxes Department and Customs and Excises Department of the Gambia Revenue Authority (GRA). - Tax revenue is the sum of revenues collected against all the tax codes outlined in Text Table 2. - Exclusions: Nontax revenue (licensing fees, fines, levies collected by the GRA) and levies collected by the GRA on behalf of other organizations (National Education & Technology Training Levy, AU Levy, ECOWAS Levy). ### Supporting material - A monthly report on revenue collected by the GRA will be transmitted within four weeks of the end of each month (¶25). --- ### I. Central Bank Credit to the Central Government at Non-Market Terms ### Definition - Refers to the consolidated balance on the Treasury Main Account, the Consolidated Revenue Fund, and other revenue accounts. - Covers all gross claims on the Central Government on the balance sheet of the central bank with terms (including maturity and yield) materially different from those prevailing in the market 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. - Assessment frequency: This performance criterion will be assessed at the end of each month. ### Supporting material - Reporting on new central bank credit to the government at non-market terms will form part of the monetary sector data described in ¶34 and ¶35 (¶27). --- ### J. Poverty-Reducing Expenditures ### Definition and coverage - Consist of 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 (¶29). --- ### Other Data Requirements and Reporting Standards — Key Items ### Prices - Monthly disaggregated consumer price index, including weights for each major category, with January 2020 = 100, transmitted within four weeks of the end of each month (¶31). ### Government accounts data - Monthly consolidated Central Government budget report covering: - Revenue data by major items; - External grants by type; - Details of recurrent expenditure; - Details of capital expenditure and net lending; - The overall balance, the primary and the basic balance; - Details of budget financing. - Transmission within four weeks of the end of each month (¶32). - End-week data on net domestic borrowing transmitted weekly within five business days of the end of each week (¶33). ### Monetary sector data - Balance sheet of the CBG prepared on the basis of current and program exchange rates, transmitted monthly within four weeks of the end of each month; must explicitly identify all claims on, and liabilities to, the government (¶34). - Consolidated balance sheet of commercial banks and a monetary survey transmitted within four weeks of the end of each month (¶35). - Daily data on reserve money transmitted weekly within five business days of the end of each week (¶36). ### Treasury bill and interbank market - Weekly data on amounts offered and issued, net issuance, over/under subscription, and yields transmitted weekly within five business days of the end of each week (¶37). - Daily data on interbank money market transmitted weekly within five business days of the end of each week (¶38). ### External sector data - CBG to forward within four weeks of the end of each month, data on transactions in official reserves (¶39). - Daily interbank market exchange rates to be transmitted on a weekly basis within five business days of the end of the week; weekly interbank market exchange rates transmitted monthly within seven days of the end of the month; CBG’s monthly average and end-month exchange rates transmitted within seven days after the end of each month (¶40). - Daily data on foreign exchange intervention transmitted weekly within five business days of the end of each week (¶41). - Detailed reserve statement with end-week data on net usable international reserves transmitted weekly within five business days of the end of each week (¶42). - Monthly data on volume of transactions in the foreign exchange market by each major group of participants transmitted within seven days of the end of each month (¶43). ### Public enterprises and arrears - MoFEA to forward within eight weeks of the end of each quarter, data on monthly cash flow of NAWEC, GNPC, GAMTEL, GAMCEL, GCAA, SSHFC, and NFSPMC (¶44). - MoFEA to forward within eight weeks of the end of each quarter, data on the stock of consolidated Central Government’s stock of payment arrears to NAWEC at the end of each month (¶45). --- ### COVID-19 Update and Policy Actions (Statement by the Staff Representative — March 23, 2020) ### Situation and immediate impact - 2 confirmed cases so far, including one fatality. - 128 people are now officially under quarantine. - The Gambian president ordered the closure of all air and land borders effective March 23, 2020 (closure does not affect movement of security personnel, and transportation of foodstuff and medical supplies). ### Program and financial position as of mid-March 2020 - As of March 19, net domestic borrowing of the government stood at GMD 666.48 million (compared with the end-March program ceiling of 1.65 billion). - Net usable international reserves of the central bank stood at US$191.54 million (compared with the end-March floor of US$170 million). - As of March 18, the average yield on the most used 364-days T-bills was 10.78 percent (365 bps higher than at end-2019). ### Outlook, requests, and assistance - Expected foreign exchange inflows will considerably drop as tourism has stopped, and domestic revenue performance will deteriorate. - The authorities have formally requested disbursement under the Rapid Credit Facility (RCF). - They consider that a minimum of 25 percent of the quota (SDR15.55 million) will be needed at this stage and further recourse to the RCF cannot be excluded. - World Bank intends to increase the emergency grant from US$5 million to US$10 million as part of the COVID-19 response. - Authorities are working with providers of sector-level project support in health, social protection, agriculture, tourism, and private sector development to refocus projects on immediate COVID-19 needs. ### Additional measures noted in Executive Director statement - The Central Bank of Gambia (CBG) reduced the monetary policy rate by 50 basis points to 12 percent, while the deposit facility rate was increased to 3 percent in February 2020. - Authorities are re-directing domestic spending to the health emergency and will require donor support. *Source: 1gmbea2020001 - 15. Definition: This target refers to new non-concessional external debt contracted or (IMF document).* ### 2. The Gambian authorities have made bold strides in stabilizing macroeconomic conditions ### 2. The Gambian authorities have made bold strides in stabilizing macroeconomic conditions ### Background and reform program - Strong reform efforts following the 2017 democratic transition and election of President Barrow, supported by a Rapid Credit Facility (RCF) and successive Staff Monitored Programs (SMP). - Reforms guided by the National Development Plan (NDP 2018-21) with objectives: promoting good governance and accountability, social cohesion, national reconciliation, and improving the business environment to foster private sector development and inclusive growth. - Request for a 39-month Extended Credit Facility (ECF) arrangement to consolidate gains, catalyze donor financing, support poverty reduction, facilitate an effective response to the COVID-19 virus outbreak, and strengthen public financial management, domestic revenue mobilization, and debt sustainability. ### Recent economic developments and outlook - Growth: - GDP growth of 6.5 percent in 2018. - GDP growth of 6 percent in 2019. - Growth supported by tourism, services, construction, private sector activity, and investment. - Downside risks: vulnerability to climate shocks and possible effects of the COVID-19 disease outbreak (noted as "COVID-9" in the source). - Inflation: - Inflation increased from 6.5 percent in 2018 to 7.7 percent in 2019, driven by a once-off increase in postal charges in March 2019 and higher food prices associated with a low food harvest. - Inflation is expected to trend downwards and converge at the CBG target of 5 percent by 2024, premised on exchange rate stability and well-anchored inflation expectations. - External sector: - Trade balance worsened in 2019 due to rapid expansion of imports, but the overall BOP position remained in surplus owing to high private capital inflows. - Gross official reserves improved from 2.7 months of import cover in 2018 to 3.4 months of imports in 2019. ### Fiscal policy and debt management - Revenue and targets: - Plan to gradually increase domestic revenue to around 15.2 percent of GDP by end-2025 from 14.4 percent of GDP in 2019, supported by growing taxable activity and improvements in revenue administration consistent with the TADAT recommendations. - Refinement of the tax policy framework and plan to establish a Tax Advisory Committee. - Expenditure control and PFM: - Plans to reduce subsidies to state-owned enterprises (SOEs) as corporate governance and PFM improve. - Expenditure prioritization, wage containment, and fiscal space from five-year debt re-payment deferrals to free resources for social outcomes and public investment. - Treasury Single Account (TSA) established; implementing 2019 PIMA recommendations; GPPA Act revision to improve public investment management. - Debt strategy: - Commitment to strong fiscal discipline and prudent external borrowing to bring down the public debt-to-GDP ratio below 60 percent by 2024. - Secured assurances of debt relief through 5-year restructuring and deferrals on debt re-payments. - New borrowings to be confined to concessional loans for high return projects, informed by borrowing plans; pursue a zero limit on new external arrears through implementation of arrears clearance policy. ### Monetary and financial sector policies - Monetary stance and rates: - Central Bank of The Gambia (CBG) pursued an expansionary monetary policy since 2017 to support private sector credit growth. - Monetary policy rate (MPR) cuts: from 23 percent in May 2017 to 12.5 percent in November 2019; further cut to 12.0 percent in February 2020. - CBG will deploy short term bills and pursue narrowing the interest rate corridor to guide the interbank market and dampen interest rate volatility; maintain a flexible exchange rate and limit FX interventions to liquidity management. - Central bank capitalization and capacity: - Initial injection made towards an increase in the bank’s authorized share capital consistent with the 2018 CBG Act; internal arrangements being finalized to meet the full capital requirement. - Plans to enhance liquidity forecasting and management capabilities with Fund technical support. - Banking system health and supervision: - Banking system described as strong, profitable and adequately capitalized with ample liquidity. - Non-performing loans (NPLs) rose from 3.3 percent of gross loans in 2018 to 4.5 percent at end-2019. - CBG will improve underwriting standards and loan classification regulations, transition to risk-based supervision, prepare a strategic plan to address weaknesses from the 2019 FSSR, and strengthen AML/CFT based on GIABA recommendations. - Prioritization of financial inclusion through formulation and implementation of a National Financial Inclusion Strategy. ### Structural policies, governance, and social issues - Governance reforms: - Draft Constitution under debate in Parliament; progress in transitional justice; human rights commission established; progress on recovery of stolen assets. - Anti-Corruption bill proposing an Anti-Corruption Commission in the National Assembly; strengthening criminal code and a new PPP law. - Authorities requested Fund TA to undertake a Governance Diagnostics to assess institutions, identify gaps, and propose recommendations. - Human trafficking: - Adopted a zero-tolerance policy; implementing the Trafficking in Persons Act through a detailed Action Plan. - Measures include deploying more investigators to the National Agency Against Trafficking in Persons, strengthening inter-agency collaboration, increasing security at border points, sensitization campaigns, and collaboration agreements with immigration authorities (Senegal signed; another planned with Nigeria). - Climate change and renewable energy: - Recognition of increased duration and frequency of weather-related events (droughts and floods) and vulnerability to sea level rise affecting tourism. - Increasing budgetary allocation towards renewable infrastructure and bringing on stream a solar plant by 2021. - Working with UNDP and the Green Climate Fund to strengthen capacities and resilience to climate change; donor support noted as essential. - SOE reform: - Draft SOE law focused on reducing executive interference and improving efficiency in service delivery. - Improved monitoring of SOE financial performance. ### Key policy priorities and commitments - Consolidate macroeconomic stability and restore investor confidence to sustain accelerated and inclusive growth. - Implement ECF-supported reforms to catalyze donor financing and respond to COVID-19 outbreak effects. - Strengthen PFM, domestic revenue mobilization, and safeguard debt sustainability. - Maintain prudent fiscal consolidation while protecting critical social and infrastructure spending. - Continue CBG recapitalization and strengthen banking supervision, AML/CFT, and financial inclusion. *Source: 1gmbea2020001* --- _Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1gmbea2020001.pdf_