## The Gambia — IMF staff report (content unit 1gmbea2021001)

## Source details

**Canonical URL:** [The Gambia — IMF staff report (content unit 1gmbea2021001)](https://www.imf.org/-/media/files/publications/cr/2021/english/1gmbea2021001.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2021/english/1gmbea2021001.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2021/english/1gmbea2021001.pdf.json)

---

### Executive summary and context
- IMF approvals and assistance:
  - 39-month Extended Credit Facility (ECF) arrangement approved March 23, 2020: SDR 35 million (56.3 percent of quota).
  - Rapid Credit Facility (RCF) disbursement approved April 15, 2020: SDR 15.55 million (25 percent of quota).
  - Debt service relief under the Catastrophe Containment and Relief Trust (CCRT) expected to total SDR 7.9 million (SDR 4.2 million already approved).
  - Authorities request ECF augmentation of SDR 20 million (32.15 percent of quota) and a waiver of nonobservance of a continuous PC (zero ceiling) on new external payment arrears of the central government.
- COVID-19 timeline and response:
  - First COVID-19 case on March 17, 2020.
  - As of December 12: 3,779 documented cases and 123 COVID-19-related fatalities.
  - Borders closed March 23; state of emergency declared March 27; borders reopened October 16; schools and airport reopened end-October.
  - National Assembly approved supplementary appropriation (SAP) GMD 2.85 billion (nearly 3 percent of GDP), including 0.5 percent of GDP for emergency health and food distribution and an economic stimulus package.
  - COVID-19-related procurement contracts published on GPPA website; committed ex-post audit by NAO.

### Macroeconomic performance and outlook
- 2020 outturn and drivers:
  - GDP growth in 2020 estimated at about zero.
  - Tourism: Q1 2020 arrivals fell 11.3 percent (y/y); by end-September tourism activity declined 54.5 percent (y/y).
  - Inflation: 5.6 percent (y/y) in October 2020; 5.2 percent (y/y) at end-September.
  - Private credit: contracted by 0.7 percent between end-2019 and September 2020.
- External sector and reserves:
  - Gross official reserves increased by 50 percent since end-2019 and reached US$350 million in November.
  - Reserves expected to rise to about US$390 million or 4.6 months of prospective imports (projection).
  - CBG gross reserves reached US$314 million at end-September (4.4 months of prospective imports).
  - Dalasi practically stable versus US$ and appreciated slightly in real terms.
- Medium-term outlook and projections:
  - Growth projected: 6.0 percent in 2021; average 6.5 percent per year in 2022–25.
  - Inflation expected to remain in the 5–6 percent range.
  - Staff view: pandemic will not affect potential output significantly; mobile banking adoption expected to boost TFP growth.
- Key risks:
  - Biggest downside risk: uncertain intensity and duration of the pandemic globally impeding tourism recovery.

### Program implementation and performance
- Quantitative and structural targets (through end-June 2020):
  - Six out of seven quantitative performance criteria (PCs) met for end-June 2020.
  - Missed continuous zero-ceiling PC on new external payment arrears: interest payment US$0.25 million to Export-Import Bank of China (GAMTEL) not settled on time; IsDB arrears called outstanding US$7.6 million at end-June.
  - Arrears cleared: Export-Import Bank of China arrear cleared June 19, 2020; IsDB arrears cleared in stages with final installment in early December.
  - Indicative floor for poverty-reducing spending not met at end-June (missed by 2 percent of the target per program definition), but actual level was about 30 percent higher when including emergency social spending.
  - All end-September indicative targets met; all structural benchmarks through end-June met; three end-September SBs initially not met due to surge in COVID-19 cases but subsequent corrective actions achieved objectives.
- Staff recommendation:
  - Staff supports waiver of nonobservance and augmentation of access; supports completion of the first review of the ECF-supported program and the financing assurances review.

### Fiscal performance, 2020 execution, and 2021 budget
- Mid-year (January–June cumulative, percent GDP) selected figures (Program / Est. / Diff.):
  - Revenue: Program 10.2; Est. 9.1; Diff. -1.1
  - Domestic revenue: Program 6.8; Est. 7.4; Diff. 0.6
    - Taxes: Program 5.9; Est. 5.5; Diff. -0.4
    - Non-tax: Program 1.0; Est. 1.9; Diff. 0.9
  - Grants: Program 3.4; Est. 1.7; Diff. -1.7
  - Expenditures: Program 11.1; Est. 11.4; Diff. 0.3
  - Net lending (+)/borrowing (–): Program -0.9; Est. -2.3; Diff. -1.4
  - Net incurrence of liabilities: Program 1.1; Est. 2.4; Diff. 1.3
  - Memorandum: Primary balance: Program 0.5; Est. -0.7; Diff. -1.2
- Key orientations for 2021:
  - 2021 draft budget aligned with medium-term fiscal framework; anchored on debt sustainability.
  - Fiscal space from 2020 performance, reforms, and concessional resources (including requested ECF augmentation) intended to: stimulate recovery; strengthen public health; enhance social safety net.
  - 2021 fiscal impulse (one-off spending composition):
    - 0.5 percent of GDP on compensation in health and education.
    - 0.7 percent of GDP in transfers (pandemic-related social interventions).
    - 0.8 percent of GDP in local capital spending.
- Budget arithmetic and staff estimates:
  - Budget overall deficit (budget figure): 5.7 percent of GDP.
  - Staff estimate overall deficit would not exceed 3.9 percent of GDP under agreed policies.
  - Implied need for net domestic borrowing: 0.8 percent of GDP (within program ceiling of 1.2 percent of GDP).
  - Nominal GDP (billions of dalasi): 98.0 (2020), 108.3 (2021).

### Monetary policy, financial soundness, and banking sector resilience
- Monetary policy actions:
  - CBG policy rate cut from 12.5 percent at end-2019 to 10 percent by end-May 2020.
  - Reserve requirement ratio cut from 15 to 13 percent.
  - Banks advised to postpone dividend distribution.
  - Policy rate unchanged at 10 percent at MPC meetings in late August and early December.
- Interest rates, liquidity, and inflation:
  - T-Bill yields fell; 365-day T-Bill yields fell from 12 percent in late May to below 8 percent in late July.
  - Broad money growth supported by net foreign assets: about 15 percent since end-2019 (other tables report M2 growth 21.8 percent y/y at end-September 2020).
- Financial soundness indicators (end-September 2020 / statutory requirements where noted):
  - Banks’ capital adequacy ratio: 36 percent (statutory requirement: 10 percent); industry figure elsewhere: 38.5 percent.
  - Industry liquidity ratio: 93.5 percent (minimum prudential requirement 30 percent).
  - Non-performing loans (NPLs): increased from 4.5 percent at end-2019 to 6.5 percent (concentrated in tourism and hospitality exposures).
  - Total banking sector assets increased 15.6 percent (y/y) through September 2020.
- CBG safeguards and governance:
  - Updated safeguards assessment completed July 2020 noted progress; joint audit of 2020 financial statements arranged; MOU with Auditor General proposed SB for end-March 2021.
  - Plan to increase CBG statutory capital to GMD 1 billion gradually (understanding with MoFEA).

### External sector, reserves, and exchange rate
- Balance of payments and external flows:
  - Current account deficit widened slightly in 2020; strong current transfers and remittances supported external resilience.
  - Overall balance improved driven by private capital transfers; FDI dropped.
- Reserves:
  - Gross official reserves: US$314 million at end-September 2020 (4.4 months of prospective imports).
  - Projected gross reserves: US$330 million by end-2020; US$389.8 million / about US$390 million by end-2021 (or 4.6 months of imports).
  - Series in staff tables: gross official reserves (millions of US$): 157.0, 225.0, 258.0, 330.0, 303.4, 389.8, 410.1, 426.5, 435.8, 451.3 (table series).
- Exchange rate policy and assessment:
  - CBG exchange rate policy remained neutral with limited purchasing interventions.
  - Updated Exchange Rate Assessment indicates REER broadly in line with fundamentals; staff favors REER undervaluation in the range 0.0–3.4 percent (model implies 9 percent but noted poor fit).
  - Reserve cover objective: maintain at least 4.5 months of imports; without augmentation reserve cover would drop to 4.2 months at end-2021.

### Debt sustainability, augmentation request, and financing
- Debt outlook (baseline):
  - PV of public debt expected to decline below 55 percent in 2024 (one year later than previous DSA projection).
  - Public debt (percent of GDP) series in staff tables: 87.0, 84.6, 80.1, 77.3, 75.9, 71.8, 65.3, 60.7, 55.9, ... (table series).
- Augmentation request and modalities:
  - Requested ECF augmentation: SDR 20 million (32.15 percent of quota) frontloaded for 2021.
  - Proposal: augment second disbursement from SDR 5 million to SDR 20 million and third disbursement from SDR 5 million to SDR 10 million — total SDR 30 million to be on-lent to the Treasury; servicing obligations defined in MoU between CBG and MoFEA.
  - IMF contribution with augmentation covers 27 percent of total financing needs in 2021 and brings total IMF contribution (excluding CCRT) from 19 percent in 2020 to 47 percent in 2021.
  - With augmentation, program fully financed for next 12 months (staff).
- Repayment capacity and access limits:
  - Repayments to the Fund projected to rise and peak at around SDR 14 million per year in 2027–29 (about 4 percent of exports of goods and services).
  - Proposed augmentation falls within annual and cumulative access limits under PRGT financing.
- Lending-into-arrears assessment (Annex III):
  - Staff assesses conditions met to provide financing notwithstanding outstanding arrears to Venezuela, given good-faith engagement and program policy anchors.
  - Financing judged essential to anchor macro stability and catalyze international support; staff approval conditioned on continued good-faith creditor engagement and program implementation.

### Downside scenario and policy recommendations
- Downside scenario (pandemic prolonged with tourist arrivals suspended until Q4 2021; no additional policy action):
  - Economic activity would stagnate in 2021; full recovery to pre-COVID-19 GDP delayed beyond 2025.
  - PV of public debt-to-GDP ratio would rise to about 70.3 percent of GDP in 2021 before regaining downward path.
  - Larger fiscal and external deficits, higher health spending and financing costs, lower revenue and export receipts.
  - Attainment of 55 percent PV debt-to-GDP threshold within medium term likely would require additional fiscal adjustment.
- Policy recommendations in downside:
  - Active policy response to meet emergency needs and stimulate the economy with high-growth-multiplier actions; rely as much as possible on foreign financing in the form of grants.
  - If tourism suffers permanent damage, emphasize diversification away from tourism (e.g., export-oriented agriculture, FDI-driven horticulture).
  - Mitigate risks from election-related spending and political tensions by maintaining fiscal discipline.

### Structural reforms, governance, and SOE reforms
- Tax policy and revenue mobilization:
  - Elimination of ad-hoc tax exemptions and restoration of full MoFEA authority to approve exemptions (SB for June 2021); expected yield 0.5 percent of GDP in 2021.
  - Indicative floor for tax revenue: GMD 11.4 billion (10.5 percent of GDP) for 2021.
  - Medium-term target: overall domestic revenue ~15 percent of GDP by 2025 (from just over 13.0 percent in 2020).
  - GRA CSP 2020–24 published; IT improvements (GamTaxNet enhancements; ASYCUDA World migration; Treasury Payment Gateway) underway.
- SOE reform and fiscal risk containment:
  - Audit findings: all 14 SOEs show issues including insolvency and governance weaknesses.
  - GGC and NAWEC are fiscally most important SOEs; government support to GGC and NAWEC in 2018–20 averaged 0.5–0.6 percent of GDP per year.
  - Measures: new management at GGC; organizational restructuring and performance contract at NAWEC; phased reforms and special audits of SOEs.
  - Revised SOE bill expected to be presented to NA before end-2021 (SB for end-December 2021).
- Public financial management and procurement:
  - IFMIS extension roadmap (SB for end-June 2021); Public Finance Bill to strengthen budgetary processes (SB for end-December 2021).
  - Revised GPPA Act submitted to NA (expected to curb executive waivers, limit single sourcing, require online publication of procurements).
  - Procurement 2020 statistics (selected):
    - Non-COVID-related procurement total: GMD 8,676,086,404 — Open Tendering GMD 2,736,724,697 (31.5%); Request for Proposals GMD 5,165,105,242 (59.5%); Single-Sourcing GMD 425,368,029 (5.0%).
    - COVID-related procurement total: GMD 825,786,446 — Open Tendering GMD 723,394,500 (87.6%); Single-Sourcing GMD 86,840,365 (10.5%).
    - "Contract for the COVID-19 Food Aid": GMD 723.4 million (0.8 percent of GDP or 88 percent of COVID-related contracts), procured through open tendering.
- Governance, transparency, and AML/CFT:
  - Anti-corruption bill submitted to NA; commitment to publish COVID-19 procurement contracts including beneficiary company owners; NAO to complete ex-post audit of COVID-19 spending by end-September 2021.
  - AML/CFT strengthening per GIABA recommendations; Gambian second Mutual Evaluation expected late 2021.

### Program monitoring, data, and conditionality
- Program reviews and targets:
  - Semi-annual reviews with proposed quantitative PCs for end-June 2021 and end-December 2021; intermediate quarterly indicative targets proposed.
  - Proposal to eliminate PC on CBG Net Domestic Assets (NDA) and treat quarterly NDA ceilings as indicative.
- Reporting and data requirements (selected):
  - Weekly: end-week data on net domestic borrowing transmitted within five business days.
  - Monthly: consolidated Central Government budget report, CBG balance sheet, consolidated commercial banks’ balance sheets and monetary survey within four weeks/30 days; poverty-reducing expenditure monthly within four weeks.
  - Frequency and deadlines specified for many indicators including T-bill auctions, interbank rates, reserves, SOE cash flows.
- Capacity development:
  - Focus on PFM, revenue administration, financial regulation and supervision; support from STA and AFRITAC West2 to improve fiscal reporting, national accounts, CPI, BoP, and monetary statistics.

*Source: Content unit 1gmbea2021001 — IMF staff report excerpts and tables.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- IMF approvals and assistance:
  - On March 23, 2020, the IMF Executive Board approved a 39-month Extended Credit Facility (ECF) arrangement in the amount of SDR 35 million (56.3 percent of quota) for The Gambia.
  - The Gambia benefited from a Rapid Credit Facility (RCF) disbursement of SDR 15.55 million (25 percent of quota) approved on April 15, 2020.
  - The Gambia is receiving debt service relief under the Catastrophe Containment and Relief Trust (CCRT) expected to total SDR 7.9 million (SDR 4.2 million of which has already been approved).
  - The authorities are seeking an ECF augmentation of SDR 20 million (32.15 percent of quota) and a waiver of nonobservance of a continuous performance criterion (a zero ceiling) on new external payment arrears of the central government.
- COVID-19 public health situation (Box 1):
  - First COVID-19 case on March 17, 2020.
  - As of December 12, there were 3,779 documented cases of COVID-19 in The Gambia, with 123 COVID-19-related fatalities.
  - Borders closed starting March 23; state of emergency declared March 27.
  - Reintroduction of lockdown measures in mid-July; daily infections peaked in mid-August and declined to single digits in early October.
  - Borders reopened on October 16; schools and airport reopened at end-October.
- Fiscal COVID-19 response and transparency:
  - National Assembly approved a supplementary appropriation (SAP) totaling GMD 2.85 billion (nearly 3 percent of GDP), which included 0.5 percent of GDP for possible emergency health and food distribution and an economic stimulus package.
  - Authorities published COVID-19-related procurement contracts on the Gambia Public Procurement Authority website and committed an ex-post audit by the National Audit Office.

### Macroeconomic performance and outlook
- 2020 performance and near-term drivers:
  - Economic growth is estimated to have been about zero in 2020, due mainly to a halt in tourism and slowdown in other activities; partially mitigated by an upswing in agriculture and sustained construction activity.
  - Tourism: Q1 2020 tourism arrivals fell 11.3 percent (y/y); by end-September tourism activity declined 54.5 percent (y/y).
  - Inflation: on a declining path since end-2019, reaching 5.6 percent (y/y) in October 2020; subsided to 5.2 percent (y/y) at end-September.
  - Private credit: contracted by 0.7 percent between end-2019 and September 2020.
- External sector and reserves:
  - Current account deficit widened slightly as export receipts from tourism dropped, offset by an increase in official transfers and remittances.
  - Overall balance of payments registered a larger surplus driven by strong inflows of private capital transfers while foreign direct investment dropped.
  - Gross official reserves increased by 50 percent since end-2019 and reached US$350 million in November.
  - Reserves are expected to rise further to about US$390 million or 4.6 months of prospective imports, in part thanks to projected ECF disbursements.
  - The dalasi was practically stable relative to the US dollar and appreciated slightly in real terms.
- Monetary and credit developments:
  - Buildup of net foreign assets in the banking system supported broad money growth at about 15 percent since end-2019, while credit to the private sector has been flat.
- Outlook and risks:
  - Growth projected to reach 6.0 percent in 2021, helped by a strong fiscal stimulus in the 2021 budget.
  - Biggest downside risk: uncertain intensity and duration of the pandemic globally impeding tourism recovery.

### Program implementation and performance
- Quantitative and structural targets:
  - Six out of seven quantitative performance criteria (PC) through end-June 2020 were met.
  - The missed PC related to a continuous zero-ceiling on new external payments arrears of the central government; the authorities subsequently cleared the arrears and implemented corrective measures.
  - The indicative floor for poverty-reducing spending was not met at end-June; all end-September indicative targets, including the floor for poverty-reducing spending, were met.
  - All structural benchmarks (SB) through end-June 2020 were met; the three structural benchmarks for end-September were not met due to a surge in COVID-19 cases, but adequate subsequent actions were taken to achieve their key objectives.

### Fiscal performance and the 2021 program
- Fiscal 2020 execution and mid-year performance (Text Table 1, January–June cumulative, percent GDP):
  - Revenue: Program 10.2; Est. 9.1; Diff. -1.1
  - Domestic revenue: Program 6.8; Est. 7.4; Diff. 0.6
    - Taxes: Program 5.9; Est. 5.5; Diff. -0.4
    - Non-tax: Program 1.0; Est. 1.9; Diff. 0.9
  - Grants: Program 3.4; Est. 1.7; Diff. -1.7
    - Budget support: Program 2.1; Est. 0.5; Diff. -1.6
    - Project grants: Program 1.3; Est. 1.2; Diff. -0.1
  - Expenditures: Program 11.1; Est. 11.4; Diff. 0.3
    - Expenses: Program 7.6; Est. 8.2; Diff. 0.6
      - Compensation of employees: Program 2.2; Est. 2.0; Diff. -0.2
      - Use of goods and services: Program 1.6; Est. 2.3; Diff. 0.7
      - Interest: Program 1.4; Est. 1.6; Diff. 0.2
      - Subsidies and transfers: Program 2.4; Est. 2.3; Diff. -0.1
    - Net acquisition of nonfinancial assets: Program 3.5; Est. 3.2; Diff. -0.3
      - Foreign financed: Program 2.7; Est. 2.6; Diff. -0.1
      - Gambia local fund: Program 0.9; Est. 0.6; Diff. -0.3
  - Net lending (+)/borrowing (–): Program -0.9; Est. -2.3; Diff. -1.4
  - Financing: Program 0.9; Est. 2.4; Diff. 1.5
    - Net incurrence of liabilities: Program 1.1; Est. 2.4; Diff. 1.3
      - Domestic: Program 0.3; Est. 1.4; Diff. 1.2
      - Net borrowing: Program 0.5; Est. 0.6; Diff. 0.0
      - RCF/ECF (Onlent): Program ...; Est. 1.1; Diff. 1.1
      - Change in arrears: Program -0.3; Est. -0.2; Diff. 0.0
      - Foreign: Program 0.9; Est. 1.0; Diff. 0.1
      - Exceptional financing (DSSI): Program ...; Est. 0.1; Diff. 0.1
  - Statistical discrepancy: Program 0.0; Est. -0.1; Diff. -0.1
  - Memorandum items:
    - Primary balance: Program 0.5; Est. -0.7; Diff. -1.2
    - Domestic primary balance: Program -0.2; Est. 0.9; Diff. 1.1
- Key budget and policy orientations for 2021:
  - The 2021 draft budget is aligned with the medium-term fiscal framework and anchored on ensuring debt sustainability.
  - Fiscal space from 2020 performance, reforms (tightening policies on tax exemptions and transfers to subvented agencies), and availability of concessional resources (including requested ECF augmentation) is intended to:
    - Stimulate post-pandemic recovery.
    - Strengthen the public health system.
    - Enhance the social safety net.
  - Broader reform agenda includes legislative reforms to strengthen public financial management, public procurement, and governance and financial performance of state-owned enterprises (SOEs).
- Specific emergency spending and financing notes:
  - Emergency spending accommodated: health (0.5 percent of GDP) and food distribution program in Q2 (0.7 percent of GDP), largely financed by IMF on-lent RCF disbursement.
  - Capital expenditure lagged relative to program at mid-year.
  - The authorities expect the end-December net domestic borrowing target (GMD 0.5 billion, corresponding to about 0.5 percent of GDP) will be met.

### Challenges, risks, and governance
- Main fiscal and structural risks:
  - Potential resurgence of the pandemic.
  - Structural weaknesses in SOEs reflecting unclear mandate and legacy of executive interference.
  - Heightened budgetary pressures in the run-up to the 2021 presidential election that will test commitment to macroeconomic discipline.
  - Political tensions related to promulgation of a new constitution could delay crucial reforms, including a new SOE bill.
- Governance and reform progress:
  - Notable progress in transitional justice and enforcement against trafficking in persons.
  - Strengthened PFM and accountability notably in SOE monitoring; sale of assets identified by the Janneh Commission initiated; interim TRRC report published; human rights commission established.
  - Constitutional reform process experienced a setback when the promulgation bill failed to secure the required majority in the National Assembly in September 2020.

### Staff recommendations and program decisions
- Staff supports:
  - The authorities’ requests for a waiver of nonobservance of a PC and augmentation of access under the ECF arrangement.
  - Completion of the first review of The Gambia’s ECF-supported program and the financing assurances review.

*Source: Content unit 1gmbea2021001 - EXECUTIVE SUMMARY (IMF).*

### 8.      Monetary policy has been accommodative (Annex I and Text Figure 2).  The CBG reduced

### Monetary policy has been accommodative

### Monetary policy actions and outcomes
- The CBG reduced its policy rate from 12.5 percent at end-2019 to 10 percent by end-May.
- Reserve requirement ratio cut from 15 to 13 percent.
- Banks were advised to postpone the distribution of dividends.
- These actions eased liquidity conditions, muted inflation prospects, and set the stage for a drop in T-Bill yields.
- At subsequent MPC meetings in late August and early December, the CBG made no further changes, citing a stable exchange rate and an increase in local food production as mitigating factors.

### Interest rates and inflation (text figure context)
- Headline inflation and core inflation tracked alongside yields on 364-day T-Bills, policy rates, interbank interest rates, and interest rates on the CBG deposit facility (2017–20).

### FX market operations (text figure context)
- CBG FX transactions (purchases), interbank FX transactions, and GMD/USD exchange rate (Index Sep-18=100) shown for 2017–20.

---

### Financial soundness and banking sector resilience

- Banks’ capital adequacy ratio stood at 36 percent at end-September (statutory requirement: 10 percent).
- Short-term liabilities were nearly fully covered by liquid assets at end-September.
- Non-performing loans (NPLs) increased from 4.5 percent of gross loans at end-2019 to 6.5 percent (primarily COVID-19-related, concentrated in tourism and hospitality exposures).
- Impact contained to a few small banks; affected clients were in good standing prior to COVID-19 and are expected to recover with tourism.
- The CBG allowed suspension of provisioning rules for these clients until end-2020 and is prepared to consider additional steps if tourism recovery is protracted.
- Interbank FX market replenished due to strong private FX inflows: an almost 60–percent y/y increase in the volume of net FX transactions was registered in September.
- CBG played an auxiliary role in resolving cross-border settlement frictions caused by suspension of cash shipments and difficulties experienced by Travelex.

---

### External sector and reserves

- Significant official and private remittance inflows helped external sector resilience.
- In the context of abundant FX, banks mainly sold FX to finance domestic clients and to participate in the T-Bills and bonds market.
- CBG exchange rate policy remained neutral with limited presence (usually on the purchasing side) in the FX market.
- CBG’s official gross reserves reached US$314 million at end-September (equivalent to 4.4 months of prospective imports).
- The dalasi/US$ rate remained stable.
- Updated Exchange Rate Assessment (Appendix I) indicates the real effective exchange rate is broadly in line with economic fundamentals.

---

### Program performance through June and structural actions

### Quantitative and indicative targets
- All end-June quantitative performance criteria (PCs) were met, with large margins after adjusting for lower-than-projected disbursement of budget support.
- Continuous zero-ceiling on new external payment arrears of the central government was breached:
  - An interest payment of US$0.25 million on a loan signed between the government and Export-Import Bank of China for GAMTEL was not settled on time.
  - Arrears amounting to US$7.6 million were called outstanding at end-June by the Islamic Development Bank (IsDB).
- MoFEA cleared the arrears to the Export-Import Bank of China on behalf of GAMTEL on June 19, 2020.
- Authorities reached an agreement with IsDB to clear the arrears in the course of 2020; the last installment was paid in early December.
- MoFEA instructed GAMTEL to service debt via an escrow account and to make provisions for future payments.
- Based on corrective actions and program strength, authorities requested a waiver of nonobservance of this performance criterion.

### Indicative targets and structural benchmarks
- Two out of three end-June indicative targets were met, including the floor for tax revenue despite marked weakening in Q2.
- Poverty-reducing spending fell short of the indicative floor by 2 percent (per program definition), but actual level was about 30 percent higher due to pandemic-related emergency health and social spending (not included in program definition).
- All end-September indicative targets, including the floor for poverty-reducing spending, were met.
- All four structural benchmarks (SBs) due through end-June 2020 were met:
  - Developed a monthly cashflow plan for the whole year and updated it monthly (end-March 2020 SB).
  - Cleaned up the taxpayers’ registry in the greater Banjul area.
  - Adopted project selection criteria ensuring strategic alignment, viability, affordability and readiness.
  - Published a strategic plan to address recommendations of the 2019 Financial Sector Stability Review (FSSR).
- All three end-September 2020 SBs were not met due to a surge in COVID-19 cases; subsequent implementation:
  - Updated Medium-Term Debt Strategy (MTDS) finalized and published in October.
  - Policy actions to launch reform of tax exemptions policy and rationalization of subvented agencies were articulated in the 2021 Budget Speech and clarified for the 2021 budget.
  - Next steps to be mapped out with IMF and World Bank technical assistance.

---

### Economic outlook and risks

### Near-term outlook (2020)
- With tourist arrivals in Q4 projected to attain at best 20 percent of Q4 2019 levels, GDP growth in 2020 is estimated to be close to zero.
- Favorable weather (ample seasonal rains) spurred rebound in agriculture; strong private FX inflows supported construction and commerce, improving economic outcome and tax revenue collection.
- Inflation is projected to edge up to 6.5 percent (y/y) by year’s end due to anticipated increases in food prices before the new harvest.

### Medium-term baseline
- Baseline assumptions include return of tourism to pre-pandemic levels starting in the second half of 2021.
- Growth expectations:
  - Rebound to 6.0 percent in 2021.
  - Average 6.5 percent per year in 2022–25.
- Inflation expected to remain in the 5–6 percent range.
- Staff view: pandemic will not affect potential output significantly; vacant tourism capacity will be available once health conditions allow travel resumption.
- Pandemic accelerated absorption of technological innovation (e.g., mobile banking), expected to boost TFP growth.
- Public investment expected to rebound, with a pipeline of projects stimulating growth above previously projected trajectory.
- Current account balance (including official grants) projected to deteriorate in 2021–22 as budget support drops after emergency support in 2020 ends; subsequently expected to improve gradually as tourism reaches potential.

### Debt and fiscal trajectory (baseline)
- Predicated on the COVID-19 emergency receding in 2021, the overall fiscal balance is expected to converge to the original ECF forecast by 2023.
- PV of public debt expected to decline below 55 percent in 2024.
- Baseline subject to upside risk if swift recovery and stronger-than-expected tourism rebound occur.

### Downside scenario
- If pandemic is prolonged and tourist arrivals suspended until Q4 2021 (downside scenario), assuming no additional policy action:
  - Economic activity would stagnate in 2021.
  - Full recovery to pre-COVID-19 GDP level delayed beyond 2025.
  - Higher health spending and financing costs, lower revenue and export receipts would widen fiscal and external current account deficits.
  - PV of public debt-to-GDP ratio would rise to about 70.3 percent of GDP in 2021 before regaining a downward path.
  - Attainment of 55 percent of GDP threshold within medium-term horizon would likely require additional fiscal adjustment.
- Policy recommendation in downside: active policy response to meet emergency needs and stimulate the economy with high-growth-multiplier actions; rely as much as possible on foreign financing in the form of grants.
- If pandemic causes more permanent damage to tourism, policy response should include greater emphasis on diversification away from tourism, e.g., export-oriented agriculture (FDI-driven and labor-intensive horticulture).
- Additional downside risks: potential policy slippages from election-related spending and political tensions.

---

### Fiscal policy discussions and the 2021 budget

### Policy focus
- Address short-term pandemic mitigation and support recovery within a medium-term framework to ensure debt sustainability.
- 2021 budget submitted to NA on November 6, 2020 aims to deliver a fiscal impulse of about 4 percent of GDP (measured by change in the primary balance).
- Stimulus is frontloaded in 2021 and primarily relies on one-off increases in public spending to be withdrawn starting in 2022.

### Composition of the 2021 fiscal impulse (one-off spending)
- 0.5 percent of GDP on compensation in health and education.
- 0.7 percent of GDP in transfers (pandemic-related social interventions).
- 0.8 percent of GDP in local capital spending.

### Revenue measures and targets
- Measures to tighten tax loopholes, rationalize exemptions, and tighten the exemption granting process (consistent with end-September SB).
- Indicative floor for tax revenue set at GMD 11.4 billion (10.5 percent of GDP).
- Medium-term objective: increase overall domestic revenue from just over 13.0 percent of GDP in 2020 to about 15 percent of GDP by 2025.

### Staff caveat on fiscal impulse
- In staff projections, the fiscal impulse in 2021 will be about 1½ percentage points of GDP lower due principally to:
  - Conservative tax revenue projections formed in Q3 when COVID-19 cases surged (current trend indicates stronger revenue performance).
  - Assumption of foreign-financed investment implemented at a pace above historically observed execution capacity.
- Authorities agreed revenue objectives could be revisited upward in mid-2021 if rebound materializes.

### Key elements of the 2021 Budget (Box 2 highlights)
- Revenue:
  - Domestic tax revenue projected at 10.5 percent of GDP (increase of 0.1 percent of GDP relative to 2020 outcome projected by staff).
  - Non-tax revenues expected to remain elevated due to continued sales of stolen assets.
  - Foreign grants expected to inch up by 0.1 percent of GDP as the decline in budget support is offset by accelerated project grants disbursement.
- Expenditure:
  - Sharp increase in capital spending outweighing projected moderation in current spending.
  - Contingency of up to 0.5 percent of GDP for additional compensation in education and health.
  - Increased appropriation for the Independent Electoral Commission estimated to cost about 0.3 percent of GDP.
  - Reduced subsidies to SOEs, containment of transfers to subvented agencies, and increased room for social support.
  - Increase in capital spending (including domestically financed) reflecting preparations for the OIC conference and other infrastructure projects.
- Financing:
  - On-lending of ECF funds to the Treasury (2.1 percent of GDP) critical to contain recourse to domestic borrowing, which authorities intend to keep below 1 percent of GDP, aided by expected privatization receipts in early 2021.
  - Staff note execution capacity constraints underpinning projections.

### Budget arithmetic and indicators (selected figures from The Gambia: 2021 Budget Estimates)
- Overall deficit in budget: 5.7 percent of GDP (budget figure).
- Staff estimates overall deficit would not exceed 3.9 percent of GDP under agreed policies, half financed by drawing on IMF resources (second and third disbursements under the ECF, augmented as proposed) on-lent to the Treasury.
- Implied need for net domestic borrowing: 0.8 percent of GDP (within program ceiling of 1.2 percent of GDP).
- Domestic primary balance: projected to improve from -1.7 percent of GDP (2020 proj.) to -1.2 percent of GDP (2021 budget).
- Primary balance: 1.3 percent (2020 proj.), -1.3 percent (2021 proj.?), -2.8 percent (?) — source table shows multiple columns; follow authoritative tables for exact mapping.
- Nominal GDP (billions of dalasi): 98.0 (2020), 108.3 (2021).

(Note: detailed tabular line items for revenue, expenditures, financing and memorandum items are presented in budget tables.)

---

*Source: The Gambia — IMF staff report (selected excerpts on monetary policy, financial soundness, external resilience, program performance, economic outlook, risks, and fiscal policy).*

### 18.      The 2021 budget is supported by measures to ensure the attainment of key reform

### 18.      The 2021 budget is supported by measures to ensure the attainment of key reform objectives

### A. Fiscal measures to support the 2021 budget
- Elimination of all ad-hoc tax exemptions and restoration of the full authority of the Ministry of Finance in approving tax exemptions (SB for June 2021).
- Implementation of the new tax exemption policy expected to yield 0.5 percent of GDP in revenue in 2021; oversight by a tax exemption committee and piloted by a tax policy unit at MoFEA.
- Strengthening of tax compliance efforts with technical assistance (TA) from the Fund and other partners, consistent with the revenue authority’s (GRA’s) strategic plan for 2020–24.
- Additional revenue measures, including:
  - realignment of the registration and reporting thresholds for selected tax items (increased voluntary VAT and capital gains tax threshold, and lower fringe benefit tax rate);
  - reduction of business registration fees for MSMEs, sole proprietors and investors;
  - reduction of excise tax rates on new vehicles;
  - increase of excise tax rates on tobacco products;
  - elimination of some distortionary taxes (e.g., the environmental tax of GMD 1 per employee).
- Preparation of a roadmap for extending the IFMIS to all flows from projects and subvented agencies’ accounts (SB for end-June 2021).
- Preparation, in consultation with IMF staff, and submission to the NA of a new Public Finance Bill to strengthen budgetary processes, including exceptional budget procedures, treasury management, internal controls and fiscal reporting (SB for end-December 2021).

### B. Public debt sustainability — outlook and borrowing plan
- The Gambia’s debt sustainability outlook remains qualitatively unchanged relative to the assessment made at the time of the RCF request (MEFP ¶29 and Text Figure 5).
- Public debt continues to be deemed sustainable, but external and overall debt distress ratings remain high.
- COVID-19 effects: decline in exports and weaker domestic revenue performance have amplified the magnitude of threshold breaches for external debt service-to-exports and external debt service-to-revenue ratios in the near term.
- Owing to lower GDP, the proposed ECF augmentation contributing to a rise in external debt, and a small increase in domestic debt in the near term, the PV of overall debt-to-GDP now drops below its indicative threshold (55 percent) by 2024, a year later than in the previous DSA.
- Authorities need to adhere to the external borrowing plan (Text Table 2). The revised borrowing plan has been expanded to allow space for the Banjul port expansion; the additional US$65 million in 2021 is reserved for this purpose, envisaging a mix of concessional and non-concessional loans (the latter to be combined with a grant of US$25 million as part of a concessional financing package) to be on-lent to the Gambia Port Authority (GPA).
- The composition and terms of the port financing package are still under discussion and will be clarified at a later stage.
- Servicing of debt for the Banjul port expansion is expected not to burden the treasury because the GPA is a profitable company deemed capable of generating the revenue stream needed to cover the debt service obligations.
- Text Figure 5: Debt Sustainability Indicators — (figure noted as source: IMF staff estimates).

### C. Debt management and medium-term outlook
- Public debt sustainability is underpinned by a medium-term fiscal outlook featuring consolidation and improvements in debt management (MEFP ¶¶31–32).
- Strengthening domestic debt management to lower costs and rollover risks by:
  - enhancing transparency through the quarterly debt bulletin and monthly publication of a rolling domestic debt issuance calendar for the ensuing three months (proposed SB for end-March 2021);
  - updating the Medium-Term Debt Strategy (MTDS).
- Authorities favor grant financing for foreign-financed projects and are strengthening capacity to improve debt recording and reporting (including effective use of the newly acquired software, Meridian).
- Finance ministry is strengthening oversight of contingent liabilities from SOEs to ensure timely debt service payments on SOE debt guaranteed by the government and prevent recurrence of external arrears.
- The debt sustainability outlook remains robust to the proposed revisions to the borrowing plan, including the assumed composition of the borrowing for port expansion.

### D. Debt relief and temporary financing measures
- The Gambia benefitted from debt service relief at the onset of the pandemic (MEFP ¶30 and Annex III).
- Participation in the G20 DSSI and IMF’s CCRT reduced debt service to official bilateral creditors and the IMF by US$4 million and SDR 4.2 million, respectively, allowing redirection of debt service payments to social and infrastructure needs.
- Authorities requested extension of the DSSI; if approved for the entire year of 2021, it would yield about US$3 million in debt service deferrals.
- On-lending of IMF disbursements under the RCF and prospectively under the ECF arrangement to the Treasury is helping meet large temporary financing needs at reduced interest costs.
- Authorities are disputing debt service liabilities to Libya and engaging in good faith efforts to resolve arrears to Venezuela but without success due to international sanctions (Annex III).

### E. SOE reform and fiscal risk containment
- Containment of SOE-related risks is critical given reliance of several SOEs on short-term external financing (mainly from the Islamic Trade Finance Corporation, ITFC) for liquidity support.
- A broader SOE reform will be enshrined in the revised SOE law, expected to be presented to the NA before end-2021 (proposed structural benchmark for end-December 2021).
- Government is taking steps to improve efficiency and financial performance of fiscally most important SOEs; key objectives include:
  - limiting executive interference;
  - strengthening the SOE governance framework with greater control by the ministry of finance to ensure management accountability and improved financial performance to contain fiscal risks.
- Staff will continue to work with authorities on specifics to be reflected in the SOE bill; objectives informed by findings of special audits of all 14 SOEs.

Box 3 — SOE Reform—Addressing Fiscal Risks (summary of findings and measures)
- Audit findings: all 14 Gambian SOEs show issues including insolvency, weak accounting systems, overstatement of assets, conflicting commercial and socio-economic objectives, corporate governance issues, and executive interference.
- GGC and NAWEC are the two fiscally most important SOEs; total government support to GGC and NAWEC in 2018–20 amounted, on average, to 0.5–0.6 percent of GDP per year.
- Measures for GGC:
  - Entire senior management replaced since February 2020; new team tasked with reforms and periodic reporting to a new board.
  - Payroll cleaned up: laying off 21 permanent employees at senior positions and above retirement age.
  - Internal audit unit and marketing department created; recruitment for heads advanced.
  - Engaged Reliance Financial Services for fertilizer purchases and distribution; sold 98 percent of 2020’s fertilizer stock.
  - Decommissioned old decorticating plant and hired smaller, more efficient machinery; increased groundnut price by 15 percent and will pay farmers through local banks upon delivery.
- Measures for NAWEC:
  - Organizational restructuring with appointment of new managing director and group directors.
  - Information Management System modernization with World Bank financial assistance.
  - New Board Charter approved and a strategic development plan for 2019–25 developed.
  - Signed a 5-year performance contract with clear financial, commercial, operational, and HR deliverables.
  - Management actions: installation of prepayment meters at all government’s non-essential services, establishment of a Revenue Protection Department, procurement of smart meters for major consumers.
- Remaining challenges:
  - GGC: investments required to replace facilities not updated in 50 years; staffing inadequacies; reliance on rainfall; poor product quality; executive interference; transportation issues; expensive financing; competition from Chinese and Senegalese traders.
  - NAWEC: significant investments needed to replace obsolete plant and machinery; heavy reliance on HFO-powered generators with excessive costs and expensive external borrowing; potential need to separate electricity generation/distribution from water and sewer services, as water/sewer services generate less than 20 percent of NAWEC’s income while causing significant financial burden.

### F. Monetary policy and exchange rate
- Monetary policy stance geared toward supporting economic recovery (MEFP ¶¶9 and 37, Annex I, and Tables 5–7).
- With subdued inflation, the CBG used instruments to ensure adequate liquidity as COVID-19 shaved off incomes and domestic demand.
- CBG reaffirmed accommodative stance at the recent MPC meeting and plans to maintain it; however, if inflation rises in context of abundant liquidity, CBG will stand ready to:
  - use instruments to narrow the interest rate corridor, including by raising the deposit rate to facilitate liquidity absorption;
  - adjust the reserve requirements ratio as needed.
- CBG committed to a flexible exchange rate regime to support alignment of the real effective exchange rate with fundamentals (MEFP ¶38).
- CBG expected to limit FX purchases in the interbank market to opportunistic interventions during seasonal peaks while making FX available for servicing foreign debt and central government external obligations.
- Reserves projection: gross reserves projected to reach US$330 million (or 4.6 months of prospective imports) by year’s end and increase further to about US$390 million by end-2021.

### G. Central Bank safeguards, balance sheet, and governance
- Updated safeguards assessment of the CBG (completed in July 2020) noted progress in strengthening legal framework, modernizing internal audit, and improving financial reporting.
- CBG financial position strengthened in recent years but capacity challenges remain; need for more active oversight by the CBG Board and the Audit Committee.
- Joint audit arrangements: CBG arranged joint audit (local audit firm and international audit firm with central banking experience) of 2020 financial statements.
- A Memorandum of Understanding will be signed with the Auditor General to formalize arrangement for audit of the CBG’s 2021 financial statements (proposed SB for end-March 2021).
- Safeguards assessment emphasizes strengthening the CBG’s balance sheet, including implementing the understanding with MoFEA to increase the CBG capital gradually to its statutory level, GMD 1 billion, and preserving CBG integrity and autonomy.
- Recent change in central bank leadership highlights transitional challenges in implementing provisions of the 2018 CBG Act pertaining to appointment terms for CBG management.

### H. Financial sector issues
- COVID-19 impacted asset quality in banks and nonbanks, varying with exposure to tourism (Table 11, MEFP ¶¶10 and 40–41, and MEFP Table 4).
- Indicators of bank capital adequacy, liquidity, and profitability look strong but mask weaknesses in a few small banks.
- CBG’s case-by-case approach to liquidity-crunched customers and advice to delay dividend distribution may have delayed onset of bad loans and reduced provisioning, helping keep capital adequacy high.
- CBG expected to avoid blanket weakening of prudential requirements and to implement 2019 FSSR recommendations, including sharper macroprudential tools.
- Planned measures:
  - develop a framework for banking sector stress testing (SB for end-June 2021);
  - strengthen supervision of Non-Bank Financial Institutions (NBFIs), including through the apex body of credit unions and village savings associations;
  - work with telecommunications companies to develop and strengthen confidence in mobile banking by tackling regulatory inefficiencies and fostering consumer awareness.

### I. Governance and other structural reforms
- Enhancing transparency in public procurement, use of public funds, and financial flows (MEFP ¶¶3 and 47–50, and Box 4).
- Procurement reforms:
  - A bill sent to the NA seeks to revise the GPPA Act to curtail executive interference and tighten emergency procedures.
  - Soon after GPPA Act approval, in early 2021, authorities will extend GPPA’s authority to all SOEs and publish all procurement contracts online, including details of all COVID-19-related contracts and owners of beneficiary companies (Box 4).
- Transparency in pandemic-related support:
  - creation of a sub-account in the Treasury Single Account (TSA) and a committee dedicated to this effort;
  - strengthened internal audit at the Ministry of Health (helped transparency of recent food distribution exercise);
  - an independent ex-post audit by the NAO of all COVID-19-related spending, first phase launched in September.
- Enactment of an anti-corruption bill currently in parliament to strengthen fight against rent seeking by public officials.
- Strengthening of the AML/CFT framework based on recommendations of GIABA to curb illicit financial flows.

### J. Structural reforms to support inclusive growth
- Authorities recognize role of strong business environment in promoting inclusive growth (MEFP ¶¶51–52) and are addressing structural challenges behind low Global Competitiveness Index ranking.
- Key actions:
  - expanding the seaport and refreshing port IT infrastructure to reduce congestion and lower charges;
  - upgrading IT infrastructure at the GRA to enhance transparency and boost tax compliance;
  - pursuing the energy roadmap, supported by the World Bank’s Gambia Electricity Renewal and Modernization Project and ECOWAS Regional Electricity Access Project, to diversify energy supply mix and expand access and affordability;
  - addressing hold-ups to enhanced digitalization and streamlining related regulatory environment.

*Source: 1gmbea2021001 - 18.      The 2021 budget is supported by measures to ensure the attainment of key reform objectives*

### 29.      Program performance will continue to be assessed through semi-annual reviews (MEFP

### 1gmbea2021001 - 29.      Program performance will continue to be assessed through semi-annual reviews (MEFP

### Program monitoring, targets, and flexibility
- Program performance will be assessed through semi-annual reviews (MEFP Tables 2 and 4).
- Quantitative PCs proposed for end-June 2021 and end-December 2021 as basis for the third and fourth ECF reviews.
- Intermediate quarterly indicative targets (ITs) are also proposed.
- To increase flexibility:
  - Proposal to eliminate the PC on net domestic assets (NDA) of the central bank and treat all quarterly NDA ceilings as indicative.
  - Rationale: with inflation firmly under control, NDA ceilings are of secondary importance; CBG’s lending to central government is statutorily restricted by the CBG Act.
- Proposed structural benchmarks (SBs) draw on continuation of the current agenda given limited implementation capacity during the pandemic and political economy challenges from forthcoming presidential elections.

### Public procurement reforms (Box 4)
- Objective: improve legal framework and strengthen the Gambia Public Procurement Authority (GPPA) to align local practices with best international standards—ensure transparency, eliminate executive interference, tighten single sourcing.
- COVID-19-related needs accelerated reform and publication of COVID-19-related procurement contracts (including names of companies and beneficial owners, contract amounts, procurement methods).
- Key statistics (2020, non-COVID-related and COVID-related procurement):
  - Non-COVID-related procurement by method (Amount (GMD) / Share (%)):
    - Single-Sourcing: 425,368,029 — 5.0
    - Open Tendering: 2,736,724,697 — 31.5
    - Restricted Tendering: 186,292,019 — 2.1
    - Request for Proposals: 5,165,105,242 — 59.5
    - Request for Quotations: 121,024,807 — 1.4
    - National Competitive Bidding: 29,212,788 — 0.3
    - Total: 8,676,086,404 — 100.0
  - COVID-related procurement by method (Amount (GMD) / Share (%)):
    - Single-Sourcing: 86,840,365 — 10.5
    - Open Tendering: 723,394,500 — 87.6
    - Request for Quotations: 15,551,581 — 1.9
    - Total: 825,786,446 — 100.0
  - The “Contract for the COVID-19 Food Aid” amounted to GMD 723.4 million (0.8 percent of GDP or 88 percent of COVID-related contracts) and was procured through open tendering.
  - Excluding that large contract, 85 percent of COVID-related significantly smaller contracts were single sourced, and 15 percent were procured through requests for quotations.
- Trends (procurement methods, 2018–2020):
  - Single-sourcing share: 21.4 percent (2018), 74.7 percent (2019), 5.0 percent (2020, non-COVID).
  - Restricted tendering: 36.6 percent (2018), 9.5 percent (2019), 2.1 percent (2020).
  - Open tendering recovered to 31.5 percent of total contract value in 2020 (13.3 percent in 2019; 36.7 percent in 2018).
  - Request for proposals became dominant in 2020: 59.5 percent (0.2 percent in 2018; 0.5 percent in 2019).
- Revised GPPA Act submitted to NA in November and scheduled for parliamentary consideration by end-2020.
  - Expected to: make GPPA sole procurement institution, eliminate executive waivers, limit single sourcing to exceptional circumstances (technical/exclusive rights or extension of existing competitively awarded contracts).
  - Risks: low technical capacity at GPPA, operational strain during COVID-19, potential impediments to effective implementation.

### Financing assurances, augmentation request, and modalities
- Confirmed budget support for 2021 (grants) from AfDB, the EU, and the World Bank (Table 10).
- Confirmed commitments imply a 50-percent drop (equivalent to about 2.5 percent of GDP) relative to 2020.
- Residual financing need could be bridged via fiscal adjustment and domestic financing, but augmentation of access under ECF and making second and third disbursements (altogether SDR 30 million, of which SDR 20 million through an augmentation) available for budget financing would help recovery and lower domestic financing recourse.
- Reserve cover objective: maintain at least 4.5 months of imports throughout the medium term.
  - Without the requested augmentation, reserve cover would drop to 4.2 months of imports at end-2021.
- Augmentation details:
  - Requested augmentation: SDR 20 million (32.15 percent of our quota) frontloaded to support 2021 financing needs.
  - Proposal: augment the second disbursement from SDR 5 million to SDR 20 million and the third disbursement from SDR 5 million to SDR 10 million.
  - Total two disbursements (SDR 30 million) to be on-lent to the Treasury with servicing obligations defined in an MoU between the CBG and MoFEA, along modalities used for the RCF loan approved April 15, 2020.
- IMF contribution:
  - Augmentation covers 27 percent of total financing needs in 2021.
  - Bringing total IMF contribution (excluding CCRT) from 19 percent in 2020 to 47 percent in 2021.
  - With augmentation, program is fully financed for next 12 months.

### Repayment capacity, access limits, and debt service projections
- With proposed ECF augmentation, repayments to the Fund are projected to rise and peak at around SDR 14 million per year in 2027–29.
  - SDR 14 million corresponds to about 4 percent of exports of goods and services.
- The Gambia has a good track record of Fund borrowing and repayment.
- CBG is strengthening financial safeguards (see ¶25).
- Proposed augmentation of access falls within annual and cumulative access limits under PRGT financing.

### Risks and mitigation
- Main risks:
  - Protracted global COVID-19 pandemic delaying tourism recovery, widening financing gaps, straining the financial sector.
  - Government fast-tracking infrastructure projects and possibly underbudgeting 2021 election costs could challenge fiscal strategy.
  - Recent parliamentary rejection of draft constitution affecting timing/content of legislative reforms (new SOE bill, revised Public Finance Act).
- Mitigation measures:
  - Vigilant program monitoring with emphasis on maintaining financial buffers and spending contingencies.
  - Coordinated efforts with development partners in support of the structural agenda.

### Capacity development and data
- Capacity development strategy to focus on:
  - PFM, revenue administration, financial regulation and supervision (drawing on 2019 FSSR).
- Support to continue from STA and AFRITAC West2 to improve:
  - Fiscal reporting, national accounts, CPI, BoP, and monetary sector statistics.

### Staff appraisal — key findings and policy recommendations
- Public health and reopening:
  - Authorities commended for effective COVID-19 response and support to vulnerable households.
  - Borders reopened on October 16, 2020.
- Fiscal policy:
  - 2021 budget fits within the medium-term fiscal framework and allows room for stimulus.
  - Fiscal tightening will be needed once recovery takes hold to ensure debt sustainability.
  - Authorities should keep within agreed fiscal envelope, including budgeted spending on planned presidential election and public projects.
  - Domestic tax collection remains below potential; any fiscal excesses could constrain essential social spending.
- SOE governance:
  - Need to strengthen SOE governance to minimize fiscal risks and improve service delivery.
  - All SOEs audited with governance and financial management deficiencies identified.
  - Steps by new management at NAWEC and GGC encouraging.
  - Staff advises parliamentary approval of the SOE bill and steadfast implementation of special audit recommendations.
- Debt sustainability and debt management:
  - The Gambia assessed at high risk of external and overall debt distress.
  - Newly adopted Meridian debt management system should be effectively used for updated debt projections and creditor-reconciled data to ensure timely debt service and prevent external arrears.
  - Crucial to observe program ceilings on net domestic borrowing and new concessional external debt contracted or guaranteed by the central government.
  - Authorities should strictly avoid non-concessional borrowing and seek mainly grant financing for priority projects.
  - Additional borrowing space under the program should be reserved for financing the critical Banjul port expansion.
- Transparency and COVID-19 spending:
  - Publication of COVID-19-related procurement contracts on GPPA website enhances public and donor confidence.
  - Resources from IMF’s RCF, CCRT, and G20 DSSI expected to be used for intended purposes.
  - Enhancement of internal audit at the health ministry is welcome.
  - Authorities committed to transmit all required information and receipts to NAO to enable a timely audit by end-September 2021 of all COVID-19-related spending.
- Central Bank of The Gambia (CBG) governance and monetary policy:
  - Expansionary monetary stance early in pandemic assessed as appropriate given muted inflation, weak credit growth, and increased foreign exchange availability.
  - CBG’s case-by-case approach helped prevent bankruptcies and facilitated credit access and reduced Treasury interest costs.
  - Going forward, CBG should be ready to narrow the interest rate corridor, possibly by adjusting both lending and deposit rates, to reduce intermediation costs and facilitate liquidity absorption if inflation reappears.
  - CBG should implement recommendations of the 2020 safeguards assessment to strengthen its balance sheet, maintain financial credibility, preserve instrument autonomy, and uphold appointment terms of CBG management as per 2018 CBG Act.
- External position:
  - The Gambia’s external position in 2020 broadly in line with fundamentals and desirable policies.
  - Current account deficit widened in 2020 due to COVID-19 shocks, but overall balance of payments remained strong.
  - Current account deficits expected to be covered by autonomous financial flows and concessional borrowing consistent with debt sustainability.
  - Authorities should maintain fiscal prudence and preserve exchange rate flexibility.
  - Augmentation of access under ECF needed to maintain strong external buffers in view of heightened vulnerabilities and anticipated rise in debt service burden after debt deferral period ends.
- Financial inclusion, intermediation, and supervision:
  - Pandemic boosted mobile banking and financial inclusion.
  - CBG should strengthen supervision of non-bank financial institutions, including apex body of credit unions and village savings associations.
  - Implementation of IMF’s 2019 FSSR recommendations needed to strengthen financial sector supervision, sharpen macroprudential tools, and improve crisis preparedness.
- Governance, business environment, and anti-corruption:
  - Enhancements needed to sustain perception of The Gambia as a good business destination: expand port facilities, improve water and electricity reliability, uphold rule of law, expand access to information, and establish an anti-corruption commission.
  - Passage of proposed Anti-Corruption bill urged; law should meet UNCAC requirements, including:
    - Establishment of financial disclosure system for senior public officials.
    - Creation of an independent Anti-Corruption Agency and appropriate criminalization of corruption offenses.
    - Anti-corruption agency should be appropriately resourced to investigate, prosecute, and confiscate assets.
- AML/CFT:
  - Authorities urged to accelerate improvements to laws and institutions to combat money laundering and financing of terrorism.
  - As a GIABA member, The Gambia expected to undergo its second Mutual Evaluation in late 2021.
  - Strong AML/CFT system critical to deterring corruption and organized crime, and to support financial investigations, asset seizure, prosecution, and asset confiscation.
  - Authorities should enhance AML/CFT risk-based supervision to ensure compliance of reporting entities with preventive measures, especially beneficial ownership and politically exposed persons.

*Source: 1gmbea2021001 - 29.      Program performance will continue to be assessed through semi-annual reviews (MEFP).*

### 45.      Staff recommends approval of the authorities’ requests for a waiver of nonobservance

### 1gmbea2021001 - 45.      Staff recommends approval of the authorities’ requests for a waiver of nonobservance

### IMF staff recommendation and program status
- Staff recommends approval of the authorities’ requests for a waiver of nonobservance of a continuous PC and for augmentation of access under the ECF arrangement.
- Staff supports completion of the first review of The Gambia’s ECF-supported program and the financing assurances review.

### Recent economic developments (2014–20)
- The COVID-19 pandemic has adversely affected growth; tourism arrivals have halted and private credit stagnated.
- T-Bill rates started declining in Q2 2020, as liquidity conditions eased.
- Large FX inflows improved reserve coverage of imports, and confidence in the dalasi strengthened.
- Inflation dropped in Q2 2020, as the effect of a one-off administrative price hike in early 2019 dissipated.
- The primary fiscal balance is projected to strengthen, thanks to the inflow of budget support.
- Private credit growth halted and NPLs increased as of end-September 2020, due to COVID-related localized asset deterioration. (NPLs for 2020 is September actual.)

### Fiscal and public debt developments (highlights)
- Large inflow of grants has compensated for lower domestic revenue collection in 2020 due to low economic activity.
- As a result, the overall fiscal deficit narrowed in 2020.
- Spending on subsidies and goods and services increased in 2020 in response to COVID-19 emergency.
- Total public debt-to-GDP ratio is expected to drop further in 2020.
- Domestic borrowing has been contained in 2020, due to on-lending of the RCF disbursement.

### Medium-term outlook (2019–25)
- Economic growth is expected to rebound in 2021, as tourism resumes.
- Average inflation is projected to drop toward the CBG's medium-term target of 5 percent.
- Expenditure restraint and improved tax effort offsetting the decline in donor support will drive projected fiscal consolidation in the medium term.
- Public borrowing requirements are expected to lower and the public debt-to-GDP ratio is projected to decline steadily.
- The external current account deficit is expected to narrow from 2023, once tourism recovers fully.

### Selected key statistics and projections (from tables and figures)
- Gross official reserves (millions of US$): 157.0, 225.0, 258.0, 330.0, 303.4, 389.8, 410.1, 426.5, 435.8, 451.3 (series shown in Table 1).
- Consumer prices (average): 6.5 percent (act.), projections and subsequent values shown in tables.
- Public debt (percent of GDP): 84.6, 80.1, 80.3, 76.4, 74.4, 70.4, 65.7, 60.8, 55.9 (series shown in Table 1 and projections).
- Domestic public debt and external public debt shares shown separately in Table 1 (domestic public debt and external public debt series present in the source tables).
- Net incurrence of liabilities and financing flows detailed in Table 2: net lending (+)/borrowing (–) figures include -6.1, -2.5, -2.6, -1.7, -1.8, -3.9, -6.1, -2.5, -1.2, -0.8, -0.2 (percent of GDP series in Table 3).
- Broad money growth and monetary aggregates (Table 5 and Table 6): Broad money growth rates shown as 20.0, 27.1, 12.8, 15.5, 12.5, 9.5 (percent series); reserve money and net foreign assets series provided in the monetary tables.
- Use of Fund resources (millions of SDRs) in Table 1 includes disbursements entries and indicates Of which: 2020 RCF ......15.6 15.6 and Of which: Proposed ECF Augmentation ... 20.0 (as presented in the table).

### Policy-relevant observations (from staff analysis and figures)
- Budget support inflows have materially strengthened the fiscal position in 2020; maintaining spending discipline and improving domestic revenue mobilization will be central to medium-term fiscal consolidation.
- Continued support for reserve accumulation and FX liquidity helped strengthen dalasi confidence; sustaining these buffers is important while tourism and external receipts recover.
- Financial sector vulnerabilities increased with pandemic-related asset deterioration; monitoring NPLs and supporting bank balance sheet resilience remain priorities.
- On-lending of RCF/ECF resources to the budget contained domestic borrowing in 2020; planned on-lending and proposed ECF augmentation feature in monetary and fiscal financing projections.

*Sources: The Gambian authorities; and IMF staff estimates, projections, and analyses as presented in the source unit.*

### 1. Current account

### 1. Current account

### A. Goods and services (levels, US$ millions)
- Goods and services (net): -307.2 -337.1 -384.4 -464.1 -409.5 -532.5 -578.8 -569.1 -567.3 -557.5
- Goods (net): -405.0 -453.6 -467.2 -458.5 -552.1 -533.8 -596.2 -622.4 -656.5 -680.4
  - Exports, f.o.b.: 115.0 142.7 127.1 127.4 164.0 156.8 176.7 201.5 217.6 230.5
  - Imports, f.o.b.: -520.0 -596.2 -594.2 -585.8 -716.0 -690.6 -772.9 -823.9 -874.1 -910.9
- Services (net): 97.8 116.4 82.8 -5.6 142.5 1.3 17.3 53.3 89.2 122.9
  - Services exports: 198.6 226.6 193.3 102.7 270.3 166.8 251.5 293.1 344.8 378.4
    - Of which: Travel income: 153.8 181.3 146.8 69.2 219.7 113.6 195.3 228.3 273.3 303.2
  - Services imports: -100.8 -110.2 -110.6 -108.3 -127.8 -165.6 -234.1 -239.8 -255.6 -255.6

### B. Income (net)
- Income (net): -29.1 -30.0 -30.7 -30.5 -31.7 -31.4 -31.5 -30.2 -31.1 -32.1
  - Income credits: 2.3 2.3 2.4 2.4 2.5 2.4 2.5 2.4 2.4 2.5
  - Income debits: -31.4 -32.4 -33.1 -32.9 -34.1 -33.8 -34.0 -32.6 -33.6 -34.6

### C. Current transfers
- Current transfers: 178.1 270.8 234.1 375.5 236.6 316.8 328.2 331.9 332.7 346.0
  - Official transfers: 15.0 55.8 72.0 89.1 52.3 43.7 52.0 47.6 42.7 45.2
    - Of which: COVID-19 assistance: ...... 10.0 26.4 ..................
  - Remittances: 150.8 202.7 149.8 274.2 171.8 260.5 263.3 270.0 275.5 285.8
  - Other transfers: 12.3 12.3 12.3 12.3 12.6 12.6 12.9 14.2 14.6 14.9

### D. Current account aggregates (US$ millions)
- Current account (excl. official transfers): -173.3 -152.2 -253.1 -208.1 -256.8 -290.8 -334.1 -315.0 -308.3 -288.9
- Current account (incl. official transfers): -158.3 -96.4 -181.1 -119.1 -204.6 -247.1 -282.1 -267.4 -265.7 -243.6

### E. Current account (percent of GDP) — selected series
- Goods and services: -18.5 -18.5 -20.7 -24.4 -20.1 -25.7 -25.7 -23.2 -21.2 -19.2
- Goods (net): -24.4 -24.9 -25.2 -24.1 -27.1 -25.8 -26.5 -25.3 -24.6 -23.5
  - Exports, f.o.b.: 6.9 7.8 6.8 6.7 8.1 7.6 7.8 8.2 8.1 7.9
  - Imports, f.o.b.: -31.3 -32.8 -32.0 -30.8 -35.2 -33.4 -34.3 -33.5 -32.7 -31.4
- Services (net): 5.9 6.4 4.5 -0.3 7.0 0.1 0.8 2.2 3.3 4.2
  - Services exports: 11.9 12.5 10.4 5.4 13.3 8.1 11.2 11.9 12.9 13.0
    - Travel income: 9.2 10.0 7.9 3.6 10.8 5.5 8.7 9.3 10.2 10.5
  - Services imports: -6.1 -6.1 -6.0 -5.7 -6.3 -8.0 -10.4 -9.8 -9.6 -8.8
- Current transfers (percent of GDP): 10.7 14.9 12.6 19.7 11.6 15.3 14.6 13.5 12.5 11.9
  - Remittances: 9.1 11.1 8.1 14.4 8.4 12.6 11.7 11.0 10.3 9.9
- Current account (excl. official transfers, percent of GDP): -10.4 -8.4 -13.6 -10.9 -12.6 -14.1 -14.8 -12.8 -11.5 -10.0
- Current account (incl. official transfers, percent of GDP): -9.5 -5.3 -9.8 -6.2 -10.0 -11.9 -12.5 -10.9 -9.9 -8.4

### 2. Capital and financial account
- Capital account (US$ millions): 38.0 73.5 101.0 102.6 115.0 104.7 121.8 130.3 128.7 128.9
- Financial account (US$ millions): 134.7 110.8 78.4 89.5 121.1 150.5 169.2 152.1 152.0 137.7
  - Foreign direct investment: 90.8 93.9 64.7 77.9 84.0 116.7 124.5 110.7 112.2 111.2
  - Portfolio investment: 4.2 4.1 3.9 4.0 3.9 4.0 4.3 4.7 5.1 5.5
  - Other investment: 39.7 12.8 9.8 7.6 33.2 29.8 40.5 36.8 34.7 21.0
- Capital and financial account (US$ millions): 172.7 184.3 179.4 192.1 236.1 255.1 291.0 282.4 280.7 266.6

- Errors and omissions: 6.5 -13.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Overall balance: 20.9 74.3 -1.7 73.0 31.5 8.0 8.9 15.0 15.0 23.0

### Financing and reserves
- Net international reserves (increase -): -20.9 -74.3 -2.7 -81.5 -37.0 -15.4 -10.0 -15.0 -15.0 -23.0
- Change in gross international reserves: -13.0 -68.0 -33.0 -105.0 -45.4 -59.8 -20.3 -16.4 -9.3 -15.5
- Use of IMF resources (net): -7.8 -6.3 30.3 23.5 8.4 44.4 10.3 1.4 -5.7 -7.5
  - Disbursements: 0.0 0.0 35.3 28.6 13.9 50.0 14.4 7.2 0.0 0.0
    - Of which: 2020 RCF: ...... 21.4 21.6 ..................
    - Of which: Proposed ECF augmentation: ............... 28.6 ............
  - Repayments: -7.8 -6.3 -5.0 -5.0 -5.5 -5.7 -4.0 -5.9 -5.7 -7.5
- Exceptional financing: ...... 4.4 8.4 5.5 7.4 1.1 0.0 0.0 0.0
  - Of which: CCRT debt relief: ...... 4.4 4.4 4.4 5.5 5.7 1.1 0.0 0.0 0.0
  - Of which: DSSI: ......... 4.0 ... 1.7 0.0 0.0 0.0 0.0

### Memorandum items (levels)
- Gross international reserves, US$ millions: 157.0 225.0 258.0 330.0 303.4 389.8 410.1 426.5 435.8 451.3
- Months of current year's imports of goods and services: 3.0 3.8 4.4 5.7 4.3 5.5 4.9 4.8 4.6 4.6
- Months of next year's imports of goods and services: 2.7 3.9 3.7 4.6 4.1 4.6 4.6 4.5 4.5 4.5
- Net international reserves, US$ millions: 125.5 187.4 188.3 268.9 222.7 284.3 294.3 309.3 324.3 347.3
  - Months of current year's imports of goods and services: 2.4 3.2 3.2 4.6 3.2 4.0 3.5 3.5 3.4 3.6
  - Months of next year's imports of goods and services: 2.1 3.2 2.7 3.8 3.0 3.4 3.3 3.3 3.3 3.4
- Exports of goods and services: 313.6 369.3 320.4 230.1 434.3 323.6 428.2 494.6 562.4 608.9
- Imports of goods and services: -620.8 -706.4 -704.8 -694.2 -843.8 -856.1 -1007.0 -1063.7 -1129.7 -1166.4
- GMD per U.S. dollar, period average: 48.4 50.3 ........................ 

### External financing needs and sources (selected, US$ millions)
- Total financing requirement: -310.2 -354.7 -325.1 -381.1 -386.2 -366.8
  - Current account deficit (excl. official transfers): -253.1 -208.1 -256.8 -290.8 -334.1 -315.0
  - Public debt amortization: -19.2 -36.6 -17.4 -25.0 -27.7 -29.6
  - Repayment to the IMF: -5.0 -5.0 -5.5 -5.5 -4.0 -5.8
  - Change in official reserves: -33.0 -105.0 -45.4 -59.8 -20.3 -16.4
- Total financing sources: 198.6 207.1 253.5 273.9 318.6 312.0
  - Capital transfers: 101.0 81.0 115.0 98.6 121.8 130.3
  - Foreign direct investment (net): 64.7 77.9 84.0 116.7 124.5 110.7
  - Portfolio investment (net): 3.9 4.0 3.9 4.0 4.3 4.7
  - Public sector debt financing: 47.5 36.2 50.0 59.7 69.2 67.1
  - Other net capital inflows: -18.5 8.0 0.6 -5.0 -1.1 -0.8
- Total financing needs (after sources): 111.7 147.7 71.6 107.2 67.5 54.9
  - Budget support (grants): 62.0 89.1 52.3 43.7 52.0 47.6
  - IMF disbursements: 35.3 28.6 13.9 50.0 14.4 7.2
    - Of which: Proposed ECF augmentation: ......... 28.6 ...... 
  - Exceptional financing: 4.4 8.4 5.5 7.4 1.1 0.0
    - Of which: CCRT debt relief: 4.4 4.4 4.4 5.7 1.1 0.0
    - Of which: DSSI: ... 4.0 ... 1.7 0.0 0.0
- COVID-19 assistance (memorandum): 10.0 48.0 ... 6.1 ......

### Projections and indicators of capacity to repay the Fund (selected)
- Outstanding Fund credit, in millions of SDRs: 26.1 43.0 74.1 81.3 82.2 78.3 73.2
- Outstanding Fund credit, in millions of US$: 36.9 59.4 103.0 116.2 118.2 113.2 106.1
- Nominal GDP (millions of US$): 1,818 1,905 2,068 2,252 2,458 2,671 2,900
- Exports of goods and services (millions of US$) (memorandum): 240.9 138.1 191.0 278.1 318.6 369.7 406.0
- Gross International Reserves (millions of US$) (memorandum): 225.0 330.0 389.8 410.1 426.5 435.8 451.3

*Sources: The Gambian authorities; and IMF staff estimates and projections.*

### Annex III. Lending into Arrears to Official Bilateral Creditors

### Annex III. Lending into Arrears to Official Bilateral Creditors

### Lending-into-arrears decision
- 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.
- Rationale for approving financing despite arrears:
  - Prompt financial support from the Fund is considered essential and the member is pursuing appropriate policies. 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 long-standing debt service pressures, building on improvements in the medium-term debt profile as a result of debt service deferrals.
  - The Gambian authorities’ 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.
- Good-faith efforts to reach agreement with Venezuela:
  - Gambian authorities 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 and the Gambian authorities are committed to continued good faith efforts until all remaining arrears are resolved.
  - The terms offered 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.
- Funding-pack mobilization assessment:
  - 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, given strong international community support for The Gambia and the authorities’ efforts to resolve the arrears in a timely manner.

### Key policy implication
- Financing from the Fund is judged essential to anchor macro stability, support debt sustainability, catalyze international support, and create fiscal space for growth and poverty reduction under the ECF-supported program for 2020–23.

### Endnote
- Staff’s approval is conditioned on continued good-faith creditor engagement and program implementation consistent with the ECF financing and debt objectives.

### External Sector Assessment — Overall assessment and outlook
- Overall Assessment:
  - Based on preliminary data and EBA-lite results, the external position of The Gambia in 2020 was broadly in line with the level implied by fundamentals and desirable policies.
  - Current account deficit at 6.2 percent of GDP, after adjusting for cyclical and temporary pandemic-related factors, was within 0.0–0.5 percent of GDP below the estimated norm, implying real effective exchange rate undervaluation in the range of 0.0–3.4 percent.
  - Under the assumption of multilateral consistency, this assessment reflects the estimated deterioration in global factors being relatively sharper than the change in The Gambia-specific factors.
  - The external position is expected to deteriorate significantly in 2021.
- Potential policy responses:
  - Preservation of exchange rate flexibility in the context of continued structural reforms and fiscal consolidation will help sustain The Gambia’s external position.
  - Maintaining strong external buffers is essential, considering heightened vulnerabilities due to the COVID-19 shock and in anticipation of the conclusion of debt deferrals.

### Foreign assets and liabilities — position and trajectory
- Background:
  - The Gambia’s net international investment position (NIIP) has gradually improved since 2014, reaching -49.6 percent of GDP in 2020.
  - External debt and FDI liabilities have been the primary drivers of the NIIP, with a sizeable share denominated in US dollars.
  - Gross liabilities in 2020 were 70.2 percent of GDP, half of which were debt liabilities.
  - FX reserves dropped to their lowest level in 2016, then rose due to strong FX inflows from remittances, private capital transfers, and budget support grants.
- Assessment:
  - The Gambia’s external position is projected to further improve in the medium term, reflecting mainly efforts to ensure external debt sustainability.
  - Improvement is buoyed by limits on external borrowing under the current ECF arrangement and continued build-up of FX reserves buffers by the Central Bank of The Gambia (CBG).

### Current account — background and assessment
- Background:
  - The current account balance deteriorated in 2020 due to the COVID-19 shock and the resulting halt in foreign tourism.
  - Deterioration was muted by strong current transfers, disbursement of COVID-related budget support, and a surge in remittances.
  - This follows substantial improvement in 2019 driven by tourism pickup, remittances growth, and increased budget support grants.
- Assessment:
  - EBA-lite CA approach produces a current account gap of 0.5 percent of GDP, after including adjustors for temporary pandemic impacts on tourism, oil imports, and remittances.
  - This gap is associated with an adjusted current account deficit of 3.4 percent of GDP against a norm of -4.0 percent of GDP.
  - Compared to the 2017 External Sector Assessment, the CA gap has narrowed, reflecting ongoing alignment with fundamentals and desirable policies.
  - The CA gap of 0.5 percent of GDP is consistent with a REER undervaluation of 3.4 percent.

### Real exchange rate (REER)
- Background:
  - The REER initially depreciated in the wake of the pandemic, but more recently reversed toward real appreciation, consistent with trends over the past 3 years due to strong inflows from development partners, remittances, and tourism income.
  - Going forward, REER is expected to continue upward as competitiveness strengthens through structural reforms and investment.
- Assessment:
  - The REER model implies an undervaluation of 9 percent, but given its poor fit for The Gambia (historically producing large residuals), staff assess the REER is broadly in line with fundamentals as suggested by an undervaluation in the range of 0.0–3.4 percent, consistent with the CA gap (excess surplus) in the range 0.0–0.5 percent of GDP.

### Capital and financial accounts — flows and assessment
- Background:
  - Capital account in 2020 strengthened to 5.4 percent of GDP due to increased disbursements of project (capital) grants.
  - Financial account deteriorated moderately to 4.7 percent of GDP due to a drop in project loan disbursement and FDI.
- Assessment:
  - A strong capital and financial account, together with current account improvements, raised the overall balance-of-payments surplus.
  - Net capital and financial flows are expected to be sustained over the medium term.

### FX intervention and reserves level — background and assessment
- Background:
  - Gross international reserves stood at US$314 million at end-September 2020, which is 16 percent of GDP or 4.4 months of prospective imports.
  - Gross reserves rose from a trough of US$60 million in 2016, driven by external financial assistance (including IMF), CA improvement, and private FX inflows, allowing the CBG to rebuild buffers.
  - Gross reserves were expected to reach US$330 million by end-2020.
  - The 2019 AREAER classifies The Gambia’s exchange rate arrangement as an “Other managed arrangement”, with a monetary aggregate target.
  - Since 2017, the CBG has intervened only to purchase FX from the interbank market, supplying domestic liquidity, dampening short-term exchange rate volatility, and contributing to reserve buildup.
- Assessment:
  - Using the Fund’s ARA-CC approach with a cost of holding reserves of 3 percent, the estimated adequate level of reserves is 3 months of imports.
  - Staff assess that the CBG should be holding foreign exchange reserves corresponding to at least 4.5 months of prospective imports of goods and services, given vulnerability to BoP shocks and sharply rising external debt service projected at the end of the debt deferral period in 2025.

### Drivers of external debt accumulation (selected narrative)
- Drivers include residual, capital transfers, endogenous debt dynamics, net FDI, non-interest current account deficit, and change in nominal external debt. These factors jointly influence external debt trajectories and the medium-term financing needs, particularly around the 2025 end of debt-deferral period.

### Letter of Intent — program requests, commitments, and transparency measures
- Program support and recent Fund actions:
  - 39-month ECF arrangement approved on March 23, 2020 in the amount of SDR 35.0 million (56.3 percent of quota).
  - IMF Executive Board approved on April 13, 2020 debt relief under the CCRT covering up to SDR 7.93 million (12.75 percent of quota).
  - Disbursement of SDR 15.55 million (25 percent of quota) under the Rapid Credit Facility (RCF) on April 15, 2020.
  - DSSI support supplemented debt service deferral agreements concluded with most bilateral and plurilateral creditors in 2019.
- Request for augmentation:
  - To secure financial resources for recovery, the Government requests an augmentation of the second and third disbursements under the ECF arrangement by a total of SDR 20 million (32.15 percent of quota).
  - Augmentation would be combined with the two initially scheduled disbursements of SDR 5 million each to be made available upon completion of the first and second reviews in the amount of SDR 20 million and SDR 10 million, respectively.
  - The full amount of SDR 30 million would be on-lent to the Treasury to help advance structural reforms and reduce recourse to domestic borrowing.
- Program performance and fiscal intentions:
  - All but one quantitative PCs and all but one (in June) indicative targets were observed through end-September 2020.
  - Continuous zero ceiling on new external payment arrears of the central government was missed in early 2020; arrears incurred by the telecommunications company have been settled and safeguards put in place.
  - All structural benchmarks through end-June 2020 were implemented; agreed policy actions were taken to achieve end-September SBs missed due to pandemic disruptions.
  - 2021 budget envisages high spending on social support and health, contingency provisions, and infrastructure investment; includes measures to strengthen governance in procurement, tax policy, wages and pensions, and public financial management; supports transitional political and justice reforms and targeted election-related outlays.
- Central bank autonomy and safeguards:
  - Commitment to central bank autonomy as enshrined in the 2018 CBG Act; strict adherence to rules on use of central bank overdraft and strengthened policy coordination with Ministry of Finance and Economic Affairs.
  - Implementation of recommendations of the 2020 safeguards assessment to strengthen CBG’s balance sheet, integrity, and autonomy.
- Transparency and accountability measures:
  - Strengthened internal audit at the Ministry of Health; National Audit Office instructed to complete audit of all COVID-19-related spending by mid-2021 and submit a report to parliament for deliberation and publication.
  - All COVID-19-related procurement contracts concluded through August, including company names and beneficiary owners, published on the Gambia Public Procurement Agency (GPPA) website; record to be updated semi-annually.
- Specific request to the IMF:
  - The Government requests a waiver of nonobservance of the continuous PC on non-accumulation of new external payment arrears by the central government at end-June, approval of augmentation of access under the ECF arrangement by SDR 20 million (32.15 percent of quota), and completion of the first review to enable disbursement of the augmented second tranche totaling SDR 20 million.
  - Upon Executive Board approval, disbursement would be on-lent to the government and credited to the Treasury’s account at the CBG; a MoU between the Ministry of Finance and Economic Affairs and the CBG will define roles and responsibilities for servicing related Fund obligations.
- Program consultation and publication consent:
  - Government will consult with the IMF prior to adopting additional measures or revising MEFP policies and will continue to provide information needed for monitoring.
  - Government consents to publication of the IMF staff report, the letter, the MEFP, TMU, updated DSA, and ESA upon Board approval of the first review completion.

### Program documentation and attachments
- Attachments listed by the Government: I. Memorandum of Economic and Financial Policies (MEFP); II. Technical Memorandum of Understanding (TMU).
- The attached MEFP updates the MEFP underpinning the ECF arrangement and the RCF disbursement, summarizes achievements, and outlines policies for pandemic response and structural reform to foster inclusive growth.

### Key statistics and quantitative indicators (as reported)
- ECF arrangement amount: SDR 35.0 million (56.3 percent of quota)
- CCRT debt relief: SDR 7.93 million (12.75 percent of quota)
- RCF disbursement: SDR 15.55 million (25 percent of quota)
- Requested augmentation: SDR 20 million (32.15 percent of quota)
- Total full amount to be on-lent to Treasury after augmentation and scheduled disbursements: SDR 30 million
- Current account deficit (2020, headline): 6.2 percent of GDP
- Adjusted current account deficit: 3.4 percent of GDP
- Norm for adjusted CA: -4.0 percent of GDP
- Current account gap: 0.5 percent of GDP
- REER undervaluation (model): 9 percent (staff favors range 0.0–3.4 percent)
- NIIP (2020): -49.6 percent of GDP
- Gross Assets (2020): 20.5 percent of GDP
- Debt Assets (2020): 11.5 percent of GDP
- Gross Liabilities (2020): -70.2 percent of GDP
- Debt Liabilities (2020): -32.2 percent of GDP
- Gross international reserves (end-September 2020): US$314 million = 16 percent of GDP = 4.4 months of prospective imports
- Recent trough of gross reserves (2016): US$60 million
- Projected gross reserves (end-2020): US$330 million
- ARA-CC assumed cost of holding reserves: 3 percent
- ARA-CC estimated adequate reserves: 3 months of imports
- Staff-assessed adequate reserves (given vulnerabilities): at least 4.5 months of prospective imports
- Debt deferral period end: 2025

*Source: IMF staff report materials for The Gambia — Annex III, Appendix I, Appendix II, and Attachment I (Memorandum of Economic and Financial Policies).*

### 1.      The COVID-19 pandemic has affected The Gambia severely, shifting government

### 1gmbea2021001 - 1.      The COVID-19 pandemic has affected The Gambia severely, shifting government

### Pandemic impact and policy priorities
- The Gambia registered its first confirmed COVID-19 case on March 17.
- Containment measures kept cases low until late June; progressive relaxation from late June led to a surge in confirmed cases including among healthcare workers and high-level government officials.
- The surge strained the health system and government response capacity, dampening prospects for a swift economic recovery.
- Government priorities shifted toward containing the pandemic and mitigating its impact while maintaining program objectives focused on:
  - maintaining debt sustainability,
  - strengthening domestic revenue mobilization,
  - tackling poverty.

### External support and fiscal response
- A health emergency support package equivalent to 0.5 percent of GDP was mobilized from existing budget resources.
- World Bank health emergency support: US$10 million (equivalent to another 0.5 percent of GDP).
- Nationwide food distribution program: 0.9 percent of GDP, covering 84 percent of households, drawing on RCF support from the IMF.
- World Bank additional support for social safety nets and education: US$13.5 million.
- Economic recovery package articulated in a Supplementary Appropriation (SAP) approved by the National Assembly in July: equivalent of 3 percent of GDP, including an additional 0.5 percent COVID-19 emergency spending.
- The bulk of the SAP focused on support for the tourism sector, agriculture, and infrastructure investment.
- The SAP was prepared prior to the late July surge; SAP expected to be implemented as envisaged, but COVID-19 response could be augmented in 2021 if cases resurge, including by tapping requested augmented IMF financial support.

### Monitoring, transparency, and procurement oversight
- A dedicated sub-account was opened in the Treasury Single Account (TSA) to monitor pandemic-related spending.
- Allocation decisions for pandemic resources taken by a committee representing all entities involved in procurement to payment.
- Internal audit at the Ministry of Health was strengthened; all pandemic-related spending to be subject to an independent ex-post audit by the National Audit Office (NAO), with the first phase launched in September 2020.
- COVID-19 spending data published in monthly expenditure reports on the MoFEA’s website.
- Gambia Public Procurement Agency (GPPA) published a list of all COVID-19-related procurement contracts signed between March and August and will update this record semi-annually.

### Transitional justice, constitutional process, and political timeline
- Recent advances:
  - submission to the National Assembly (NA) of the anti-corruption bill;
  - increase in non-tax revenue from sale of stolen assets identified by the Janneh Commission;
  - completion of the TRRC interim report; final report expected by end-July 2021, paving way for reparations and prosecutions;
  - establishment of a human rights commission and publication of its 2019 annual report;
  - progress on security sector reforms, finalization of a security sector audit, and launch of the 5-year National Security Sector Reform Strategy in November 2020;
  - upgrade from Tier 3 to Tier 2 watch list in the US Department of State’s June 2020 Trafficking in Persons (TIPs) report.
- Promulgation bill for the new constitution was submitted to the NA but dropped at second reading on September 22 after failing to obtain the required three-quarter majority.
- Presidential election expected to be held in December 2021; alternative options and stakeholder dialogue mandated by the Cabinet via the Attorney General.

### Recent economic developments: growth and sectoral impacts
- Real GDP growth averaged 6.5 percent per year in 2018–19, driven by record-high tourist arrivals and private capital inflows supported by donor-induced infrastructure development and budget supports.
- Strong performance continued into Q1 2020 but was interrupted by COVID-19 which completely shut down the tourism sector and reduced activity in other sectors.
- Construction sector and food retail services remained resilient, supported by strong private FX inflows, the government’s food distribution program, and reopening of the economy and borders.

### Inflation and prices
- Headline inflation declined from 7.3 percent (y/y) at end-2019 to 4.8 percent in July 2020.
- Headline inflation slightly exceeded 5 percent (y/y) in August–October 2020 due to seasonal food price increases, lifting of price controls, and COVID-19 containment impacts.

### Balance of payments and foreign exchange reserves
- Current account deficit through September 2020 widened to 5.6 percent of GDP from 2.0 percent of GDP in the corresponding period of 2019.
- Contributing factors:
  - 16-percent increase in imports,
  - 45-percent drop in exports, especially re-exports,
  - deterioration of services account from a surplus of 3.7 percent of GDP (first three quarters of 2019) to a deficit of 0.3 percent of GDP (corresponding period in 2020) due to halted tourism.
- Higher-than-expected private FX inflows (remittances and capital transfers) and steady official transfers supported FX market stability.
- Net international reserves of the CBG increased by US$35.85 million above program projection to reach US$203.85 million at end-June 2020, and further up to US$253.76 million at end-September 2020.
- Gross official reserves reached US$314.26 million or 4.4 months of prospective imports by end-September 2020.

### Fiscal performance and revenue
- Overall fiscal balance reached 2.6 percent of GDP at end-September 2020 against a projection of 1.6 percent of GDP, due to a 1.5-percent of GDP shortfall in EU budget support (disbursed in October) partly offset by slower execution of project loans.
- Domestic primary surplus: 0.1 percent of GDP (close to projected 0.2 percent of GDP).
- Emergency assistance including RCF support (1.1 percent of GDP) on-lent to budget helped cover pandemic-related additional spending (1.7 percent of GDP as of end-June).
- Total revenue and grants: GMD 13.9 billion (14.2 percent of GDP) at end-September 2020 vs GMD 13.3 billion (13.4 percent of GDP) same period last year.
- Tax revenue: GMD 7.7 billion in first three quarters of 2020 (nominally constant) representing 7.9 percent of GDP at end-September 2020 vs 8.4 percent of GDP at end-September 2019.
- Non-tax revenue through September 2020: GMD 2.3 billion (2.4 percent of GDP), more than 75 percent higher (in nominal terms) than end-September 2019; proceeds from sales of assets authorized by the Janneh Commission boosted non-tax revenue by about 0.7 percent of GDP.

### Expenditure composition
- Total expenditure was 0.4 percent of GDP below projection due to 2.2 percentage points of GDP less capital expenditure than projected.
- Pandemic-related emergency spending:
  - health: 0.5 percent of GDP,
  - food distribution program in Q2–Q3: 0.9 percent of GDP.
- Expenditure and net lending for first nine months of 2020: GMD 16.4 billion (16.8 percent of GDP) from GMD 15.0 billion (16.4 percent of GDP) in first nine months of 2019 (increase of 9.7 percent).
- Recurrent expenditure increased by 28.7 percent to GMD 12.5 billion (12.8 percent of GDP) from GMD 9.7 billion (10.7 percent of GDP) at end-September 2019.
- Capital expenditure declined by 25.6 percent to GMD 3.9 billion (4.0 percent of GDP).

### Monetary policy and liquidity
- CBG policy rate reduced from 12.5 percent at end-2019 to 12 percent in February 2020 and further to 10 percent at end-May 2020.
- Statutory reserve requirement ratio cut by 200 basis points to 13 percent at end-May 2020.
- Interest rates on 365-day T-Bills fell from 12 percent in late May to below 8 percent in late July.
- CBG maintained policy rate at 10 percent at MPC meetings on August 27 and December 3, citing subdued inflation pressure, economic slack, and expected good agricultural harvest.
- Money supply (M2) growth: 21.8 percent (y/y) at end-September 2020 (same as same period in 2019).
- Credit growth: 13.2 percent (y/y) at end-September 2020 vs 29.7 percent in 2019.
- Dalasi/US$ interbank depreciation: 2.1 percent (y/y) to end-September 2020.

### Banking sector resilience and non-bank financial sector
- Total banking sector assets increased by 15.6 percent (y/y) through September 2020.
- Industry-wide average risk-weighted capital adequacy ratio: 38.5 percent at end-September 2020 (statutory minimum 10 percent).
- Industry liquidity ratio: 93.5 percent (minimum prudential requirement 30 percent).
- Non-performing loans (NPLs): increased by 2-percentage points from end-2019 level to 6.5 percent of gross loans at end-September 2020, mainly from banks exposed to tourism and hospitality.
- Central Bank of The Gambia eased prudential provisioning requirements on a case-by-case basis for clients in transport and tourism.
- Interbank FX market transactions: a 62.9-percent y/y increase in volume of net FX transactions registered in September 2020.
- Non-bank financial sector:
  - Three finance companies’ total assets and total deposits expanded by 22 percent and 23 percent to GMD 1.7 billion and GMD 1.3 billion, respectively, as at September 2020.
  - Mobile Money Wallet transactions (deposits and withdrawals) increased by 66 percent y/y to GMD 67.15 million in September 2020.
  - Mobile money membership increased by 4 percent to over 35,144 thousand during the same period.
  - Leading mobile carrier reported a threefold increase in mobile money transactions between March and August 2020.

### Performance under the ECF program
- All semi-annual performance criteria for end-June 2020 were met except a continuous performance criterion on new external payments arrears of the central government, which was breached.
- Ceilings and floors:
  - Central government net domestic borrowing (NDB) ceilings observed with a GMD 1.5 billion margin.
  - Floor on net usable international reserves (NIR) exceeded by US$65.9 million.
  - Ceilings on central bank net domestic assets, non-concessional external debt contracted and guaranteed, and outstanding external public debt with original maturity less than one year were met.
- Breach reason: public telecommunications company (GAMTEL) did not make sufficient provisions to service loans from Islamic Development Bank (IsDB) and Export-Import Bank of China related to ECOWAS Wide Area Network (ECOWAN) and Gambian National Broadband Network (GNBN).
  - Arrears to IsDB: US$7.6 million as of end-June 2020 (called after three-year gestation period under ECOWAN project ended).
  - Government cleared outstanding dues to IsDB amounting to US$8.9 million (including current maturities) in stages before end-2020; as of December 2, 2020, all outstanding dues cleared.
  - Arrears to Export-Import Bank of China: US$0.25 million cleared on June 19, 2020 (interest payment due March 21, 2020).
- Going forward, GAMTEL is expected to maintain and replenish a dedicated escrow account to ensure timely servicing of its debt obligations.

*International Monetary Fund — The Gambia: recent economic developments and policy response as presented in the source content.*

### 13.      Two out of the three end-June indicative targets were also met, including the floor for

### 1gmbea2021001 - Program Implementation and Macroeconomic Outlook (excerpts)

### Program performance and indicative targets (June–September 2020)
- Two out of the three end-June indicative targets were met, including the floor for tax revenue despite its decline after March following the introduction of the state of public health emergency regulations.
- The floor for poverty-reducing spending was missed by about GMD 60 million, 2 percent of the target; however, the actual level of poverty-reducing spending was 30 percent higher when including the social support program (food distribution) of about GMD 867 million implemented using a special project account that was not included in the original program definition of poverty-reducing spending.
- All end-September 2020 indicative targets were met.
- The continuous performance criterion on new external payments arrears of the central government continued to be breached until early December when the arrears to the IsDB were cleared.

### Structural benchmarks and institutional actions (through end-June 2020)
- All program structural benchmarks (SBs) through end-June were met, aided by strong IMF technical support.
- Achievements:
  - A comprehensive monthly cashflow plan for the whole year, consistent with the 2020 budget, was put in place before end-March 2020; the Cash Management Committee resumed monthly meetings after a two-month interruption and minutes are shared with IMF staff.
  - The taxpayers’ registry in the greater Banjul area was cleaned up by end-June 2020; the registry covers taxpayers who have contributed thus far to more than 95 percent of total tax revenues in 2020. Findings highlighted: (i) the small percentage of taxpayers registered for VAT compared to the total taxpayer base (11.4 percent), and (ii) the large number of large taxpayers not registered for VAT (almost a quarter, 88 out of 334, of large taxpayers) dealing with exempt supplies under the IVAT Act 2012.
  - Project selection criteria were developed by end-June 2020 (in line with IMF’s 2019 PIMA recommendations) and subsequently approved by the Gambia Strategic Review Board (GSRB) and circulated to the Cabinet to ensure strategic alignment, viability, affordability, and readiness for implementation of projects.
  - A strategic plan addressing recommendations of the IMF’s 2019 Financial Sector Stability Review (FSSR) was published by end-June 2020.

### Delays and completion of end-September benchmarks
- Logistic difficulties from the COVID-19 surge delayed three end-September 2020 benchmarks; revised timing and scope were agreed during the virtual September mission (September 14–30) and actions were subsequently completed.
- Completed/revised actions:
  - MoFEA prepared a document for review of subvented agencies to reorganize, streamline, or downsize them; Cabinet pronouncements to rationalize subvented agencies were made in the 2021 Budget Speech (December 4).
  - Cabinet approved in principle a tax policy document (based on IMF FAD TA of July 2020) outlining key principles of a new tax exemption policy to be implemented starting in 2021; a specialized unit is being created at the GRA to track and enforce proper use of tax exemptions; the new policy will be accompanied by revisions to the GIEPA act and the investment code to centralize legal provisions in the tax code and give MoFEA sole authority to pre-approve tax exemptions.
  - The Medium-Term Debt Strategy (MTDS) was updated and published on October 22, 2020; it aims to lower the cost of government borrowing, mitigate rollover risk, improve treasury cash management, favor instruments with maturity exceeding one year, increase financial buffers, and develop the secondary market for government debt instruments.

### SOE reforms and audits
- Progress continued on SOE reforms despite legacy challenges from the Jammeh period.
- A draft SOE law (prepared with World Bank support) defines a governance framework aligned with international standards; promulgation is contingent on adoption of a new constitution, which has not achieved required NA support. Alternatives to pass the SOE bill are being explored, potentially disconnecting it from the constitutional review.
- MoFEA and NAO are implementing recommendations from Ernst & Young (E&Y) audits of the first batch of seven fiscally most important SOEs (completed in 2019); the audit of the remaining seven SOEs was completed and the report finalized in November 2020 with consolidated feedback informing the report to be presented to Cabinet.
- Audit findings have already been used to initiate improvements in several key SOEs, including GCC, whose operations continue to entail a major fiscal cost.

### National Development Plan (NDP) and COVID-19 response
- The program remains anchored on the NDP while addressing the health emergency, protecting vulnerable households, and enabling economic recovery.
- A cross-sectoral socioeconomic response plan to COVID-19 is being finalized with development partners, building on sectoral response plans such as the Ministry of Health’s ‘National Novel Coronavirus COVID-19 Preparedness and Response Plan.’
- The 2020 NDP progress report preparation and the definition of a new long-term strategy were delayed by the pandemic; the mid-term evaluation (MTE) is underway with concept note and terms of reference developed. The MTE outcome will inform a new long-term vision to be unveiled in the second quarter of 2021.
- The Voluntary National Reviews (VNR) presented at the Virtual UN High Level Political Forum indicated uneven SDG results: progress in governance, school enrolment and retention, access to improved water sources, child health, and births attended by skilled health personnel; but poverty levels remained stagnant between 2010 and 2015/16 and agricultural production declined in the 2018/19 cropping season.

### Macroeconomic framework and outlook
- 2020 outlook:
  - Tourism absent in Q2 and Q3; Q4 tourist arrivals projected at about 20 percent of the level seen in Q4 2019 (assuming gradual reopening from November).
  - Economic activity is projected to stagnate (a zero-percent growth) in 2020 compared to a 6.3 percent pre-COVID-19 growth projection.
  - Inflation is projected to increase to 6.5 percent (y/y) by end-2020, driven by higher international oil and food prices and a rebound in re-exports.
- Financing and reserves:
  - A financing need of about 2.5 percent of GDP is expected in the first half of 2021 to be filled by the ECF augmentation prior to expected budget support.
  - Gross official reserves are expected to rise to nearly US$400 million (or 4.6 months of next year’s imports) by end-2021 (assuming disbursement of augmented ECF tranches), and further to about US$450 million by end-2025.
- Medium-term outlook:
  - Gradual recovery to pre-pandemic levels over 4–5 years.
  - Growth projected at 6 percent in 2021 and to average 6.5 percent over the medium term, assuming progressive tourism recovery and rebounds in agriculture, trade, and private construction.
  - Inflation expected to remain stable around 5 percent in the medium term.
- Risks:
  - Resurgence of COVID-19 cases in Europe (main market for The Gambia’s tourism) poses downside risk to tourism recovery and the 2021 outlook; 2021 tourist arrival projections are very conservative.

### Fiscal policy, 2020 execution, and 2021 budget
- Changes since the RCF request:
  - Domestic revenue collection to exceed initial projection by 0.2 percent of GDP; tax revenue shortfall projected at 0.7 percent of GDP but offset by non-tax revenue net increase of 0.9 percent of GDP and one-off revenue of 1.4 percent of GDP from CBG net profits and asset sales from the Janneh commission.
  - Additional budget support of 1.4 percent of GDP (including 1.2 percent of GDP World Bank COVID-19 support) will bring total grants in 2020 to 0.9 percent of GDP above the RCF projection.
  - Total revenue expected to increase by 1.1 percent of GDP relative to the RCF projection.
  - Spending increased mostly due to SAP implementation of about 3 percent of GDP, with 0.5 percent of GDP allocated for potential emergency health and food distribution spending.
  - These changes will result in a large float (0.6 percent of GDP) maintaining the NDB target at GMD 0.5 billion at end-2020; floats expected to be cleared in early 2021 via an augmentation of access.
- Domestic arrears (audit findings):
  - Stock of substantiated domestic arrears rose from GMD 265 million (2019 audit) to GMD 322.6 million at end-September 2020, including GMD 148.5 million accumulated in 2020.
  - Of the GMD 265 million identified in 2019, GMD 91 million was settled and GMD 174 million remained outstanding at end-September.
  - Arrears to Securiport (US$4.4 million) will be cleared progressively by drawing on the government share (25 percent) of airport security fee proceeds (US$20 per passenger).
- 2021 budget objectives and parameters:
  - Domestic primary deficit foreseen at 1.2 percent of GDP, slightly lower than the level projected in 2020, and 1.8 percent of GDP larger than the 2021 RCF approval projections.
  - Financing need projected to increase by 4.0 percent of GDP compared to end-2020 projection, mainly due to a drop in budget support grants from EU frontloading in 2020; additional financing largely to be covered by augmented ECF disbursements and expected 0.7 percent of GDP privatization proceeds.
  - Revenue measures and expectations:
    - Rationalization of tax exemptions expected to yield 0.5 percent of GDP through increased (non-oil) import duties and VAT receipts; measures include MoFEA’s exclusive authority to pre-approve tax exemptions and prohibition on other agencies issuing new exemptions without MoFEA approval effective January 2021.
    - Other measures: requirement that VAT be paid by all taxpayers; use of proceeds from reduction in VAT reimbursements to refund entities benefiting from tax exemptions; increase of capital gains tax threshold; increase of excise tax rate on tobacco products; measures to encourage MSME formalization and reduce cost of doing business; elimination or reduction of some taxes (e.g., fringe benefits, air transport levy).
  - Grants and external financing assumptions:
    - Budget support grants expected to decrease to 2.2 percent of GDP.
    - Extension of G20 DSSI and the CCRT for 2021 expected to generate 0.4 percent of GDP in additional financing.
    - Project grants projected to reach 8.1 percent of GDP (about 65 percent of partners’ scheduled project grant disbursements, reflecting implementation capacity constraints).
  - Expenditure and financing:
    - Total expenditure projected at 29.5 percent of GDP, split almost equally between recurrent and capital expenditure.
    - Recurrent spending represents 15.1 percent of GDP with pressures on personnel emoluments (additional health personnel and new teachers), use of goods and services (election organization, COVID-19 contingencies), and subsidies (NAWEC and GGC subsidy needs estimated at GMD 800 million).
    - Most capital expenditure is foreign- and predominantly grant-financed; domestically financed capital expenditure expected to increase for infrastructure projects (notably road construction) and election equipment procurement.
    - Net domestic borrowing required: GMD 885 million (excludes on-lending of IMF credit through the central bank; assumes rollover of maturing treasury bonds of GMD 1.2 billion and clearance of pre-existing domestic arrears of GMD 417 million per agreed payment plan).
    - Privatization proceeds are expected to be used to strengthen the treasury and reduce reliance on domestic debt; quarterly NDB ceilings will be adjusted downward by amounts equivalent to privatization proceeds.

### Execution guidance and contingencies
- MDAs instructed to execute the SAP prudently and efficiently based on absorption capacity to avoid inefficiencies; measured execution could lead to lower-than-programmed recourse to the NDB at end-2020 due to a larger treasury float.
- Excess float to be settled in early 2021 by drawing on ECF augmentation and drawing down treasury buffers, including accelerated issuance of T-Bills to take advantage of low interest rates and support the banking sector.
- With the presidential election scheduled for late 2021 and ongoing COVID-19 uncertainty, the 2021 budget provides additional transparent room for one-off election and health spending; room for non-priority spending is contingent on a baseline scenario and may be reduced to preserve debt sustainability if adverse shocks materialize.

_Excerpt from IMF staff report (content unit 1gmbea2021001)._

### 28.      The updated medium-term fiscal and economic framework (MTEFF) is centered on

### 1gmbea2021001 - 28. The updated medium-term fiscal and economic framework (MTEFF) is centered on

### MTEFF objectives and fiscal trajectory
- Transition from the COVID-19-induced emergency to sustainability while addressing critical social and infrastructure needs.
- The COVID-19 pandemic resulted in a higher primary deficit in 2020–21 than projected at the time of the RCF request because of higher expenditure needed to address the pandemic and its social and economic impacts.
- The primary surplus is expected to improve to above 1–1¾ percent of GDP between 2023 and 2025 as projected at the time of the RCF request.
- Fiscal profile aims for:
  - Tax revenue increasing to 12.8 percent of GDP by end-2025.
  - Overall domestic revenue around 15 percent of GDP by end-2025.
- Projected tax revenue increases supported by:
  - Gradual recovery.
  - Strengthened revenue administration, including rationalization of tax expenditures and broadening the tax base (hospitality sector, cable television, real estate taxation).
- Expenditure-side measures:
  - Improved expenditure prioritization and public financial management to contain current spending, particularly the wage bill through electronic payment of wages and nationwide staff audit recommendations.
  - Containment of subsidies to subvented agencies to create room for social programs and capital spending.
  - Strengthening capital spending effectiveness via better procurement, project appraisal, and project selection.

### Public debt outlook and relief initiatives
- Debt sustainability outlook worsened marginally but remains qualitatively unchanged relative to the assessment at the time of the RCF request.
- External and overall debt distress ratings remain high and public debt continues to be deemed sustainable.
- Due to decline in exports and domestic revenue, external debt service-to-exports and external debt service-to-revenue ratios remain above respective thresholds through 2021.
- PV of overall debt-to-GDP will now drop below its indicative threshold (55 percent) by 2024, a year later than in the previous DSA.
- Relief and support:
  - CCRT first six months provided US$2.9 million in debt relief; second tranche will provide another US$3 million.
  - In 2020, the DSSI amounts to around US$4 million from ECOWAS Bank for International Development, Export–Import Bank of China, Kuwait Fund for Arab Economic Development, and the Saudi Fund for Development.
  - Possible extension of the DSSI to cover the entire 2021 would yield a debt service relief of US$3.5 million of which US$1.7 million are covered by the already G20-approved six-month (January-June 2021) extension.

### Public and domestic borrowing: recent developments and limits
- Public borrowing characterized as prudent.
- External borrowing:
  - External debt of US$12 million contracted in 2020 (as of November 30).
  - External borrowing within US$60 million ceiling under the borrowing plan for 2020.
- Disbursements of external loans slowed; GMD 1.7 billion disbursed at end-September compared to GMD 4 billion annual budget projection.
- Domestic borrowing primarily short-term to rollover existing debt; steps taken to extend maturity and manage rollover risks.
  - As of end-November 2020: issued GMD 23.3 billion T-Bills and Sukuks (maturity ≤ one year) and repaid GMD 21.6 billion — net issuance close to GMD 2 billion.
  - Issued GMD 2.24 billion 3-year bonds, including to roll-over GMD 1.69 billion maturing in 2020.

### Project financing policy and exceptional accommodations
- Going forward, project financing will rely primarily on grants and highly concessional borrowing; non-concessional borrowing will be avoided (including for SOE financing such as Banjul port expansion).
- Revised concessional borrowing plan geared toward financing infrastructure needed for the OIC summit.
- Seek renegotiation of OIC road project loans that do not meet the 35-percent grant element requirement under the program.
- Exceptional accommodation:
  - Special accommodation requested under the borrowing plan for the Banjul port expansion (financial package for growth- and revenue-enhancing investment).
  - To justify accommodation: on-lending arrangements so concessional debt package is entirely serviced by The Gambia Ports Authority (GPA) from its own revenue; GPA required to fund an escrow account dedicated to servicing these loans from its own earnings.
  - Efforts to expand grant component for port expansion, including tapping the grant facility at the AfDB and the EU COVID-19 resource pool.

### Project appraisal, selection, and debt management reforms
- Strengthened institutional project appraisal and selection to increase public investment efficiency and ensure debt sustainability.
  - GSRB staff trained on the project selection criteria template; template adopted by GSRB and used for appraising all public projects (domestic and foreign-financed), including grant-financed projects and projects involving direct government borrowing, government-guaranteed debt, and PPPs, prior to Cabinet approval.
  - Template confirms consistency with debt sustainability and the borrowing plan agreed with the IMF.
- Debt recording and reporting strengthened:
  - New debt management software, Meridian, obtained with Commonwealth Secretariat support.
  - Publication of annual report on public debt for end-2019 and quarterly bulletins for Q1, Q2 and Q3 2020.
  - Commitments: continue quarterly debt bulletins and publish rolling monthly domestic debt issuance calendar for the ensuing three months (SB for each quarter in 2021).
  - Aim: improve accuracy and timeliness of debt data in the Statement of Government Operations (SGO) and ensure timely payments of external debt service (including on-lent to SOEs) to avoid arrears.
  - Arrangements made to clear arrears toward IsDB by the end of the year and ensure future obligations of GAMTEL and GAMCEL are paid timely.
  - Bond and T-Bills issuance plans published monthly to anchor market expectations and limit interest rate volatility.
  - Recording and reporting of project grants disbursements being strengthened for tracking public investment and guiding grant- vs debt-financed project choices.

### SOE reform, contingent liabilities, and sector-specific measures
- Control over trade credit facilities contracted on behalf of SOEs being exercised; SOEs encouraged to seek trade financing from other sources, including local banks.
  - Domestic borrowing from local banks seen as viable and helps reduce vulnerabilities from ITFC repayments.
  - GGC secured a domestic bank loan to replace the ITFC facility.
  - NAWEC expected to reduce reliance on ITFC credit and limit use to genuine short-term trade credit.
- Improving PPP framework, SOE financial management, and control of contingent liabilities:
  - Draft PPP Act submitted to the NA for approval to create institutional PPP framework and limit fiscal risks.
  - Revised SOE bill expected to be presented to the NA before end-2021 (SB for end-December 2021) with objectives to reduce political interference and strengthen SOE governance under Ministry of Finance control.
  - NAO tasked to assist in implementing E&Y audit recommendations to improve SOE governance and financial conditions.
  - Reconciliation of cross-arrears between government and SOEs conducted annually; arrangements strengthened to ensure prompt clearance.
  - Adequate space for SOE subsidies provided in annual budgets to ensure SOEs fulfill tax and public service delivery obligations.

- Selected SOE developments and measures:
  - NAWEC:
    - Government paid off its obligation per cross-arrears agreement signed in 2019 and is also paying new bills.
    - NAWEC paying tax obligations and expected to reimburse in installments the advance of GMD 137 million received from the Treasury in Q1 to repay ITFC.
    - Procured a 3-month supply of HFO using a competitive tender; international tender launched for long-term fuel procurement.
  - GGC:
    - New management team appointed; operations entail major fiscal cost with total subsidy needs in 2020 estimated at about 0.9 percent of GDP.
    - Measures: retire staff above retirement age, procure new payroll system, not renew expiring contractual staff, implement E&Y audit recommendations, strengthen audit/finance/marketing departments.
    - Improved fertilizer sales via Reliance Financial Services to collect and remit proceeds; secured local bank funding for 2020/21 groundnut campaign.
    - Use of ITFC facility by GGC to be phased out upon repayment of outstanding claims of US$4.9 million maturing in 2021.
    - Government raised purchase price in November to a level 28 percent above the price of the last trading campaign; GGC target volume 40 thousand tons (50 percent of projected annual production) may be difficult given increased private and foreign operators.
  - Telecommunications liberalization:
    - World Bank Fiscal Management Development project approved; legal consultant onboarded to help establish an SPV to hold wholesale fiber optic backbone assets (ECOWAN and possibly sections of the GNBN).
    - RFP issued on September 16 to select a Transaction Advisory firm; evaluation report submitted to the World Bank in early December 2020.
    - Advisory scope: asset valuation; market testing for investor interest to inform divestment options for wholesale SPV, GAMTEL and GAMCEL; conduct selected transactions.
  - Banjul port expansion and GPA:
    - Resources lined up to implement 20-year port expansion plan.
    - Immediate investment financing options evaluated for jetty expansion and container storage area and land acquisition.
    - Project magnitude: US$65 million for jetty expansion alone.
    - GPA financially viable and could finance from reserves or borrowing without government guarantee, but will avoid commercial options; sovereign support to enable GPA to access concessional financing from the EIB and AfDB (both expressed readiness to support GPA investment plans).

### Monetary policy, exchange rate, and central bank governance
- Monetary policy conduct strengthened with increased emphasis on interest rate-based instruments to ensure adequate liquidity for recovery while containing inflation.
- CBG medium-term inflation target remains 5.0 percent.
- Current accommodative monetary policy stance consistent with subdued inflation and weak economic environment; policy expected to remain accommodative for the rest of the year given demand weakness, subdued inflation, and uncertainties.
- Policy rate normalization may commence in the second half of 2021, subject to inflation developments and recovery speed.
- CBG will continue to use the monetary policy rate as the key instrument and may adjust required reserve ratio if circumstances call for it.
- Exchange rate policy:
  - CBG maintaining a flexible exchange rate policy and monitors domestic FX market; intervenes sporadically during periods of excess FX liquidity.
  - Such interventions not expected to exceed US$10 million in the last quarter of 2020.
  - Target: increase gross official reserves of the CBG to about US$390 million (the equivalent of 4.6 months of prospective import of goods and service) by end-2021.
- Central bank autonomy and safeguards:
  - Commitment to principles of central bank autonomy as enshrined in the 2018 CBG Act; operational independence fundamental to curbing inflation and strengthening CBG positions.
  - Strict adherence to rules on central bank overdraft use by the government and strengthened policy coordination with MoFEA.
  - Implement recommendations of the 2020 safeguards assessment to strengthen CBG balance sheet, integrity, and autonomy.
  - Board vacancies: two out of three vacancies filled, including a woman certified accountant.
  - Interim audit of CBG’s 2020 financial statements commenced (joint local and international firm) to complete audit in the first quarter of 2021.
  - Arrangement for distributing CBG retained earnings at end-2019 of GMD 1.3 billion approved and implemented.
  - Program-specific safeguards steps:
    - (i) Sign a memorandum of understanding (MOU) with the Auditor General for a joint audit of the CBG’s financial statements for 2021 (SB for end-March 2021).
    - (ii) Implement MOU with MoFEA to ensure a gradual increase in the statutory capital of the CBG through a half-yearly contribution of GMD 90 million by MoFEA.

*Source: 1gmbea2021001 - 28. The updated medium-term fiscal and economic framework (MTEFF) is centered on (PDF chapter content).*

### 40.      The recommendations of the IMF’s 2019 Financial Sector Stability Review (FSSR) will

### 1gmbea2021001 - 40.      The recommendations of the IMF’s 2019 Financial Sector Stability Review (FSSR) will

### Strengthening banking supervision and financial sector stability
- CBG has drawn up a strategic plan prioritizing:
  - strengthening banking supervision;
  - enhanced electronic data submission by banks;
  - bank safety net, resolution and crisis management.
- At the onset of the COVID-19 pandemic, the CBG strengthened its assessment of bank’s exposure to risks and will prepare a framework for banking sector stress testing, in line with the recommendations of the FSSR (SB for end-June 2021).
- CBG actions in parallel:
  - strengthen oversight of non-bank financial institutions;
  - strengthen regulation and supervision of credit unions, particularly given adverse effects of COVID-19 on financial intermediation and increasing utilization of mobile banking.
- CBG will seek technical assistance (TA) from the IMF and other partners to help implement these reforms and strengthen banking system stability.
- Government decision on MegaBank stake:
  - Recognizing need for CBG to divest from MegaBank, and that current situation is not favorable for outright sale, the government will issue a bond to overtake the CBG stake in MegaBank at the face value of the initial investment to resolve the conflict of interest resulting from the CBG’s having intervened and acquiring a stake in a commercial bank.

### FINTECH and financial inclusion
- Finscope survey (funded by UNCDF, conducted November 2019) finding:
  - financial inclusion rate of only 19 percent based on the number of adult persons with access to formal financial services (banks and NBFIs).
- Stakeholder engagement and strategy development:
  - Stakeholder sensitization workshop convened December 2019 (in collaboration with World Bank, UNCDF, Alliance for Financial Inclusion (AFI)); informed the National Financial Inclusion Strategy, at an advanced drafting stage and expected to be launched in June 2021.
  - Strategy envisages development of digital financial services based on 5 pillars: Access, Quality and Usage, Enabling Financial Infrastructure, Financial Innovation and Digital Financial Services-Developing inclusive products and services, Financial Education and Literacy, Consumer Protection and Empowerment.
  - Target: raise degree of financial inclusion in The Gambia to 70 percent by end-2025.
- Priority areas for financial innovation (especially mobile financial services):
  - increase access to finance by women and the youth.
- CBG support for digital infrastructure and GAMSWITCH:
  - support formulation of supportive policies for digital infrastructure development;
  - capacity building on GAMSWITCH (the national payment system);
  - encourage subscription to GAMSWITCH by a wider group of stakeholders (banks, NBFIs, government agencies, and private businesses).

### Domestic Revenue Mobilization: GRA strategic plan and COVID-19 impacts
- GRA Corporate Strategic Plan (CSP) 2020–24:
  - informed by IMF Tax Administration Diagnostic Assessment Tool (TADAT) recommendations;
  - CSP published on GRA website.
- COVID-19 effects on CSP implementation:
  - implementation slowed, development and adoption of departmental operational plans delayed;
  - operations reduced by half in some instances as tax offices divided staff into two alternating groups;
  - field and post clearance audits and enforcement measures were suspended.
- Tax relief and facilitation measures during COVID-19:
  - flexible payment plans for tax arrears;
  - direct delivery facilities (deferred document processing and payments) at borders for imports related to COVID-19 relief and essential supplies;
  - 24-hour cross-border customs services for essential goods and services;
  - e-mail exchange and remote processing encouraged for border transactions;
  - GRA engaged two large banks to facilitate tax payments using their mobile app platforms.
- Risk management improvement:
  - improved risk management procedures to differentiate between relief supplies and normal goods to fast-track border movement.

### Tax registry, base broadening, and TA support
- Taxpayer register cleaning exercise:
  - completed for the Large Taxpayers Unit and seven tax offices in greater Banjul area covering 95 percent of tax revenue; continuing in other regions.
- Issues highlighted by register cleaning and TA missions:
  - missing contact details for a large number of taxpayers including untraceable taxpayers;
  - significant number of large taxpayers not registered for VAT;
  - lack of standardized registration protocols weakening registry quality.
- Measures to address registry issues:
  - new registration and registry maintenance manual developed and approved to standardize taxpayer registrations;
  - monthly monitoring measures to track registrations and overall reform and operational performance.
- Revenue protection plan under development to counter COVID-19 impact on collections; will include VAT registration and backdated audits of applicable large taxpayers.
- Continued TA from AFRITAC West 2 to train GRA auditors on risk-based audits in Hotel and Tourism industry and Pay TV operators (mainly subscription-based television services) as part of telecommunications industry audit TA.

### Tax expenditures and Tax Expenditure Policy (TEP) recommendations
- Tax expenditures magnitude:
  - represent significant revenue loss to the government, of around 3 percent of GDP in 2019.
- MoFEA commitments and targets:
  - committed to reducing investment incentives building on TEP recommendations to save at least GMD 500 million in tax expenditures in 2021.
  - adopt a fully-fledged new tax expenditure policy in line with IMF TA recommendations, prepared in collaboration with World Bank TA team, before end-June 2021 following review of investment incentives.
  - revisions to GIEPA Act to move all tax incentive provisions to the Tax Code, eliminate ad-hoc tax exemptions, and restore full and sole authority of Ministry of Finance in approving tax exemptions (SB for June 2021).

### GRA technology and customs modernization
- GamTaxNet (current ITAS) enhancements:
  - registration, return filing and payment modules enhancements being deployed in phased approach;
  - four tax offices (Banjul, Kanifing, Serrukunda and Tallingding) using new GamTaxNet modules;
  - full roll-out expected by October 2020.
  - second phase remediation (enforcement, taxpayer accounting, audit and management information modules) to be completed by December 2020.
  - ledger cleansing to commence once second phase completed; a ledger cleansing manual prepared awaiting validation and approval.
- New ITAS procurement:
  - to be procured with World Bank assistance to replace GamTaxNet and support digital transformation.
  - governance structure set up: project steering committee, technical committee, functional committees.
  - Business Process Re-engineering (BPR) document drafted with fourteen customs processes re-engineered.
- Migration of customs data:
  - from ASYCUDA++ to ASYCUDA World progressing; procurement of four servers in contract evaluation phase.
  - AfDB support sought to introduce Electronic Cargo Tracking System (ECTS) and Road Cargo Tracking System (RCTS) for transit trade.

### Treasury Payment Gateway and non-tax revenue
- Newly acquired treasury Payment Gateway expected outcomes:
  - boost non-tax revenue collection;
  - ensure timely sweeping to the TSA and recording by the AGD.
- Procurement and rollout timeline:
  - despite delay in signing procurement contract, acquisition of payment platform to be finalized in December 2020.
  - government expects all MDAs connected within 6 months and system running by mid-2021.
- Expected benefits:
  - facilitate automation of revenue collection and ensure government revenues are collected electronically to improve overall revenue performance.
- Infrastructure revenue note:
  - payment toll at the Senegambia bridge completed; opening early next year and construction of access road expected to increase traffic and revenue collected from the bridge.

### Public Financial Management (PFM) reforms and priorities
- PFM reform objectives:
  - increase efficiency in public spending;
  - strengthen expenditure control and cash management;
  - eliminate delays in completing audits of public accounts.
- Civil service reform measures:
  - Personnel Management Office (PMO) concluded Pay and Grading review of Civil Service;
  - Civil Service Grading, Pay and Incentive Policy developed to propose realistic minimum salary;
  - nationwide staff audit conducted with final report shared with ministries;
  - Biometric Time and Attendance Register System to be implemented in all Government offices and linked to payroll to sanction lateness and early leaving;
  - Performance Management System to create merit-based promotions, training and development;
  - e-recruitment system planned for 2021 to speed recruitment.
- IFMIS extension and electronic payments:
  - IFMIS functionalities and coding upgraded to facilitate timely comprehensive reports for SGO, public expenditure reports and poverty reducing spending;
  - Electronic Funds Transfer (EFT) Module implemented for electronic payments directly to beneficiary bank accounts;
  - capacity assessment for rollout to projects and subvented agencies completed; donor support sought for training and IT equipment/software;
  - IFMIS extension to Self-Accounting Projects commenced with six projects piloted; progressive onboarding by end-June 2021;
  - plans to extend IFMIS to all donor-funded projects, Local Government Councils, remaining Embassies, and Subvented Agencies in 2021;
  - roadmap for extending IFMIS to subvented agencies’ accounts to be prepared by end-June 2021 (SB for end-June 2021).
- Cash management improvements:
  - accelerate completion of TSA and strengthen Cash Management framework with IMF TA support;
  - MOU with Commercial banks to be signed as part of Revenue Collection platform implementation;
  - CBG engaged on ledger system implementation and user requirements being defined;
  - TSA stakeholders sensitization completed;
  - closure of accounts that have outlived purposes is ongoing; minor/one–off disbursement projects managed under special projects bank accounts with individual ledgers;
  - strengthen functioning of Cash Management Committee (CMC), Liquidity Management Committee (LMC) and Cash Management Unit (CMU);
  - commitment to produce annual cash plans and update monthly under CMC guidance;
  - CMC resumed monthly meetings after two-month COVID-19 interruption; minutes shared with IMF staff upon request and systematic transmission of minutes (including LMC) to IMF to commence.
- Audit backlog and COVID-19 spending transparency:
  - backlog from Jammeh period being progressively eliminated;
  - 2016 and 2017 audit reports tabled by Minister of Finance and Economic Affairs and to be discussed by NA; 2016 audit report published on NAO website;
  - NAO report on 2018 accounts submitted to NA and expected to be published promptly after consideration by NA;
  - 2019 accounts finalized by MoFEA and submitted to NAO; NAO auditing 2019 accounts and intends to complete by end of February 2021;
  - 2020 accounts work expedited to ensure submission to NAO by end-March 2021 and audit completion for submission to NA with audit report promptly thereafter;
  - target: by end-September 2021, 2020 accounts audited, approved by NA and published, with a detailed section on COVID-19 spending to fulfill transparency requirements for resources from IMF and development partners;
  - NAO launched audit of COVID-19 spending incurred through August 2020 and will proceed with remainder of 2020; audit will include validation of delivery for all contracts.
- Internal audit strengthening:
  - internal audit functions rolled out to all MDAs to provide assurance and advisory services;
  - effective January 1, 2021, Ministry to liaise with Boards of Agencies, Commissions, Authorities and other autonomous entities to formulate regulatory frameworks for effective public sector internal audit services;
  - all Government internal audit activities to be regulated to enhance independence and objectivity.
- Public Finance Bill and PFM strategy:
  - Public Finance Bill being prepared with UNDP support and in consultation with IMF and WB, featuring enhanced transparency and accountability provisions for submission to NA (SB for end-December 2021);
  - bill will reflect ongoing and recently completed PFM reforms on budget process, treasury management and fiscal control and reporting, and governance/transparency around exceptional budget procedures;
  - supporting documents (regulations and user guides) being prepared to ensure bill operational upon enactment;
  - support from development partners sought to conduct a Public Expenditure and Financial Assessment (PEFA).
  - New PFM Strategy Document 2021–25 being formulated to continue and strengthen ongoing PFM reforms and institutionalize prudent public financial management practices.

### Reform of Subvented Agencies (SAs)
- Government intends a medium-term reform strategy to address rising fiscal costs from SAs with objectives to:
  - ensure greater efficiency in use of funds allotted to SAs;
  - contain their spending within a sustainable medium-term envelope;
  - ensure greater effectiveness in execution of statutory functions.
- Expected efficiency gains through:
  - streamlining services, eliminating duplication, addressing function-specific efficiency issues, greater professionalization of staff, digitalization, and outsourcing.
- Reform strategy to increase transparency and incorporate SAs into central government budget to strengthen accountability.
- Two-part reform process:
  - (i) Interdepartmental working group (IWG) to be set up by government to conduct, starting January 2021, with IMF, World Bank and other partners’ technical support, a thorough assessment of all SAs and formulate a medium-term reform strategy to be submitted for Cabinet approval by end-June 2021;
  - (ii) starting July 2021, IWG to begin implementing approved SAs reform plan, including incorporating SAs in the central government budget, eliminating redundancies in SA employment, and harmonizing SAs wages and allowances in context of broad-based civil service reform.

*Italic: IMF country report content unit 1gmbea2021001 - 40.*

### 49.      Significant efficiency gains in public spending will accrue from public procurement

### 1gmbea2021001 - 49.      Significant efficiency gains in public spending will accrue from public procurement

### Public procurement reform
- Revised GPPA Act submitted to the NA for approval; passing expected before end-2020.
- Key reform elements and expected outcomes:
  - Eliminate scope for executive waivers that circumvent standard procurement rules.
  - Tighten application of emergency procedures.
  - Radically reduce the use of single sourcing, including eliminating single sourcing for large-scale investment projects.
  - Strengthen technical capacity of GPPA to handle all public transactions, including large operations by GNPC and NAWEC.
  - Require online publication of all public procurements.
- World Bank–financed project actions underway:
  - Selection of an individual consultant to prepare an Electronic Government Procurement (e-GP) readiness assessment and to develop an e-GP strategy and roadmap.

### Governance, AML/CFT, and Trafficking in Persons
- Governance progress and commitments:
  - Government committed to strengthening governance, the AML/CFT framework, and broader legal reforms in public finances.
  - The Gambia scored 92 percent on Control of Corruption and Rule of Law in the US MCC scorecard for Year 2021 (passed assessment test for governance, democratic rights and economic freedom).
  - Minister of Justice mandated to consult stakeholders and review legal options related to the constitution and associated legislative agenda, including SOE legal framework.
- Anti-corruption measures:
  - Intensified fight against official corruption and graft.
  - Punitive measures being devised, including surcharging accounting officers of MDAs who commit funds outside IFMIS.
  - Anticorruption bill submitted to the NA; expected to be tabled in upcoming legislative session.
  - Interest in IMF governance diagnostic to inform anticorruption committee implementation.
- AML/CFT and bank compliance:
  - Assessment for remaining banks delayed by COVID-19; CBG working to implement GIABA recommendations to ensure bank compliance ahead of new assessment scheduled in late 2021.
- Trafficking in persons (TIPs):
  - Upgraded from TIPs Tier 3 to Tier 2 watch list by the US Department of State.
  - Steps to accelerate prosecution of perpetrators and strengthen child protection to achieve permanent Tier 2 status.

### Business climate and infrastructure
- Competitiveness and infrastructure constraints:
  - The Gambia ranked 124 out of 141 countries on the 2019 WEF Global Competitiveness Report.
  - Banjul seaport investments to date: close to GMD 245 million or US$5 million.
  - Persistent port congestion, delays, and extra charges remain; GPA plans jetty expansion, new container terminal, and IT infrastructure investment.
  - WTO-funded study commissioned to identify trade facilitation actions, including streamlining customs procedures and using new online customs declaration system.
- Energy and transport:
  - Significant investments and managerial improvements to address erratic electricity supply; new energy roadmap to diversify energy mix and promote more affordable and sustainable electricity.
  - Transport infrastructure (road and airport) being expanded to improve market access.
  - Telecommunications sector reforms to create a digital economy need acceleration.
- Business environment institutional reforms:
  - National Business Council and Ease-of-Doing-Business Taskforce established.
  - Business Environment Reform Program action plan (selected items and timing):
    - Establishment of a one-stop-shop for business registration and licensing to be operational by March 2022.
    - Setting up an online business registration and licensing facility accessible to targeted users.
    - Re-establishment of commercial courts to facilitate contract enforcement by March 2022.
    - Establishment of a credit reference bureau by March 2022.
    - Setting up private laboratories for conformity assessments by March 2022.
    - Introducing a user-friendly electronic tax payment and filling systems.
    - Preparing a framework for long-term development of the land administration system by March 2022.
    - Establishment of a functional electronic database for land registration and cadastral map by March 2022.
  - Action plan launched and adopted by the National Business Council on 12th June 2020; Vice President Dr. Isatou Touray identified as Champion.

### Poverty reduction, gender, and climate change
- Targeting and monitoring of poverty-reducing spending:
  - Existing program definition expanded to include all COVID-19 spending; will be replaced by a new vetted definition once approved by World Bank experts and adopted in expenditure reporting.
  - Collaboration with World Bank through Office of the Vice-President on programs targeting the most vulnerable, including World Bank Social Safety Net Project (the Nafa program).
  - Nafa Quick: two cash transfers of GMD 3,000 to households in the most vulnerable regions.
  - Social Protection Secretariat established to coordinate social programs and oversee development of a Social Registry.
- Gender and youth spending:
  - Ministry of Women’s Affairs, Children and Social Welfare established in 2019; steps to implement gender budgeting with IMF technical support.
  - 2021 targeted social spending prioritized toward Health, Agriculture, Women, and Youth empowerment.
  - Women Enterprise Fund Act enacted June 2020; Fund operationalizing to support women entrepreneurs.
  - Youth and Sports Development levy launched to support youth and sports initiatives.
- Budget figures and contingencies:
  - Envelope for poverty-reducing spending in 2021 set at GMD 6 billion (compared with GMD 5.6 billion in the 2020 budget).
  - Draft 2021 budget includes contingencies GMD 500 million to address COVID-19 needs.
- Climate change priorities:
  - Agriculture contributes about 20 percent to GDP and employs more than 50 percent of the working population.
  - Government to gradually increase resource allocation for mitigation and adaptation.
  - Engagement with Green Climate Fund (GCF) for projects such as Ecosystem-Based Adaptation (EBA) to enhance climate resilience of rural communities.

### Data quality and dissemination
- Improvements achieved with IMF TA:
  - Monetary and financial data (including Financial Stability Indicators), CPI, national accounts, and debt bulletin are now produced and published timely.
  - Preliminary estimates of GRA revenue collection available within ten days of the end of the month.
- Remaining fiscal data weaknesses:
  - Fiscal data quality remains weak; production of reliable monthly SGOs needs better reconciliation between data sources and improved collection of external support and execution of related spending.
  - Implementation of World Bank Public Expenditure Review and IMF missions on fiscal reporting and the TSA expected to improve SGO reliability.

### Program monitoring, targets, and key fiscal numbers
- Program reviews and adjustments:
  - Program subjected to semiannual reviews; second review based on end-December 2020 targets expected on or after March 15, 2021; third review based on end-June 2021 targets expected on or after September 15, 2021.
  - Due to subdued inflation and restrictions on direct CBG credit to central government, ceiling on CBG’s net domestic assets proposed to be downgraded from performance criterion to indicative target.
- Selected fiscal and macro numbers (as presented):
  - Poverty-reducing expenditure (floor): 2020 actual comparison: GMD 5.6 billion (2021 floor: GMD 5,600; quarterly breakdowns: Mar. 5,600; Jun. 5,600; Mar. indicative 1,300; Jun. 2,800; Sep. 4,400; Dec. 6,000).
  - Nafa Quick cash transfers: GMD 3,000 per transfer.
  - Envelope for poverty-reducing spending in 2021: GMD 6 billion (compared with GMD 5.6 billion in the 2020 budget).
  - Contingencies in draft 2021 budget: GMD 500 million.
  - Banjul seaport investment to date: close to GMD 245 million or US$5 million.
  - The Gambia ranked 124 out of 141 countries on the 2019 WEF Global Competitiveness Report.
  - Agriculture: about 20 percent of GDP; employs more than 50 percent of the working population.
  - MCC scorecard: 92 percent on Control of Corruption and Rule of Law.
- Selected program quantitative targets (2020–2021 excerpts as shown in tables):
  - Stock of net usable international reserves of the central bank (floor, US$ million): 193 (Dec. 2019), 170 (Mar. 2020 preliminary), 193 (Jun. 2020 actual), 168.0 (Sept. prog.), 138.1 (Dec. adj. act.), 204 (Memorandum).
  - Net domestic borrowing of the central government (ceiling) (millions of dalasi): 1,063 (2019), various 2020 programmed and actual figures; 2021 proposed ceilings: Mar. 500; Jun. 500; Sep. 1,000; Dec. 500; annual: 1,100 and 1,250 (as shown).
  - Total domestic tax revenue (floor) (local currency millions): 9,978 (2019), 10,000 (2020 program), 10,000 (2021 Mar. prog.), 10,198 (2021 Jun. proj.), 3,000 (2021 Sep. prog.), 6,000 (2021 Sep. prog.), 8,700 (2021 Dec. prog.), 11,400 (2021 annual prog.) as presented in Table 2.
  - Base Money (stock, GMD millions): 13,888 (2019), 15,386 (Dec. 2020), projected 15,386 (Mar. 2021), 18,178 (Jun. 2021), 19,628 (Sep. 2021), 21,079 (Dec. 2021), 20,918, 20,590 (other monthly projections shown).
  - IMF disbursements (SDR millions): 25.6 (Mar. 2021), 20.6 (Jun. 2021), 20.0 (Sep. 2021), 30.0 (Dec. 2021), 30.0, 35.0 (other monthly projections shown).
  - ECF disbursements included proposed augmentation: 15.0 (mem.), and other monthly amounts as presented.
- Structural benchmarks (selected 2020 status and 2021 planned measures):
  - 2020 met benchmarks included: GRA tax registry clean-up at tax offices in the greater Banjul area (End-June 2020); Develop monthly cashflow plan (End-March 2020); Prepare criteria for project selection for GSRB (End-June 2020); Develop and publish strategic plan addressing 2019 FSSR recommendations (End-June 2020).
  - 2021 structural benchmarks and timing (selected):
    - Approve and implement new Tax Expenditure Policy (end-June 2021).
    - Prepare roadmap for extending IFMIS to all flows to project and subvented agency accounts (end-June 2021).
    - Submit revised Public Finance Bill to National Assembly (end-December 2021).
    - Publish rolling monthly domestic debt issuance calendar for ensuing three months (end-March 2021 and quarterly thereafter).
    - CBG to sign MoU with Auditor General for joint audit of 2021 financial statements (end-March 2021).
    - Prepare framework for banking sector stress testing (end-June 2021).
    - Submit revised SOE bill to National Assembly to reduce political interference and strengthen financial accountability (end-December 2021).

*Source: 1gmbea2021001 - 49. Significant efficiency gains in public spending will accrue from public procurement (IMF PDF).*

### Introduction

### Introduction

### Overview
- This memorandum sets out the understandings between The Gambian authorities and the staff of the International Monetary Fund (IMF) regarding: definitions of quantitative targets and structural benchmarks; reporting requirements; and adjustors to certain quantitative targets under the ECF-supported program through end-2021.

### Quantitative Targets — A. Net Domestic Borrowing of the Central Government
- Definition:
  - Net domestic borrowing (NDB) = change in net claims on the Central Government by the domestic monetary sector (monetary authorities and deposit money banks) + change in the discounted value of domestic government securities held by the non-monetary sector.
  - Also covers change in any other net claims on the Central Government by the domestic non-monetary sector, and change in government arrears on domestic debt service obligations.
  - Central Government excludes local and regional governments and public enterprises.
  - Excluded from NDB computation: (i) on-lending of the IMF credit (under RCF or ECF) to the budget; (ii) changes in the balances of the project accounts listed in Table 1; (iii) the face value of government securities issued to increase the CBG’s capital to the value mandated in the CBG Act; and (iv) the face value of the government securities issued for the purpose of transferring the CBG stake in MegaBank to the treasury.
- Adjustor:
  - NDB targets (ceilings) adjusted downward/upward by the excess/shortfall of the dalasi equivalent of total budget support grants and loans received in the period relative to program forecasts specified in Text Table 1.
  - The upward adjustment of the NDB targets at each quarter’s end for the shortfall in disbursements of budget support, including ECF tranches expected to be on-lent to the budget, may not exceed GMD 1.0 billion.
  - NDB targets will be adjusted downward by the amount of privatization proceeds.
- Supporting material:
  - Reporting on net domestic borrowing will form part of the consolidated budget report described in ¶32.

- Program Forecasts of External Budget Support in 2021 (as presented in the source):
  - Raw text extract from Text Table 1: Budget Support28.634.37.116.6
  - Loans28.614.30.00.0
  - Of which:  ECF Disbursement28.614.3......
  - Grants0.020.07.116.6
  - Of which: AfDB......7.1...
  - Of which: EU.........16.6
  - Of which: World Bank...20.0......
  - Sources: IMF staff estimates and projections.

### Quantitative Targets — B. Net Domestic Assets of the Central Bank
- Definition:
  - Net domestic assets (NDA) of the CBG = reserve money − net foreign assets of the CBG.
  - Reserve money = currency issued by the CBG (currency in circulation) + deposits of commercial banks at the CBG.
  - Net foreign assets = foreign assets − foreign liabilities; foreign assets and liabilities = claims on nonresidents and liabilities to nonresidents, respectively.
- Exchange rates for 2021 program monitoring purposes (end-of-period market exchange rates prevailing at end-October 2020):
  - 51.84 GMD/USD
  - 1.17 USD/EUR
  - 1.30 USD/GBP
  - 0.92 CHF/USD
  - 1.41 USD/SDR
  - 104.58 JPY/USD
- Conversion rule:
  - Foreign assets/liabilities in other currencies will be converted into U.S. dollars at prevailing end-of-period market exchange rates for end-October 2020, then into dalasi at the rates listed above.
  - These are accounting exchange rates only and should not be construed as projections.
- Supporting material:
  - Net domestic assets of the central bank transmitted as part of the balance sheet of the CBG (compiled based on the TMU rates) on a monthly basis within four weeks of the end of each month.
  - For analytical purposes, the balance sheet of the CBG compiled on a current-rate basis will also be submitted.

### Quantitative Targets — C. Net Usable International Reserves of the Central Bank of The Gambia
- Definition:
  - Net usable international reserves (NIR) = usable reserve assets − reserve liabilities.
  - Usable reserve assets: readily available claims on nonresidents denominated in convertible foreign currencies, including CBG holdings of SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country’s reserve position at the IMF.
  - Excluded: assets pledged/collateralized/encumbered; claims on residents; claims from FX derivatives vis-à-vis domestic currency; precious metals; assets in nonconvertible currencies; illiquid assets (including capital shares in international organizations).
  - Reserve liabilities: all foreign exchange liabilities to residents and nonresidents, including commitments to sell FX from derivatives and all credit outstanding from the IMF, excluding liabilities to the IMF’s SDR Department.
- Conversion rule:
  - For program monitoring, foreign assets and liabilities converted at exchange rates in ¶5 above.
- Adjustors:
  - Quarterly NIR targets (floors) adjusted downward/upward by the US dollar equivalent of the shortfall/excess of total budget support grants and loans (excluding IMF resources expected to be on-lent to the budget) received in the period preceding quarter’s end relative to program forecasts in Text Table 1.
  - Downward adjustment to quarterly NIR floors due to shortfall in budget support capped at US$20 million.
  - 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.
- Supporting material:
  - A detailed reserve statement with end-month data on net usable international reserves of the CBG transmitted within seven days of the end of each month.

### Quantitative Targets — D. New External Debt Payment Arrears of the Central Government
- Definition:
  - External debt payment arrears are external debt obligations of the central government not paid when due in accordance with contractual terms (taking into account contractual grace periods).
- Exclusions for program purposes:
  - (i) financial obligations for which the creditor has accepted in writing to negotiate alternative payment schedules before the relevant payment;
  - (ii) arrears on claims the government has represented as being disputed;
  - (iii) arrears on claims that cannot be settled due to international sanctions;
  - (iv) arrears on trade credits, except arrears on payments due to the International Islamic Trade Finance Corporation (ITFC).
- Performance criterion:
  - Non-accumulation of new external debt payment arrears by the central government to be observed continuously.
- Supporting material:
  - An accounting of non-reschedulable external arrears (if any) by creditor countries, with detailed explanations, transmitted monthly within four weeks of the end of each month, separately for Central Government and other public sector entities and by creditor type.

### Quantitative Targets — 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 per ¶8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements and to commitments contracted or guaranteed for which value has not been received.
  - Government guarantees = any explicit legal or contractual obligation of the central government to service a debt owed by a third-party debtor.
  - Debt considered contracted when conditions for its entrance into effect met, including approval by the National Assembly.
  - Excluded: Loans or purchases from the IMF and concessional debts as defined below; any debt with maturity of one year or less.
  - Performance criterion assessed continuously.
- Concessionality definition (¶16):
  - Debt is concessional if grant element ≥ 35 percent, where grant element = (nominal value − PV of debt) / nominal value.
  - PV calculated by discounting future payments at contracting using program reference rates plus fixed spreads where applicable.
  - Program reference rate for six-month USD LIBOR = 2.42 percent and will remain fixed for the duration of the program.
  - Spreads: six-month EURIBOR over six-month USD LIBOR = -250 basis points; six-month JPY LIBOR over six-month USD LIBOR = -250 basis points; six-month GBP LIBOR over six-month USD LIBOR = -150 basis points.
  - For debts with a grant element equal or below zero, PV set equal to nominal value.
  - Discount rate used = unified discount rate of 5 percent set forth in Executive Board Decision No. 15248-(13/97).
- Supporting material:
  - Comprehensive loan-by-loan accounting of all new concessional and non-concessional debt contracted or guaranteed by the Central Government transmitted quarterly within four weeks of the end of each quarter.
  - MoFEA to forward within four weeks of contracting/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.

### Quantitative Targets — 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 as defined in ¶16.
- Special rule:
  - For borrowing packages with both loan and grant components to meet concessionality requirement (grant element of 35 percent), only the loan components count toward the borrowing limit.
- Supporting material and data provision:
  - Refer to ¶17 and ¶18.

### Quantitative Targets — G. Outstanding Stock of External Public Debt with Original Maturity of One Year or Less
- Definition:
  - Stock of outstanding external public debt with original maturity of one year or less owed or guaranteed by the public sector (public sector = Central Government, regional governments, other public agencies, including the central bank).
  - Trade credits excluded, including ITFC credits.
- Supporting material:
  - Comprehensive record of all external debt with original maturity of less than one year owed or contracted by the public sector, with detailed explanations, transmitted quarterly within four weeks of the end of each quarter.

### Quantitative Targets — H. Tax Revenue (Indicative Target)
- Definition:
  - Tax revenue = 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 tax codes outlined in Text Table 2.
  - Nontax revenue (licensing fees, fines, levies) excluded.
  - Levies collected by the GRA on behalf of other organizations excluded (National Education & Technology Training Levy, AU Levy, ECOWAS Levy).
- Supporting material:
  - Monthly report on revenue collected by the GRA transmitted within four weeks of the end of each month.
- Tax revenue items included (as listed in Text Table 2):
  - Examples extracted from source: Personal Tax (111101); Company Tax (111201); Capital Gains (113301); Payroll Tax (112010); VAT and excise items such as Import VAT Oil (114121); Import VAT Non-Oil (114122); Value Added Tax (VAT) (114533); Import Duty Oil (115101); Import Duty Non-Oil (115102); and other listed domestic and customs revenue codes.

### Quantitative Targets — 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 materially different from prevailing market terms for Treasury bills and bonds at acquisition time.
  - Also covers any overdue payments of principal and interest on Central Government securities held by the central bank.
  - Performance criterion assessed at the end of each month.
- Supporting material:
  - Reporting on new central bank credit to the government at nonmarket terms to form part of the monetary sector data described in ¶34 and ¶35.

### Quantitative Targets — J. Poverty-Reducing Expenditures
- Definition:
  - Poverty-reducing expenditures = expenditures financed out of The Gambia Local Fund (GLF) on specified 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 Programs; Support to Cross-Cutting Programs; ICT Research and Development; Decentralization and Local Government Capacity Building; Governance and Civil Service Reform Program.
  - Starting Q1 2021, poverty-reducing expenditure will include COVID-19 spending implemented through the COVID-19 project accounts.
- Supporting material:
  - Monthly report on poverty-reducing expenditures transmitted within four weeks of the end of each month.

### Other Data Requirements and Reporting Standards — K. Prices
- Consumer price data:
  - 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.

### Other Data Requirements and Reporting Standards — L. Government Accounts Data
- Monthly consolidated Central Government budget report (analytical table) transmitted within four weeks of the end of each month covering:
  - (i) revenue data by major items (taxes on income, profits, and capital gains; domestic taxes on goods and services; taxes on international trade and transactions; other taxes; non-tax revenue);
  - (ii) external grants by type (e.g., budget support grants, project grants);
  - (iii) details of recurrent expenditure (goods and services, interest payments, subsidies and other current transfers);
  - (iv) details of capital expenditure and net lending (including externally financed capital expenditure, expenditure from the Gambia Local Fund, and net lending);
  - (v) the overall balance, the primary and the basic balance;
  - (vi) details of budget financing (including net domestic and net external borrowing and their components).
- Weekly:
  - End-week data on net domestic borrowing (including data on project accounts listed in Table 1) transmitted weekly within five business days of the end of each week.

### Other Data Requirements and Reporting Standards — M. Monetary Sector Data
- Monthly:
  - 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. The balance sheet will explicitly identify all claims on, and liabilities to, the government and include individual balances on the government accounts listed in Table 1.
  - Consolidated balance sheet of commercial banks and a monetary survey (consolidation of CBG and commercial banks), including foreign currency deposits held by residents with commercial banks, transmitted within four weeks of the end of each month.
- Weekly:
  - Daily data on reserve money transmitted weekly within five business days of the end of each week.

### Other Data Requirements and Reporting Standards — N. Treasury Bill Market and Interbank Money Market
- Weekly:
  - Weekly data on amounts offered and issued, net issuance, over/under subscription, and yields (interest rates) of various instruments transmitted weekly within five business days of the end of each week.
- Monthly:
  - Data on treasury bills and CBG bills outstanding (face value and discounted value and distribution by bank and non-bank holders) transmitted monthly within six weeks of the end of each month.

*Source: 1gmbea2021001 - Introduction.*

### 38.      Daily data on the interbank money market (interest rates, maturities, and volumes of

### 38.      Daily data on the interbank money market (interest rates, maturities, and volumes of transactions)

### Interbank money market reporting requirements
- Daily data on the interbank money market (interest rates, maturities, and volumes of transactions) will be transmitted weekly within five business days of the end of each week.
- Daily interbank market exchange rates, defined as the 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, defined as the 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.
- Daily data on foreign exchange intervention by the central bank will be transmitted weekly within five business days of the end of each week.
- 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.
- 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.

### External sector data
- The CBG will forward within four weeks of the end of each month, data on transactions in official reserves.

### Public enterprises’ data reporting
- 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 (GGC).
- 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 deadlines and frequencies)
- 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.
- Foreign exchange liquidity forecasts statement/report: Weekly, 7 days after week-end.
- Commercial banks' balance sheets: Monthly, 30 days after month-end.
- Commercial banks' Forex net open position statement/report: 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.
- Commercial banks' income statements: Quarterly, 30 days after quarter-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.
- SOE cash flow statements (i.e. 13 SOEs): 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.
- Staff Monitored Program (SMP) implementation matrix: Monthly, 30 days after month-end.
- Monthly Revenue Report: Monthly, 30 days after month-end.
- Oil volumes and tax collected on oil imports: Monthly, 30 days after month-end.
- Revenue collection by tax type: Monthly, 30 days after month-end.
- Tax exceptions\duty waivers: Monthly, 30 days after month-end.
- Consumer price index (CPI): Monthly, 30 days after month-end.
- Producer price index (PPI): Monthly, 30 days after month-end.
- Data on exports (by product type, quantity, country, etc.): Monthly, 30 days after month-end.
- Data on imports (by product type, quantity, country, etc.): Monthly, 30 days after month-end.
- Gross domestic product (GDP): Quarterly, 90 days after year-end.
- Crop field cultivation per hectare: Quarterly, 90 days after year-end.
- Crop yield: Quarterly, 90 days after year-end.
- Livestock population by region: Quarterly, 90 days after year-end.
- Tourists arrivals by nationality: Monthly, 30 days after month-end.
- Out-of-pocket tourists expenditures: Monthly, 30 days after month-end.

### Debt sustainability analysis — key findings and projections
- Overall and external debt distress risk ratings: “High”; public debt continues to be deemed sustainable.
- Near-term public debt indicators have deteriorated relative to the previous DSA.
- PV of overall public debt-to-GDP ratio: estimated at 67.5 percent at end-2020 (12.5 percentage points above its benchmark).
- PV of overall public debt-to-GDP ratio follows a downward path and drops below its sustainability benchmark by 2024 (one year later than projected in the previous DSA).
- GDP growth: 2020 estimated at 0 percent (down from 2.5 percent projected earlier); rebound for 2021 projected at 6 percent (compared to 6.5 percent projected at time of RCF request).
- Primary balance: projected to deteriorate in 2021 from a surplus of 0.8 percent of GDP (projected at time of RCF request) to a deficit of 1.3 percent of GDP.
- Total COVID-19 assistance in 2020: US$48 million.
  - Budget support augmentation: US$26.4 million (European Union US$19.4 million; African Development Bank US$7 million).
  - Additional/accelerated grants by World Bank: US$21.6 million (Health Fast-Track Facility US$10 million; frontloading of the Social Safety Net Project US$8.1 million; Education Sector Response Project US$3.5 million).
- Debt service relief under 2019 initiative: US$129 million (7 percent of GDP).
- Debt service relief in 2020 under DSSI: US$2.6 million (about 0.1 percent of GDP).
  - Deferral to KFAED: US$2 million.
  - Additional EBID deferral (not part of G20 DSSI): US$1.4 million.
- Possible extension of DSSI to 2021: about US$3 million in debt service deferrals.
- External debt service-to-exports ratio: projected to reach 29.3 percent in 2020 and 15.7 percent in 2021 (threshold 15 percent).
- PV of external debt-to-exports ratio: projected at 274.2 percent in 2020 and 213.1 percent in 2021 (threshold 180 percent).
- External debt service-to-revenue ratio: 26.6 percent in 2020 (threshold 18 percent).
- External liquidity indicators rise during 2025–27 with the end of the deferral period.
- Public debt service-to-total revenue ratio: 116.5 percent in 2020; projected about 80 percent in 2024–25 with implementation of debt strategy (MTDS) and fiscal consolidation.
- Borrowing plan revision: overall borrowing envisaged over 2020–23 increased from US$190 million to US$207 million.
- Proposed port expansion financing package: US$65 million debt component including US$15 million in non-concessional debt, combined with a grant of US$25 million.
- Authorities commit to refrain from non-concessional external borrowing beyond this package, including for projects benefiting state-owned enterprises.

### Risks, mitigation, and transparency actions
- Major downside risks:
  - Possible resurgence of COVID-19 delaying economic recovery and weakening fiscal outlook.
  - Accrual of two external payment arrears in 2020 increases need for vigilance in debt monitoring, especially debt contracted on behalf of state-owned enterprises.
- Mitigating actions and transparency measures:
  - MoFEA publishes quarterly reports on public debt and debt service, new agreements signed, and disbursements in 2020 with the support of Meridian software.
  - Update of the MTDS and the medium-term fiscal framework (MTFF) in October 2020 will support development and publication of an Annual Borrowing Plan (ABP).
  - Since August 2020, the CBG publishes monthly bond and T-bills issuance plans on its website to anchor market expectations and limit interest rate volatility.
  - Publication of an ABP is expected to facilitate communication with domestic creditors and support domestic market development.

*Source: Excerpt from IMF/IDA Country Report content provided in the supplied PDF chapter.*

### 9.      The authorities agree with the staff’s assessment of The Gambia’s “High” external and

### 1gmbea2021001 - 9.      The authorities agree with the staff’s assessment of The Gambia’s “High” external and

### Authorities' assessment and commitments
- The authorities agree with the staff’s assessment of The Gambia’s “High” external and overall debt distress ratings.
- The authorities recognize that the onset of the pandemic has increased their debt vulnerabilities.
- The authorities commit to:
  - demonstrating continued prudence in public debt management to maintain debt sustainability;
  - ensuring transparency in public debt contracting;
  - strict adherence to the revised borrowing plan;
  - reserving the space for new debt contracting for projects of high priority and for which grant financing may not be available.

### Public- and Publicly-Guaranteed (PPG) external debt indicators and stress-test framework (Figures 1–3)
- Time horizon covered in figures and projections: 2020–30.
- Stress-test mechanics and assumptions:
  - The most extreme stress test is defined as the test that yields the highest ratio in or before 2030.
  - Stress tests with one-off breaches are presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach is the most extreme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) is presented.
  - All additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
  - Default terms of marginal debt are based on baseline 10-year projections.
  - The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department.
  - The public DSA allows for domestic financing to cover additional financing needs generated by the shocks under the stress tests in the public DSA.
- Identified most extreme shocks in the depicted indicators:
  - Debt service-to-revenue ratio: Most extreme shock is Combination.
  - PV of debt-to-exports ratio: Most extreme shock is Exports.
  - PV of debt-to-GDP ratio: Most extreme shock is Combination.
  - Debt service-to-exports ratio: Most extreme shock is Exports.
  - PV of Debt-to-Revenue Ratio (public DSA): Most extreme shock is Non-debt flows.
  - Debt Service-to-Revenue Ratio (public DSA): Most extreme shock is Growth.
  - PV of Debt-to-GDP Ratio (public DSA): (Most extreme shock indicated in figure).
- Selected parameter values and labels appearing in figures and captions (preserved exactly as displayed):
  - Threshold: 1.4%1.4%
  - 100%
  - Tailored Tests: 5.0%
  - 5.0%
  - Interactions: No
  - User defined
  - n.a.n.a.
  - 4
  - 23
  - 23
  - 4
  - Combine d CLs Natural Disasters No
  - n.a.
  - Market Financing 0
  - Borrowing Assumptions for Stress Tests*
  - Shares of marginal debt
  - Default
  - Avg. grace period
  - Commodity Prices 2/
  - Avg. nominal interest rate on new borrowing in USD
  - USD Discount rate
  - Avg. maturity (incl. grace period)
  - Terms of marginal debt
  - External PPG MLT debt Baseline
  - External PPG medium and long-term
  - Domestic medium and long-term
  - Domestic short-term
  - Domestic MLT debt
  - Avg. real interest rate on new borrowing
  - Avg. maturity (incl. grace period)
  - Avg. grace period
  - Avg. real interest rate
  - External MLT debt
  - Avg. nominal interest rate on new borrowing in USD
  - Avg. maturity (incl. grace period)
  - Avg. grace period
- Public debt composition and numeric labels shown:
  - 17%17%
  - 19%19%
  - 64%64%
  - 1.4%1.4%
  - 4.4%4.4%
  - 33
  - 22
  - 2.0%2.0%
- Time series axes and labels shown across figures: yearly ticks and trajectories for 2020 2022 2024 2026 2028 2030 (presented as 202020222024202620282030) for multiple debt indicators (Debt service-to-revenue ratio; PV of debt-to-exports ratio; PV of debt-to-GDP ratio; Debt service-to-exports ratio; PV of Debt-to-Revenue Ratio; Debt Service-to-Revenue Ratio; PV of Debt-to-GDP Ratio; PV of Debt-to-Revenue Ratio; Debt Service-to-Revenue Ratio; PV of Debt-to-GDP Ratio).

### Drivers of debt dynamics and realism tools (Figures 3–4)
- Drivers and contributions depicted:
  - Gross Nominal PPG External Debt and Gross Nominal Public Debt shown in percent of GDP over time with DSA vintages and comparisons to previous DSA projections (labels: Current DSA, Previous DSA, DSA-2015 proj.).
  - Debt-creating flows components labeled: Price and exchange rate, Real GDP growth, Nominal interest rate, Current account + FDI, Change in PPG debt.
  - Unexpected Changes in Debt 1/ (difference between anticipated and actual contributions on debt ratios) depicted as past 5 years, percent of GDP.
  - Distribution across LICs for which LIC DSAs were produced (Distribution across LICs 2/; Interquartile range (25-75); Median).
  - Contribution of unexpected changes and contribution of other factors to debt changes.
- Realism tools and fiscal adjustment visualization (Figure 4):
  - Gov. Invest. - Prev. DSA; Gov. Invest. - Current DSA; Priv. Invest. - Prev. DSA; Priv. Invest. - Current DSA; Contribution of other factors; Contribution of government capital.
  - Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real GDP growth paths under different fiscal multipliers (left-hand side scale).
  - Contribution to Real GDP growth (% of GDP) and (percent, 5-year average) labels.
  - Public and Private Investment Rates and contribution to Real GDP growth presented.
  - Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990.
  - The size of 3-year adjustment from program inception is shown on the horizontal axis; the percent of sample on the vertical axis.
  - 3-Year Adjustment in Primary Balance (Percentage points of GDP) and distribution labels:
    - Numerical axis markers shown include: 0 2 4 6 8 10 12 14 and a range series -4 .5-4 .0-3 .5-3 .0-2 .5-2 .0-1 .5-1 .0-0 .5 0. 00. 51. 01. 52. 02. 53. 03. 54. 04. 55. 05. 56. 06. 57. 07. 58. 0
  - Projected 3-yr adjustment and "3-year PBadju stment greater than" label shown in figure.

### Key analytical points and implications
- The authorities acknowledge heightened debt vulnerabilities due to the pandemic and signal policy intent to:
  - limit non-priority borrowing;
  - prioritize projects with high priority where grant financing is unavailable;
  - adhere to a revised borrowing plan and enhance transparency in debt contracting.
- The DSA and stress-test framework:
  - treat PPG external MLT debt as the source covering additional financing needs from shocks in the external DSA;
  - allow domestic financing to cover additional financing needs under public DSA stress tests;
  - identify Combination, Exports, Growth, and Non-debt flows as dominant stress scenarios across different indicators.
- Figures provide multi-year projections (2020–30) for debt ratios and stress-test outcomes, and show distributions and historical comparisons across LIC DSAs.

*Italic: Source: 1gmbea2021001 - 9. The authorities agree with the staff’s assessment of The Gambia’s “High” external and overall debt distress ratings (figures and captions reproduced from the provided content).*

### 2.5 percentage points of GDP in

### 2.5 percentage points of GDP in

### External debt sustainability — baseline scenario (selected findings, 2017–40)
- External debt (nominal): 48.5, 48.1, 44.7, 43.6, 44.4, 43.8, 41.3, 38.6, 35.7, 23.5, 16.1, 38.6, 35.2 (percent of GDP for 2017–2030 as listed).
- Of which: public and publicly guaranteed (PPG): 46.5, 46.3, 44.6, 43.0, 43.6, 42.2, 40.3, 37.9, 35.2, 23.5, 16.0, 36.6, 34.7 (percent of GDP for same years).
- Change in external debt: 5.7, -0.4, -3.4, -1.1, 0.8, -0.7, -2.4, -2.7, -3.0, -1.9, -0.4 (percent of GDP, annual).
- Identified net debt-creating flows: 1.0, -0.7, -4.0, 2.2, 3.9, 4.4, 3.6, 3.3, 2.5, -2.0, 3.1, 1.1, 1.6 (percent of GDP).
- Non-interest current account deficit: 6.9, 9.1, 4.6, 5.6, 11.4, 12.0, 10.4, 9.5, 7.9, 2.5, 7.3, 7.2, 7.1 (percent of GDP).
- Deficit in balance of goods and services: 20.4, 18.5, 18.5, 24.4, 25.7, 25.7, 23.2, 21.2, 19.2, 12.6, 15.4, 13.9, 19.5 (percent of GDP).
- Net current transfers (negative = inflow): -14.9, -10.7, -14.9, -19.7, -15.3, -14.6, -13.5, -12.5, -11.9, -10.7, -8.5, -8.1, -13.0 (percent of GDP).
  - of which: official: -3.7, -0.9, -3.1, -4.7, -2.1, -2.3, -1.9, -1.6, -1.6, -1.5, -0.8 (percent of GDP).
- Net FDI (negative = inflow): -5.6, -5.5, -5.2, -4.1, -5.6, -5.5, -4.5, -4.2, -3.8, -3.5, -3.5, -5.6, -4.2 (percent of GDP).
- Endogenous debt dynamics: -0.3, -4.3, -3.4, 0.6, -1.8, -2.1, -2.3, -2.0, -1.6, -1.0, -0.6 (percent of GDP).
  - Contribution from nominal interest rate: 0.5, 0.5, 0.7, 0.6, 0.6, 0.6, 0.5, 0.5, 0.5, 0.3, 0.2 (percent of GDP).
  - Contribution from real GDP growth: -2.0, -3.2, -2.7, 0.0, -2.4, -2.7, -2.8, -2.5, -2.1, -1.3, -0.9 (percent of GDP).
  - Contribution from price and exchange rate changes: 1.2, -1.6, -1.5 (percent of GDP; historical entries shown).
- Residual: 4.7, 0.3, 0.6, -3.3, -3.1, -5.0, -6.0, -6.0, -5.5, 0.1, -3.6, 0.7, -3.5 (percent of GDP).
  - of which: exceptional financing: 0.0, 0.0, 0.0, -0.2, -0.3, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 (percent of GDP).

Sustainability indicators (selected)
- PV of PPG external debt-to-GDP ratio: 33.8, 33.1, 33.3, 32.2, 30.9, 29.3, 27.2, 27.2, 17.7, 11.8 (percent).
- PV of PPG external debt-to-exports ratio: 166.4, 274.2, 213.1, 169.6, 153.6, 139.0, 129.5, 90.0, 68.6 (percent).
- PPG debt service-to-exports ratio: 31.2, 26.2, 14.2, 29.3, 15.7, 11.5, 9.7, 9.7, 11.9, 11.6, 5.8 (percent).
- PPG debt service-to-revenue ratio: 44.8, 41.8, 20.7, 26.6, 17.5, 15.8, 13.7, 14.0, 16.7, 14.5, 6.2 (percent).
- Gross external financing need (Million of U.S. dollars): 98.1, 141.9, 71.9, 98.3, 181.1, 210.9, 226.4, 221.0, 209.5, 55.8, 402.0 (Million of U.S. dollars).

Key macroeconomic assumptions (selected)
- Real GDP growth (in percent): 4.8, 7.2, 6.1, 0.0, 6.0, 6.5, 7.0, 6.5, 5.8, 5.5, 5.5, 2.9, 5.4 (percent).
- GDP deflator in US dollar terms (change in percent): -2.8, 3.5, 3.1, 4.8, 2.4, 2.2, 2.0, 2.0, 2.6, 1.9, 1.4, -0.3, 2.5 (percent).
- Effective interest rate (percent): 1.1, 1.1, 1.6, 1.5, 1.5, 1.4, 1.3, 1.3, 1.4, 1.4, 1.4, 1.5, 1.4 (percent).
- Growth of exports of G&S (US dollar terms, in percent): 2.9, 26.3, 17.8, -37.7, 40.7, 32.3, 15.5, 13.7, 8.3, 5.6, 5.7, 5.5, 9.6 (percent).
- Growth of imports of G&S (US dollar terms, in percent): 19.2, 12.1, 13.8, -1.7, 23.3, 17.6, 5.6, 6.2, 3.3, 5.1, 7.2, 6.8, 6.4 (percent).
- Grant element of new public sector borrowing (in percent): 29.4, 32.2, 38.4, 39.7, 39.4, 36.2, 36.8, 35.7, 36.1 (percent, selected projection years).
- Government revenues (excluding grants, in percent of GDP): 11.6, 11.8, 13.9, 13.3, 14.1, 13.8, 14.3, 14.6, 14.9, 15.8, 16.2 (percent).
- Aid flows (in Million of US dollars): 115.4, 54.4, 129.0, 207.0, 169.3, 209.6, 211.3, 194.6, 181.6, 206.4, 242.1 (Million of US dollars).
- Grant-equivalent financing (in percent of GDP): 11.2, 9.0, 9.1, 8.4, 7.4, 6.8, 5.4, 3.3, 7.4 (percent; projection entries shown).
- Nominal GDP (Million of US dollars): 1,498, 1,662, 1,818, 1,905, 2,068, 2,252, 2,458, 2,671, 2,900, 4,239, 8,400 (Million of US dollars across years as listed).
- Nominal dollar GDP growth: 1.9, 11.0, 9.4, 4.8, 8.6, 8.9, 9.1, 8.7, 8.6, 7.6, 7.1, 2.6, 8.0 (percent).

Memorandum items
- PV of external debt (percent of GDP / percent of exports): 33.9, 33.7, 34.1, 33.8, 31.9, 30.0, 27.7, 17.8, 11.9 (percent of GDP); ......, 167.0, 279.4, 218.2, 177.6, 158.8, 142.4, 131.9, 90.4, 69.1 (percent of exports).
- PV of PPG external debt (in Million of US dollars): 614.6, 630.8, 689.5, 726.3, 759.6, 781.5, 788.8, 750.1, 989.2 (Million of US dollars).
- (PVt-PVt-1)/GDPt-1 (in percent): 0.9, 3.1, 1.8, 1.5, 0.9, 0.3, -0.2, 0.5 (percent).

Notes and definitions included in the dataset
- 1/ Includes both public and private sector external debt.
- 2/ Endogenous debt dynamics derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.
- 3/ Residual includes exceptional financing; changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.
- 4/ Includes relief under CCRT.
- 5/ Current-year interest payments divided by previous period debt stock.
- 6/ Defined as grants, concessional loans, and debt relief.
- 7/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).
- 8/ Assumes that PV of private sector debt is equivalent to its face value.
- 9/ Historical averages: generally derived over the past 10 years; projections averages are over the first year of projection and the next 10 years.

### Public sector debt — baseline scenario (selected findings, 2017–40)
- Public sector debt: 87.0, 84.6, 80.1, 77.3, 75.9, 71.8, 65.3, 60.7, 55.9, 41.5, 47.0, 67.3, 57.5 (percent of GDP across years as listed).
- Of which: external debt: 46.5, 46.3, 44.6, 43.0, 43.6, 42.2, 40.3, 37.9, 35.2, 23.5, 16.0, 36.6, 34.7 (percent of GDP).
- Change in public sector debt: 6.0, -2.4, -4.5, -2.8, -1.4, -4.1, -6.4, -4.6, -4.8, -1.1, 1.9 (percent of GDP, annual).
- Identified debt-creating flows: 1.6, -3.7, -5.8, -2.5, -1.3, -4.0, -6.4, -4.6, -4.8, -1.1, 1.9, 1.0, -3.4 (percent of GDP).
- Primary deficit: 0.2, 3.0, -0.6, -1.1, 1.6, -0.4, -1.0, -1.3, -1.8, 0.8, 3.0, 1.0, -0.5 (percent of GDP).
- Revenue and grants: 19.3, 15.1, 21.0, 23.4, 21.3, 21.5, 21.5, 21.0, 20.9, 20.5, 19.0, 15.1, 21.3 (percent of GDP).
  - of which: grants: 7.7, 3.3, 7.1, 10.1, 7.2, 7.7, 7.2, 6.4, 6.0, 4.7, 2.8 (percent of GDP).
- Primary (noninterest) expenditure: 19.4, 18.1, 20.5, 22.3, 22.8, 21.1, 20.5, 19.7, 19.2, 21.3, 22.0, 16.1, 20.7 (percent of GDP).
- Automatic debt dynamics: 1.5, -6.7, -5.2, -1.9, -3.5, -3.8, -3.9, -3.3, -2.8, -1.5, -1.1 (percent of GDP).
  - Contribution from interest rate/growth differential: -0.7, -5.8, -4.6, -0.3, -3.7, -3.7, -3.8, -3.2, -2.6, -1.5, -1.2 (percent of GDP).
  - Contribution from average real interest rate: 3.0, 0.1, 0.2, -0.3, 0.7, 0.9, 0.9, 0.8, 0.7, 0.7, 1.2 (percent).
  - Contribution from real GDP growth: -3.7, -5.9, -4.8, 0.0, -4.4, -4.6, -4.7, -4.0, -3.3, -2.2, -2.4 (percent).
- Other identified debt-creating flows: 0.0, 0.0, 0.0, 0.5, 0.6, 0.2, -1.4, -0.1, -0.2, -0.4, -0.1, 0.0, -0.3 (percent of GDP).
- Residual: 4.4, 1.4, 1.3, -2.0, 0.0, -0.2, -0.2, -0.1, -0.2, 0.0, 0.1, 3.1, -0.3 (percent of GDP).

Sustainability indicators (selected)
- PV of public debt-to-GDP ratio: 69.9, 67.5, 65.9, 62.1, 56.2, 52.3, 48.2, 36.0, 43.0 (percent across years shown).
- PV of public debt-to-revenue and grants ratio: 332.0, 288.8, 310.0, 288.3, 261.7, 249.0, 230.2, 175.9, 226.7 (percent).
- Debt service-to-revenue and grants ratio: 151.1, 154.6, 113.9, 116.5, 109.7, 94.7, 94.6, 81.4, 79.8, 80.1, 63.1, 54.5, 60.0, 59.7 (percent, selected years).
- Gross financing need: 29.3, 26.3, 23.4, 26.6, 25.5, 20.2, 17.9, 15.7, 14.7, 12.6, 14.3 (percent of GDP).

Key macro-fiscal assumptions (selected)
- Real GDP growth (in percent): 4.8, 7.2, 6.1, 0.0, 6.0, 6.5, 7.0, 6.5, 5.8, 5.5, 5.5, 2.9, 5.4 (percent).
- Average nominal interest rate on external debt (in percent): 1.2, 1.1, 1.7, 1.5, 1.5, 1.4, 1.4, 1.3, 1.5, 1.5, 1.4, 1.6, 1.4 (percent).
- Average real interest rate on domestic debt (in percent): 7.8, 0.3, 0.8, 0.1, 3.0, 3.7, 3.9, 4.2, 4.1, 5.2, 4.7, 5.7, 3.9 (percent).
- Inflation rate (GDP deflator, in percent): 3.9, 7.0, 7.1, 4.2, 4.3, 4.4, 4.2, 4.1, 4.8, 4.7, 4.7, 6.1, 4.8 (percent).
- Growth of real primary spending (deflated by GDP deflator, in percent): 40.6, -0.3, 20.2, 8.7, 8.7, -1.4, 3.6, 2.7, 2.8, 5.4, 6.3, 8.8, 5.8 (percent).
- Primary deficit that stabilizes the debt-to-GDP ratio: -5.9, 5.3, 3.9, 1.7, 3.0, 3.7, 5.4, 3.3, 3.0, 1.9, 1.1, 1.1, 3.0 (percent).

Notes and definitions included in the dataset
- 1/ Coverage: central government, central bank, government-guaranteed debt. Definition of external debt is Currency-based.
- 2/ Includes relief under CCRT.
- 3/ Underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.
- 4/ Debt service defined as sum of interest and amortization of medium- and long-term, and short-term debt.
- 5/ Gross financing need defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.
- 6/ Primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus) that stabilizes the debt ratio only in the year in question.
- 7/ Historical averages generally over the past 10 years; projections averages over the first year of projection and the next 10 years.

### Sensitivity analysis (selected)
- Publicly-guaranteed external debt — PV of debt-to-GDP (baseline): 33.1, 33.3, 32.2, 30.9, 29.3, 27.2, 25.4, 23.0, 21.0, 19.3, 17.7 (percent, 2020–2030).
- Alternative scenarios and bound tests show variations; notable bound test outcomes (selected):
  - B1. Real GDP growth: 33.1, 37.7, 41.5, 39.8, 37.6, 35.0, 32.6, 29.6, 27.0, 24.8, 22.8 (percent).
  - B5. One-time 30 percent nominal depreciation: 33.1, 41.9, 34.5, 33.1, 31.3, 28.9, 26.8, 24.4, 22.3, 20.5, 18.9 (percent).
  - C1. Combined contingent liabilities: 33.1, 34.3, 33.7, 32.7, 31.4, 29.6, 27.9, 25.7, 23.8, 22.2, 20.6 (percent).
- PV of debt-to-exports (baseline): 274.2, 213.1, 169.6, 153.6, 139.0, 129.5, 124.0, 112.0, 103.0, 96.3, 90.0 (percent).
- Debt service-to-exports (baseline): 29.3, 15.7, 11.5, 9.7, 9.7, 11.9, 12.7, 13.6, 12.9, 12.1, 11.6 (percent).
- Debt service-to-revenue (baseline): 26.6, 17.5, 15.8, 13.7, 14.0, 16.7, 17.2, 17.6, 16.3, 15.4, 14.5 (percent).
- Tailored shock for combined contingent liabilities set at 8.7 percent of GDP (5 percent financial sector shock and 3.7 percent non-guaranteed SOEs debt).

### Policy context, program requests, and outlook (statement excerpt)
- The Gambian authorities:
  - Note the COVID-19 pandemic had a severe impact, disrupting the strong growth performance of 2018 and 2019; the economy stagnated in 2020.
  - Report that aggressive response measures effectively contained the spread of the virus, and Fund support (ECF approval and emergency financing in April) catalyzed donor support to preserve macroeconomic stability, counter economic and health impacts, and protect vulnerable households.
  - Expect a v-shaped recovery but acknowledge growth prospects remain subject to significant risks, including resurgence of the virus in major source markets for tourism and associated travel restrictions.
- Requests to the IMF:
  - Seek Directors’ support for completion of the first review of The Gambia’s ECF-supported program and the financing assurances review.
  - Request a waiver for nonobservance of a PC and augmentation of access under the ECF arrangement.
  - State that additional financing will bolster the fiscal position allowing authorities to strengthen the health care system and further broaden the coverage of social support.

*Source: Country authorities; and staff estimates and projections.*

### 3.   Economic  growth  is  estimated  to  have  declined  markedly  from  6.1  percent  in  2019  to

### 1gmbea2021001 - 3.   Economic  growth  is  estimated  to  have  declined  markedly  from  6.1  percent  in  2019  to

### Economic growth and outlook
- Economic growth is estimated to have declined from 6.1 percent in 2019 to zero percent in 2020 due to a standstill in tourism and a slowdown in other contact dependent service sectors.
- The decline in tourism was moderated by:
  - expansion in the agriculture sector;
  - an increase in foreign exchange inflows that helped finance activity in construction and commerce.
- Growth projections:
  - rebound to 6.0 percent in 2021;
  - average 6.5 percent per year in the medium-term.
- Drivers of the projected rebound: a robust fiscal stimulus in the FY 2021 budget, recovery in the tourism sector, absorption of new technology expected to boost factor productivity, and a resumption in public investment.

### Inflation and external sector
- Inflation: declined from 7.7 percent in December 2019 to 5.6 percent in October 2020 due to low fuel prices and stability in the dalasi, supported by private remittance and capital inflows, and official transfers improving reserve coverage of imports.
- Risks to inflation: renewed inflationary pressures could emanate from rising food prices attributed among other things to logistical challenges in global supply chains.
- Current account: the current account deficit widened to 5.6 percent of GDP in September 2020 from 2.0 percent of GDP in the corresponding period of 2019, reflecting the virtual halt in tourism receipts due to the COVID-19 pandemic.
- External support: continued support from the IMF and development partners will be important to shore up reserve buffers and reduce pressure on the exchange rate.

### Program performance (RCF/ECF program)
- Overall performance: program performance remains strong.
- Quantitative performance criteria (PC) through end-June test date: six out of seven PCs were met, including:
  - program ceiling on central government net domestic borrowing (NDB);
  - ceilings on the stock of net domestic assets (NDA) of the central bank;
  - ceiling on new non-concessional external debt contracted and guaranteed;
  - ceiling on the outstanding stock of external public debt with original maturity less than one year guaranteed by central government.
- Net usable international reserves (NIR) floors: floors for end-June 2020 and end-September 2020 were exceeded with significant margins.
- Missed PC: continuous zero-ceiling on new external payments arrears of the central government was missed; arrears were subsequently cleared and corrective action taken (relevant SOE required to make provisions to settle future payments on time and alert the Ministry of Finance and Economic Affairs if there’s likely to be a delay).
- Indicative targets (ITs):
  - Two out of three ITs met for end June 2020; the exception was the floor on poverty-reducing spending.
  - All ITs for end September 2020 were met, including the floor for poverty-reducing spending.
- Structural benchmarks (SBs):
  - SBs for end June 2020 were met.
  - Three end September 2020 SBs were missed due to capacity constraints induced by the COVID-19 pandemic; related program commitments have since been implemented.
- Completed actions:
  - Updating the Medium-Term Debt Strategy (MTDS) and its publication completed in October 2020.
  - Policy actions to launch reform of tax exemptions policy and rationalization of subvented agencies were completed and articulated in the 2021 budget speech.

### Fiscal policy and debt management
- Fiscal focus: emergency measures to mitigate the pandemic impact; FY 2021 budget also supports economic recovery.
- Policy stance: authorities remain mindful of prudent policies and orderly execution of FY 2021 budget, guided by the medium-term fiscal framework consistent with the program; plan to tighten fiscal policy once recovery takes hold to safeguard debt sustainability.
- Revenue measures and administration:
  - Efforts to intensify revenue collection continue.
  - Increase in domestic revenues in 2020 due to one-off non-tax receipts from the sale of assets authorized by the Janneh Commission.
  - Steps to eliminate ad-hoc tax exemptions and restore full authority to approve tax exemptions to the Ministry of Finance and Economic Affairs.
  - Implement new tax exemption policy and strengthen tax compliance.
  - Other measures: realignment of taxpayers registration and reporting thresholds for selected tax items, increase of excise tax rates on tobacco products.
- Public financial management (PFM) reforms:
  - Ongoing civil service reform by the Personal Management Office (PMO); nationwide staff audit conducted with final report to be shared with ministries.
  - PMO developed a Civil Service Grading, Pay and Incentive Policy recommending a reasonable minimum salary for civil servants.
  - Plans to effect salary payments electronically (bank or mobile money) starting in 2021.
- IFMIS and cash management:
  - Extension of the integrated financial management information system (IFMIS) to self-accounting agencies to strengthen expenditure management and reporting.
  - IFMIS functionalities and coding upgraded to facilitate timely production of comprehensive reports on public expenditure, including poverty related spending.
  - Capacity assessment for IFMIS rollout to projects and subvented agencies completed.
  - Steps to fast-track completion of Treasury Single Account (TSA) and strengthen cash management framework.
- Debt management:
  - Progress made in meeting the net domestic borrowing (NDB) target and the target for new non-concessional external debt contracted or guaranteed by central government.
  - Updated MTDS completed and published in October 2020 to guide borrowing policy, reduce rollover risk, and plan development of a secondary market in government debt instruments.
  - Continued reliance on grant financing and highly concessional borrowing for foreign-financed projects.
  - Strengthening oversight of contingent liabilities from SOEs and ensuring timely debt service payments on government-guaranteed debt.
  - Strengthening debt recording and reporting capacity.

### Monetary and financial sector policies
- Monetary stance: accommodative monetary policy consistent with low inflation and weak economic activity due to the pandemic.
- Central bank actions:
  - Central Bank of The Gambia (CBG) reduced the policy rate to 10 percent in May 2020 from 12.5 percent end-December 2019.
  - Reserve requirement lowered to 13 percent from 15 percent (with advice to banks to postpone dividend distribution).
  - CBG will continue to use interest rate-based instruments to support recovery, boosting aggregate demand while containing inflationary pressures.
  - Commitment to a flexible exchange rate regime; occasional FX market intervention to smoothen disorderly movements.
- Central bank governance: progress in strengthening legal framework, modernizing internal audit, and improving financial reporting; strengthened control and audit processes with active oversight by the Bank’s Board and the Audit Committee.
- Financial sector stability and reforms:
  - COVID-19 impacted asset quality in banks and NBFIs, particularly those with exposure to tourism-related sectors.
  - Authorities addressing liquidity-stressed bank clients on a case-by-case basis; CBG urging delay of dividend distributions to preserve capital buffers.
  - Implementation of 2019 FSSR recommendations to develop macroprudential tools.
  - Steps to develop a framework for banking sector stress testing, strengthen supervision of Non-Bank Financial Institutions (NBFIs), and partner with telecommunications companies to develop FINTECH and reinforce confidence in mobile banking to improve financial inclusion.

### Governance and structural policies
- Anti-corruption and AML/CFT:
  - Anti-corruption bill submitted to the National Assembly to strengthen the fight against rent-seeking by public officials.
  - Strengthening of the AML/CFT framework in line with GIABA recommendations to curb illicit financial flows.
- Competitiveness and infrastructure:
  - Steps to improve The Gambia’s ranking in the Global Competitiveness Index, including expanding the seaport, improving port IT infrastructure, implementing an ambitious energy roadmap, and upgrading IT infrastructure in the Gambia Revenue Authority (GRA).
  - Efforts to improve digitalization and the related regulatory environment.
- Transparency and COVID-19 spending:
  - Authorities pledged full transparency in the use of COVID-related resources under the RCF.
  - Commitment to publish all COVID-19 related procurement contracts online and strengthen emergency-related procurement practices per the revised GPPA Act (soon to be approved by the National Assembly).
  - Creation of a sub-account in the Treasury Single Account for COVID-19 spending with an overseeing committee.
  - Strengthened internal audit function at the Ministry of Health and arrangement for an independent ex-post audit by the National Audit Office (NAO) of all COVID-19 related expenditure to be finalized by end-September 2021.
- Counter-trafficking efforts:
  - Continued implementation of strategy to counter trafficking in persons (TIP) with ramped up investigations, improved coordination with partner organizations, scaled training of public officials, strengthened internal capacity to identify trafficking victims, public awareness campaigns, and an engagement campaign on TIP and child sex trafficking.
  - Plan to accelerate investigations and prosecutions.
  - Progress recognized in the latest US State Department human trafficking report, with the country’s rating elevated from Tier 3 to Tier 2.

### Conclusion
- Authorities remain steadfast in pursuing program reforms despite significant pandemic challenges.
- They value Fund support for capacity building and implementing prudent policies to support inclusive growth.
- Fund support is considered an important complement to efforts to realize national economic objectives as articulated in the National Development Plan.
- Authorities look forward to the Director’s support in completion of the first review under the extended credit facility and the associated financing assurances review.

*Source: IMF staff report content as provided.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1gmbea2021001.pdf_