## _cr04143 ## Source details **Canonical URL:** [_cr04143](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04143.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04143.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04143.pdf.json) --- ### Executive Summary — Major findings - PRGF-supported program is far off track due to excessive fiscal deficits, central bank losses, and poorly conducted monetary policy. - Key outcomes and dynamics: - Inflation rose sharply; exchange rate depreciated in terms of the euro by over 60 percent in the two years to end-December 2003. - Agricultural output fell by one-third in 2002 following an unfavorable rainy season. - Large quasi-fiscal spending, including questionable foreign exchange transactions by the central bank, compounded fiscal slippages. - Public spending financed directly out of foreign exchange reserves in 2001 was estimated at the equivalent of 7 percent of GDP and was not recorded in central government accounts or international reserves. ### Data revisions and reporting issues - Authorities acknowledged systematic misreporting of data to the Fund; two PRGF disbursements in 2001 may have been noncomplying. - Inclusion of previously unrecorded payments of US$28.5 million in 2001 would: - Raise total public expenditure from 24 percent to 31 percent of GDP. - Raise the fiscal deficit (excluding grants) from 8 percent to 15 percent of GDP. - CBG notified staff of three major errors (October 28, 2003): - Unrecorded payments by the CBG of US$28.5 million in foreign currencies on behalf of the government in 2001. - International reserves were overstated by up to US$16 million from purchases not delivered by foreign exchange bureaus. - An additional unrecorded US$1.84 million paid from foreign exchange reserves in 2003 for commissions. - Selected reserve and spending revisions (millions of U.S. dollars, end of period unless otherwise stated): - Net international reserves (as previously reported): 2000: 91.3; 2001: 75.9; 2002: 75.3; June 2003: 63.0. - Net international reserves (reflecting revised CBG data): 2000: 91.3; 2001: 37.1; 2002: 35.3; June 2003: 23.3. - Gross international reserves (reflecting revised CBG data): 2000: 110.1; 2001: 63.0; 2002: 67.3; June 2003: 56.2. - Total government spending (as previously reported): 2001: 24.3 (percent of GDP). - Total government spending (reflecting revised CBG data): 2001: 31.1 (percent of GDP). - Fiscal deficit excluding grants (as previously reported): 2001: -8.1 (percent of GDP). - Fiscal deficit excluding grants (reflecting revised CBG data): 2001: -14.9 (percent of GDP). - Staff notes assessments are provisional pending confirmation of precise magnitude and timing of unreported transactions. ### Macroeconomic performance, 2002–03 - Aggregate outcomes: - GDP contracted in 2002 and recovered to 6 percent above the 2001 level in 2003. - Consumer price inflation: 21 percent (12-month basis) in August 2003; official CPI about 18 percent at reporting. - Reserve money growth: 34 percent in 2002 and 63 percent in 2003; average reserve money growth nearly 50 percent over the period. - Dalasi nominal effective depreciation: 34 percent during 2002; further 34 percent in 12 months to October 2003; 60 percent depreciation vs euro over two years to end-December 2003. - Fiscal outcomes: - Fiscal deficits (excluding grants): 2002: -8.1 (percent of GDP, reported); 2003: -6.0 (percent of GDP, reported). - One-third of current expenditure devoted to debt interest payments. - Domestic revenue undershot the 2003 budget by 2.7 percent of GDP. - Monetary and financial indicators (selected): - Broad money (end of period): 1998-2001: 18.8; 2002: 35.3; 2003: 43.4. - Private sector credit (end of period): 1998-2001: 11.9; 2002: 72.3; 2003: 48.0. - Treasury bill yields increased to 31 percent by September 2003. - Minimum reserve requirements extended to include foreign currency deposits and increased from 14 percent to 18 percent in two steps starting April 2003. - Structural/sectoral: - Agricultural output (groundnuts) severely affected: groundnut production (thousands metric tons): 1998-2001: 121.4; 2002: 71.5; 2003: 127.0. - Little progress diversifying beyond groundnuts; economy highly vulnerable to external shocks. ### Governance, central bank weaknesses, and safeguards - Safeguards assessment found severe weaknesses at the CBG in all risk categories. - Recommended actions: - Special audit of foreign exchange transactions to determine magnitude and timing of unrecorded transactions. - Urgent improvements in internal organization, procedures, and control mechanisms at the CBG. - Principal safeguards recommendations (selected): - Replace the current external auditor with a firm experienced in central banking operations. - Conduct a special audit by the new audit firm and reaudits of 2001 and 2002 financial statements. - Retain future Fund disbursements in the SDR holdings account and commission quarterly audits of essential quantitative performance criteria until adequate controls exist. - Adopt International Accounting Standards (IAS) as the permanent accounting framework of the CBG. - Commission a review of internal controls and develop an action plan. ### Responses by authorities and disputed transactions (paras. 34–37) - Authorities recorded newly identified government spending of US$28.5 million from foreign exchange reserves in 2001 and retrospectively classified it as a foreign currency loan from the CBG repayable in domestic currency over 15 years from June 2004 at 4 percent interest. - Nondelivery of foreign currency purchased from bureaus: outstanding amounts declined to about US$11 million by end-June 2003; classified retrospectively as loans to the private sector with full repayment required by end-October 2003. - At least US$0.8 million spent arranging a short-term US$28 million loan in February 2003. - Oversight changes at the CBG: committee chaired by the General Manager to oversee FX transactions; senior management changes including the Governor and department heads. - Staff requests remained unanswered on some issues (FX swaps since June 2002; instruction to lend US$5 million to a public enterprise in March 2003 for seismic survey). ### Policy challenges, recommendations, and prerequisites for program resumption - Reestablishing macro stability requires: - Resolute actions to improve governance and contain public spending. - Reducing prospective fiscal deficit for 2004 and restoring external budgetary support. - Strengthening public expenditure management, completing and auditing government accounts, and improving accountability. - Fiscal policy recommendations (paras. 38–40, 55): - Implement quick-acting revenue measures to reduce the 2004 financing gap projected at about 9 percentage points of GDP in the absence of external budgetary support (projections include public sector wage increases of 10 percent). - Broaden the sales tax base and raise the rate on imported goods to align with domestic services. - Enforce collection of revenue arrears and reform customs procedures and discretionary exemptions. - Accelerate privatization and maintain tight control on discretionary expenditure via NEFCOM. - Monetary policy recommendations (paras. 41–44, 53–54): - Urgently strengthen CBG control mechanisms, internal organization, procedures, and internal controls. - Enhance monitoring of monetary data and reconsider arrangements for treasury bill issuance. - Rein back excessive monetary growth; separate liquidity management from government debt management; review the CBG Act to improve independence and accountability. - Preconditions for resuming program discussions: - Special audit of CBG foreign exchange transactions since December 2000 and reaudits of 2001 and 2002 financial statements. - Address integrity of key macroeconomic data and persistent governance weaknesses. ### Economic outlook and scenarios (A and B) — projections and implications - Two contrasting scenarios: - Scenario A (continuation of current policy stance): no additional fiscal measures in 2004 beyond budget proposals; monetary tightening further; some fiscal action assumed later. - Scenario B (comprehensive policy response): additional fiscal measures in 2004 (2.1 percent of GDP), substantial early-year monetary tightening, improvements in governance/data provision; assumed resumption of donor support and HIPC completion point reached during 2005. - Under Scenario A (selected projections, average percentage change unless otherwise specified): - Real GDP: 4.4. - Consumer price index: 21.2. - Exports, f.o.b. (in U.S. dollars): 14.3. - Imports, c.i.f. (in U.S. dollars): 8.3. - Current account, incl. official transfers (percent of GDP): -2.4. - Broad money (end of period): 28.5. - Private sector credit (end of period): 23.5. - Fiscal balance, excluding grants (percent of GDP): -7.7. - Domestic financing projected to surge to 9.6 percent of GDP in 2004 and remain high. - Outcome: high inflation and depreciation persist; reserves gradually depleted; GDP growth might reach about 4 percent but productive capacity harmed. - Under Scenario B (selected projections): - Real GDP: 5.0. - Consumer price index: 8.2. - Exports, f.o.b. (in U.S. dollars): 14.4. - Imports, c.i.f. (in U.S. dollars): 11.4. - Current account, incl. official transfers (percent of GDP): -0.3. - Broad money (end of period): 13.6. - Private sector credit (end of period): 12.8. - Fiscal balance, excluding grants (percent of GDP): -1.4. - Fiscal deficit would decline below 3 percent of GDP in 2004; domestic financing limited to 2 percent of GDP in 2004. - Monetary growth decelerates; 12-month CPI inflation could be brought to below 5 percent by end-2005. - Under enhanced HIPC, NPV of public sector external debt would fall to about 200 percent of exports by end-2008 from 300 percent at end-2003. - Even under Scenario B, medium-term real GDP growth likely about 4–5 percent; sustained 6 percent growth requires absence of adverse shocks and sharply favorable external inflows. ### Fiscal and monetary developments (selected historical and projected figures — preserve exact values) - Selected historical indicators (average percentage change, unless specified): - Real GDP: 1998-2001: 6.1; 2002: -3.2; 2003: 8.8. - Consumer price index: 1998-2001: 2.6; 2002: 8.6; 2003: 17.0. - Broad money (end of period): 1998-2001: 18.8; 2002: 35.3; 2003: 43.4. - Private sector credit (end of period): 1998-2001: 11.9; 2002: 72.3; 2003: 48.0. - Fiscal balance, excluding grants (percent of GDP): 1998-2001: -7.0; 2002: -8.1; 2003: -6.0. - Key time-series points (selected): - Reserve money growth: 2002: 34 percent; 2003: 63 percent. - Treasury bill yields: July 2002: 15 percent; December 2002: 20 percent; September 2003: 31 percent. - Groundnut production (metric tons, thousands): 1998-2001: 121.4; 2002: 71.5; 2003: 127.0. - Net international reserves (revised, millions of U.S. dollars): 2001: 37.1; 2002: 35.3; June 2003: 23.3. ### Data production, dissemination, and integrity concerns - Urgent implementation needed of Fund TA recommendations on data production and dissemination. - Data often late and of inadequate quality; methodological problems and outdated weights limit usefulness. - Recent substantial revisions, internal inconsistencies, and delayed submissions raise serious questions about data reliability and whether IMF Article VIII Section 5 provisions are satisfied. - Macro data published only once a year in the budget speech and only partially. - Required actions: - Special audit of CBG foreign exchange transactions and reaudits of 2001 and 2002 financial statements. - Resume systematic publication of economic data. - Use available external technical assistance under the Technical Cooperation Action Plan conditional on authorities’ capacity to utilize it. ### Structural reforms, sectoral priorities, and capacity building - Opportunities: horticulture, fishing, upscale tourism, offshore oil and mineral extraction, port and freight-related businesses (port of Banjul). - Enablers required: - Address infrastructure deficiencies (electricity, water). - Improve availability of private finance and microfinance. - Rejuvenate privatization program and consider land reform. - Improve governance and judicial functioning to secure investor confidence. - Agriculture and rural finance priorities: - Irrigation, coordinated policy for seed supply and inputs, improved marketing, and access to finance for smallholders and SMEs. - Recovery of groundnut harvest in late 2003 but shortages of good-quality seeds and inputs for planting season. ### HIPC, PRSP, donor support, and social impact - Decision point reached in December 2000; creditors committed to debt relief of US$66.6 million in NPV terms at completion point. - Paris Club flow rescheduling on Cologne terms as of January 9 2003; second tranche covering July 2003–July 2004 will not be enacted. - Interim assistance by the Fund ceased on January 1, 2004. - HIPC completion point cannot be reached until 2005, at the earliest. - Poverty likely increased markedly since 2001 due to 2002 crop failures, rising inflation, and limited income support and social services. - Some PRSP social indicators improved (gross school enrollment for girls, immunization rates, basic health facility coverage). ### Key safeguards, audit, and program preconditions (summary) - Special audit of CBG foreign exchange activity since December 2000 and reaudits of 2001 and 2002 financial statements deemed critical before resumption of program discussions. - CBG to adopt IAS, establish independent audit committee, and implement internal control remediation plan. - Authorities agreed to some measures (IAS adoption, independent audit committee) but did not commit to replacing external auditor or to special audit and reaudits initially. *Source: IMF staff report (selected sections, figures, tables, and appendices) provided in content unit _cr04143.* ### Executive Summary ...................................................................................................... ### Executive Summary ### Major findings - The Gambia’s PRGF-supported program is far off track due to excessive fiscal deficits, central bank losses, and poorly conducted monetary policy. - Key economic outcomes and dynamics: - Inflation rose sharply; the exchange rate depreciated in terms of the euro by over 60 percent in the two years to end-December 2003. - Agricultural output fell by one-third in 2002 following an unfavorable rainy season. - Large quasi-fiscal spending, including questionable foreign exchange transactions by the central bank, compounded fiscal slippages. - Public spending financed directly out of foreign exchange reserves in 2001 was estimated at the equivalent of 7 percent of GDP and was not recorded in central government accounts or international reserves. ### Data revisions and reporting issues - Authorities acknowledged systematic misreporting of data to the Fund; two PRGF disbursements in 2001 may have been noncomplying. - Inclusion of previously unrecorded payments of US$28.5 million in 2001 would: - Raise total public expenditure from 24 percent to 31 percent of GDP. - Raise the fiscal deficit (excluding grants) from 8 percent to 15 percent of GDP. - Central Bank of The Gambia (CBG) notified staff (October 28, 2003) of three major errors: - No account had been taken in 2001 of payments made by the CBG of US$28.5 million in foreign currencies on behalf of the government. - International reserves were credited during 2001 and subsequently with currency purchased from foreign exchange bureaus that had not been delivered, overstating reserves by up to US$16 million. - The CBG had paid an additional, unrecorded US$1.84 million from the foreign exchange reserves in 2003 to finance commissions on recent foreign currency transactions. - Impact of data revisions on reserves and government spending (selected figures from CBG revisions): - Net international reserves (as previously reported): 2000: 91.3; 2001: 75.9; 2002: 75.3; June 2003: 63.0 (in millions of U.S. dollars, end of period). - Net international reserves (reflecting revised CBG data): 2000: 91.3; 2001: 37.1; 2002: 35.3; June 2003: 23.3 (in millions of U.S. dollars, end of period). - Gross international reserves (reflecting revised CBG data): 2000: 110.1; 2001: 63.0; 2002: 67.3; June 2003: 56.2 (in millions of U.S. dollars, end of period). - Total government spending (as previously reported): 2001: 24.3 (percent of GDP). - Total government spending (reflecting revised CBG data): 2001: 31.1 (percent of GDP). - Fiscal deficit excluding grants (as previously reported): 2001: -8.1 (percent of GDP). - Fiscal deficit excluding grants (reflecting revised CBG data): 2001: -14.9 (percent of GDP). - Staff notes these assessments are provisional pending confirmation of the precise magnitude and time path of previously unreported transactions. ### Macroeconomic performance in 2002–03 - Aggregate outcomes and dynamics: - GDP contracted in 2002 and recovered to 6 percent above the 2001 level in 2003. - Consumer price inflation surged, reaching 21 percent on a 12-month basis in August 2003. - Reserve money grew by 34 percent during 2002 and by 63 percent during 2003; average rates of growth in reserve money were nearly 50 percent over the period. - Downward pressure on the exchange rate was accentuated by weakened external budgetary support and declining investor confidence due to policy implementation and governance concerns. - Fiscal outcomes: - Fiscal deficits (excluding grants) of 8.1 percent of GDP in 2002 and 6.0 percent of GDP in 2003 (as reported). - One-third of current expenditure is devoted to debt interest payments. - Policy response: - Recent actions to tighten policy included overall cash ceilings on allocations for discretionary public spending and an increase in treasury bill yields to 31 percent. - Current recorded CPI inflation was about 18 percent at the time of reporting. - Structural and sectoral developments: - Agricultural output, especially groundnuts, was severely affected (groundnut production figures shown in Selected Economic Indicators below). - Little progress in increasing value added in tourism or diversifying beyond groundnuts and other agricultural production. - The economy remains highly vulnerable to external shocks; modest medium-term GDP growth prospects even if macroeconomic stability and donor support are restored. ### Governance, central bank weaknesses, and safeguards - Insufficient commitment to contain public spending and weak governance lay at the heart of policy shortcomings. - The Fund safeguards assessment found severe weaknesses at the central bank in all risk categories and recommended: - A special audit of foreign exchange transactions to determine the magnitude and time path of hitherto unrecorded transactions. - Urgent improvements in internal organization, procedures, and control mechanisms at the CBG. ### Policy challenges and required actions - Reestablishing macroeconomic stability will require: - Resolute actions to improve governance. - Reducing the sizable prospective fiscal deficit for 2004. - Restoring external budgetary support. - Strengthening public expenditure management, completing and auditing government accounts, and improving accountability. - To achieve substantial improvements in living standards and poverty reduction, and to capitalize on gains in external price competitiveness and potential offshore hydrocarbon deposits, the report emphasizes: - Strengthening governance. - Upgrading inadequate infrastructure. - Implementing well-targeted and coherent agricultural policies. - Encouraging innovative approaches to private finance. - Note on technical assistance: - Substantial technical assistance has been provided, including under the Technical Cooperation Action Plan (TCAP), but implementation has been weak, particularly at the central bank and in statistics. ### Selected economic indicators, 1998–2003 (average percentage change, unless otherwise specified) - Real GDP: 1998-2001: 6.1; 2002: -3.2; 2003: 8.8 - Groundnut production (metric tons, thousands): 1998-2001: 121.4; 2002: 71.5; 2003: 127.0 - Consumer price index: 1998-2001: 2.6; 2002: 8.6; 2003: 17.0 - Exports, f.o.b. (in U.S. dollars): 1998-2001: -0.6; 2002: 9.2; 2003: -8.1 - Imports, c.i.f. (in U.S. dollars): 1998-2001: -3.2; 2002: 10.7; 2003: -3.9 - Current account, incl. official transfers (in percent of GDP): 1998-2001: -3.0; 2002: -2.2; 2003: -5.1 - Broad money (end of period): 1998-2001: 18.8; 2002: 35.3; 2003: 43.4 - Private sector credit (end of period): 1998-2001: 11.9; 2002: 72.3; 2003: 48.0 - Fiscal balance, excluding grants (in percent of GDP): 1998-2001: -7.0; 2002: -8.1; 2003: -6.0 *Source: IMF staff report (Executive Summary).* ### 9. The vulnerability of the economy to external shocks remained largely ### _cr04143 - 9. The vulnerability of the economy to external shocks remained largely ### Vulnerabilities and external dependence - Main domestically generated sources of foreign exchange: tourism, the reexport trade, and groundnuts. - Only hotels and restaurants showed indications of a positive response to improved external competitiveness. - Most of the population remained dependent on groundnut farming and hence highly susceptible to weather variations. ### Government interventions and governance concerns - October 2003: President Jammeh launched Operation No Compromise to address unfair business practices and corruption; measures included restricting the informal foreign exchange market and pressuring businesses and individuals to deposit or surrender foreign currency holdings. - Charges of tax evasion and fraud were reportedly laid against several prominent businessmen and alleged collaborators in the public sector; five officials and former officials of the central bank were indicted on offenses related to Swiss franc transactions by the CBG. - Staff and management were informed only at end-October 2003 that data on fiscal transactions and foreign exchange reserves had been substantially misstated for the period 2001–03. - The audited financial statements of the central bank for 2001 and 2002 became available only at end-October 2003; the IMF safeguards assessment mission in November 2003 expressed serious concerns about their quality. ### Macroeconomic performance, 2002 (key findings) - Real GDP shrank by about 3 percent in 2002. - Unusually short rainy season: halving of the groundnut harvest and a drop of nearly one-third in the output of other crops. - Sectoral strong growth: construction, utilities, and hotel and restaurants. - Nominal effective exchange rate index declined by 34 percent during 2002. - Consumer price inflation rose to 13 percent on a 12-month basis. - Current account deficit (excluding grants) is estimated to have been equivalent to about 13 percent of GDP in 2002. - Overall fiscal deficit (excluding grants) reached 8.1 percent of GDP in 2002, compared with a target of 5.0 percent. - Basic primary fiscal surplus for 2002: 2.7 percent of GDP. - Reserve money grew by 34 percent during 2002, partly from liquidity injections by the CBG associated with losses on foreign exchange transactions. - Treasury bill yields were raised from 15 percent in July to 20 percent in December 2002. - Credit to the private sector increased by 72 percent during 2002; broad money increased by 35 percent. ### Petroleum-pricing mechanism (summary) - Supply and pricing determined by authorities; importation confined to a single contractor chosen by government tender based on the narrowest margin over the Platts reference price. - Domestic pump prices fixed intermittently with allowances for financing costs, duties, excises, and trading and transportation margins. - Since October 2002, dealers’ margins were ensured to fully reflect costs and pump prices adjusted quarterly to prevent costs falling on government. ### Macroeconomic performance, 2003 (key findings) - Real GDP is estimated to have grown by 8.8 percent in 2003 (FAO provisional report attributing a full recovery in agricultural output). - Recovery in agricultural production contributed 5.3 percentage points to the estimated growth in GDP. - Production and exports of groundnut products dropped precipitously due to the failed 2002 crop. - Dalasi declined by a further 34 percent in nominal effective terms in the 12 months to October 2003. - Official CPI rose by 18 percent during 2003. - Fiscal deficit (excluding grants) declined to 6.0 percent of GDP in 2003, compared with a budget target of 4.5 percent. - Domestic revenue undershot the budget by 2.7 percent of GDP, largely due to weak customs performance. - Reserve money grew by 63 percent during 2003; broad money grew by 43 percent. - Credit expansion to the private sector in 2003: 48 percent. - Treasury bill yields reached 31 percent by September 2003. - Minimum reserve requirements extended to include foreign currency deposits and increased from 14 percent to 18 percent in two steps starting April 2003; penalty mechanisms for shortfalls were not properly implemented until July 2003. ### Structural and sectoral issues - Fiscal management weaknesses: customs collections deteriorated due to ineffective management and excessive discretionary exemptions. - Fiscal accounts not closed beyond 1999; general ledger entries not made beyond November 2001. - Elimination of the majority of below-the-line accounts and imposition of cash budgeting under NEFCOM helped restrain unbudgeted spending. - Public expenditure management systems remain well below standards required for reliable reporting on HIPC and other poverty and program monitoring. - Finances of public enterprises lack effective monitoring or control. - Draft organic budget law presented to cabinet but not yet approved for submission to the National Assembly. - Slow implementation of structural reforms; three out of five structural benchmarks under the first annual PRGF program completed before time; new household survey launched. - Trade Gateway Project launched with World Bank support; The Gambia Investment and Free Zones Authority established. - Poor progress on Technical Cooperation Action Plan, particularly on central bank governance and statistics; little achieved on privatization. ### Financial sector indicators - Aggregate banking system: overall capital adequacy ratio declined marginally from 10.9 percent a year earlier to 10.6 percent at end-2002 (regulatory requirement for individual banks: 8 percent). - Nonperforming loans and provisioning remained stable, but sizable increase in household overdrafts (not classified as non-performing if in default). - Regulatory environment strengthened through passage of the Financial Institutions, Insurance, and Money Laundering Acts. ### Trade and exchange regime - Imports subject to a maximum tariff of 18 percent. - Export taxes restricted to fish and fishing products (10 percent), and gold and diamonds (3 percent). - Exchange rate mechanism: part of WAMZ since April 2002; regime formally classified as a “managed float.” - Real effective exchange rate declined by 46 percent between December 2001 and October 2003. ### Poverty, PRSP, and HIPC - 2001 human development index rank: 149th. - Likely that poverty increased markedly since 2001 due to 2002 crop failures, rising inflation, and limited income support and social services. - Some PRSP priority social policy areas showed improvement: gross school enrollment rates at lower basic and secondary levels (particularly for girls), immunization rates, and coverage of basic health facilities. - Substantial donor support offered at Geneva roundtable in September 2002 had not resulted in additional financing for the PRSP due to unresolved issues over macroeconomic performance and governance. - First progress report on the PRSP scheduled for completion in early 2004. - Decision point under the enhanced HIPC Initiative reached in December 2000; creditors committed to debt relief of US$66.6 million in NPV terms at the completion point. - Paris Club provided a flow rescheduling on Cologne terms as of January 9 2003; Paris Club informed authorities that the second tranche of the rescheduling, covering the period July 2003-July 2004, will not be enacted. - Interim assistance by the Fund ceased on January 1, 2004. - HIPC Initiative completion point cannot be reached until 2005, at the earliest. ### Economic outlook and scenarios - Immediate outlook: poor. Despite exchange rate stabilization in last quarter of 2003, inflationary pressures remain strong due to persistently high monetary growth. - Fiscal deficit projected to increase in 2004; financing will be more difficult because of withholding of donor support. - Two contrasting outlooks explored: - Scenario A (Tables 1A to 8A): continuation of current policy stance. No additional fiscal measures in 2004 beyond budget proposals; monetary policy tightened further. Some additional fiscal action assumed in later years. - Scenario B (Tables 1B to 8B): comprehensive policy response. Additional fiscal measures in 2004 (2.1 percent of GDP), substantial early-year monetary tightening, and improvements in governance and data provision; assumed resumption of donor budgetary support and HIPC completion point reached during 2005. - Under Scenario A: - Domestic financing projected to surge to 9.6 percent of GDP in 2004 and remain high in later years. - High inflation and depreciation of the dalasi would persist. - Foreign exchange reserves would gradually be depleted; high external debt service associated with not reaching HIPC completion point. - GDP growth rates might reach about 4 percent, but productive capacity would suffer long-lasting damage. - Selected Economic Indicators, 2004-2006 (Average percentage change, unless otherwise specified) — Projections - Real GDP: Scenario A 4.4 Scenario B 5.0 - Groundnut production (metric tons, thousands): 123.6 123.6 - Consumer price index: Scenario A 21.2 Scenario B 8.2 - Exports, f.o.b. (in U.S. dollars): Scenario A 14.3 Scenario B 14.4 - Imports, c.i.f. (in U.S. dollars): Scenario A 8.3 Scenario B 11.4 - Current account, incl. official transfers (in percent of GDP): Scenario A -2.4 Scenario B -0.3 - Broad money (end of period): Scenario A 28.5 Scenario B 13.6 - Private sector credit (end of period): Scenario A 23.5 Scenario B 12.8 - Fiscal balance, excluding grants (in percent of GDP): Scenario A -7.7 Scenario B -1.4 - Under Scenario B: - Fiscal deficit (excluding grants) would decline below 3 percent of GDP in 2004. - Domestic financing requirements limited to 2 percent of GDP in 2004. - Monetary growth would decelerate; 12-month consumer price inflation could be brought to below 5 percent by end-2005. - Under enhanced HIPC, NPV of public sector external debt would fall to about 200 percent of exports by end-2008 from 300 percent at end-2003. - Even under Scenario B, majority of population would remain dependent on agriculture, particularly groundnuts; medium-term real GDP growth likely around 4-5 percent. - Achieving sustained GDP growth at rates of 6 percent would require absence of adverse shocks, sharply favorable trends in donor and expatriate inflows and FDI, and expansion in regional trade. ### Policy discussions and data integrity - Discussions constrained by concerns about integrity of key macroeconomic data and unresolved governance issues. - Repeated requests from mid-2003 for information about data inconsistencies yielded substantive clarification only at end-October 2003. - IMF safeguards assessment mission in November 2003 highlighted serious concerns about central bank financial statement quality. *Source: _cr04143 - 9. The vulnerability of the economy to external shocks remained largely* ### 34. In response to the staff’s requests for elaboration and explanation of the data revisions ### _cr04143 - 34. In response to the staff’s requests for elaboration and explanation of the data revisions ### Responses by the authorities and descriptions of disputed transactions (paras. 34–37) - Newly recorded government spending of US$28.5 million from the foreign exchange reserves in 2001: - Related to additional spending on infrastructure, social priorities, agriculture, and national security, made in anticipation of unspecified donor support that did not subsequently materialize. - Retrospectively classified as a foreign currency loan by the central bank to the central government, repayable in domestic currency over 15 years from June 2004 at an interest rate of 4 percent. - Nondelivery of foreign currency purchased from foreign exchange bureaus: - Described as reflecting “undesirable” arrangements. - Outstanding amounts declined to about US$11 million by end-June 2003. - Retrospectively classified as loans to the private sector; no interest charges applied; full repayment required by end-October 2003. - Spending of at least US$0.8 million incurred in arranging a short-term US$28 million loan from a foreign bank in February 2003; classification details not provided. - Oversight changes at the Central Bank of The Gambia (CBG): - Oversight of foreign exchange transactions to be the responsibility of a committee chaired by the General Manager. - Changes in senior management, including the Governor and the heads of the Foreign, Financial Control and Research Departments. - Staff requests for further information were unsuccessful concerning: - Foreign exchange swaps apparently executed by the CBG since June 2002. - Instructions by the government to the CBG to lend US$5 million to a newly created public enterprise in March 2003 for a three-dimensional seismic survey of offshore oil deposits (not anticipated in the PRGF-supported program). - Staff observation: loans to the central government and foreign exchange bureaus appeared to contravene aspects of the Central Bank of The Gambia Act (requirements on time period, size, and interest rates charged). ### Special audit and prerequisites for resuming program discussions (para. 37, 52) - Management and staff recommendation: - A special audit of foreign exchange activity at the central bank since December 2000, conducted under an agreed terms of reference, is critical to establish comprehensive information on the unprogrammed government expenditure and necessary revisions to fiscal accounts and foreign reserve positions. - A special audit and reaudits of the 2001 and 2002 financial statements would be major steps before resumption of discussions towards a possible Fund-supported program. - Authorities’ cooperation: - Authorities agreed with some findings (adoption of international accounting standards and establishment of an independent audit committee) but made no commitments on critical recommendations including replacement of the external auditor, special audit by the new audit firm, and reaudit of 2001 and 2002 financial statements. ### Safeguards Assessment — principal findings and staff recommendations (Box 3) - Assessment conclusion: - Severe vulnerabilities at the CBG in all five areas assessed: external audit mechanism, independence and legal structure, financial reporting framework, internal audit mechanism, and internal control system. - Principal staff recommendations: - Replace the current external auditor with a new external auditor with proven experience and expertise in central banking operations. - Conduct a special audit by the new audit firm to ascertain the nature and magnitude of possible misreporting to the Fund. - Reaudit the 2001 and 2002 financial statements. - CBG to agree to retain future disbursements under the current or a new PRGF-supported arrangement in the SDR holdings account and to commission quarterly audits of essential quantitative performance criteria under such a program, until adequate controls are in place. - Adopt International Accounting Standards (IAS) as the permanent accounting framework of the CBG. - Commission a review of internal controls and develop an action plan to remedy observed weaknesses. - Authorities’ response: - Agreed with some findings and committed to implement some recommendations (IAS adoption and establishment of an independent audit committee) but did not commit to the first three critical recommendations listed above. ### Fiscal policy issues and recommendations (paras. 38–40, 55) - Staff concern: - Urgent and resolute action needed to restore macroeconomic stability; focus on fiscal measures, monetary instruments, and central bank governance. - Projected fiscal gap for 2004: - Projected at about 9 percentage points of GDP in the absence of external budgetary support. (Projections included increases in public sector wage rates of 10 percent.) - Suggested revenue and expenditure measures: - Quick-acting revenue measures to reduce the fiscal financing gap. - Broaden the base of the sales tax and raise the rate applied to imported goods in line with that of domestic services. - Consider measures impacting spending and profits in the tourism and reexport sectors, mindful of exchange rate depreciation benefits. - Stronger enforcement to collect revenue arrears and redress shortcomings in customs procedures and duty exemptions. - Accelerated privatization and continued tight control on discretionary expenditure through NEFCOM (while addressing adverse consequences of cash budgeting for spending prioritization). - Authorities’ position: - Reservations about measures aimed at tourism or those directly affecting domestic price levels; concern to preserve exporter incentives. - Commitment: continue NEFCOM’s mandate through 2004 with more flexible monthly limits; reinforce measures to collect tax arrears and improve customs performance. - Budget presented to the national assembly on December 19, 2003 proposed increases in some government charges, licensing, and other fees and additional parcels of land sold, together yielding an additional 0.7 percent of GDP in 2004. - Staff appraisal: - Prospective fiscal deficit for 2004 is too large; additional fiscal measures required to return to macroeconomic stability and allow resumption of external budgetary support. ### Monetary policy performance and concerns (paras. 41–44, 53–54) - Observations: - Further tightening in monetary policy since February 2003 was welcomed but overdue. - Overshooting in monetary aggregates, prospective fiscal deficit, reluctance of private sector to increase holdings of government bills, and continued expansion in private credit indicate current interest rates unlikely to achieve required restraint. - Operational deficiencies at CBG: - Lack of separation of back-office from dealing functions. - Absence of clear policies guiding investment operations in foreign exchange. - Ineffectiveness of internal control procedures. - These factors may have contributed to high costs in foreign exchange transactions, surge in monetary growth, and nonrecording of payments from foreign exchange reserves on behalf of the government. - Quantification of impact: - Staff calculations indicate the high cost of foreign exchange transactions by the CBG may have been responsible for over half of the 34 percent increase in reserve money in the 12 months to December 2002. - Risks and governance issues: - Dependence of liquidity management on primary issuance of treasury bills for monetary policy purposes exposes the central bank to government pressure in interest rate determination and risks unwarranted spending from the “sterilization account”. - Review of the Central Bank of The Gambia Act and enhancements in central bank independence and accountability are overdue. - Staff recommendation: - Urgent focus on control mechanisms, internal organization, procedures, and internal controls at the CBG. - Monitoring of monetary data should be enhanced and arrangements for determining the issue of treasury bills should be reconsidered. - Further strong action required to rein back excessive monetary growth rates. ### Structural reforms and sectoral issues (paras. 45–47, 57) - Opportunities for diversification: - Open trading environment, improved external competitiveness, and preferential market access offer opportunities in horticulture, fishing, upscale tourism, and extraction of offshore oil and other mineral resources. - Required enablers: - Address infrastructure deficiencies in electricity and water. - Improve availability of private finance. - Rejuvenate the privatization program. - Encourage the microfinance sector and consider aspects of land reform. - Improve governance and judicial functioning to secure investor confidence. - Trade and regional issues: - Concerns about the impact on reexport and transit trades from Senegal’s border closures, restrictive transport regulations, and nontariff barriers. - Recent reductions in Senegal’s external tariffs have reduced the relative profitability of informal imports through The Gambia. - Potential development of the port of Banjul and freight-related businesses could be facilitated by progress in bilateral customs-related discussions. - Recent agreement to process much of Mali’s transit trade through Banjul may increase port activity by 25 percent. - Agriculture and rural finance: - Groundnut harvest recovery in late 2003 but substantial shortages of good-quality groundnut seeds and other inputs in the planting season. - Problems reflect insufficient coordination within/between government departments and ineffective extension services. - Long-term mitigation: irrigation, coordinated policy for seed supply and inputs, improved marketing, and access to finance for smallholders and SMEs. - Real exchange rate decline has increased export incentives, improving prospects for diversification. ### Data production, dissemination, and integrity concerns (paras. 48, 51, 52) - Staff concerns: - Urgency of implementing improvements in data production and dissemination recommended by Fund technical assistance missions. - Data are often late and of inadequate quality; methodological problems or outdated weights limit usefulness of time series on real activity and prices. - Recent substantial revisions, apparent internal inconsistencies, and delayed submissions raise serious questions about data reliability and integrity and whether IMF Article VIII Section 5 provisions are being satisfied. - Macroeconomic data are being published only once a year—in the budget speech—and only in partial form. - Required actions: - Special audit of CBG foreign exchange transactions and reaudits of the 2001 and 2002 financial statements. - Considerable external technical assistance available under the Technical Cooperation Action Plan, conditional on authorities’ ability to use assistance effectively. - Systematic publication of economic data should be resumed. ### Staff appraisal — overall assessment and priorities (paras. 49–56, 57) - Recent outcomes and setbacks: - Policy and governance shortcomings in the last two years have taken a heavy toll on the economy and set back the country’s medium-term development strategy. - Performance fell well short of PRSP macroeconomic framework targets: poverty likely increased, GDP growth erratic, inflation rose strongly, and the exchange rate depreciated very sharply. - The completion point under the enhanced HIPC Initiative cannot now be reached until 2005, at the earliest. - Causes and manifestations: - Fiscal slippages of 2001 continued and were amplified by quasi-fiscal spending and central bank losses associated with questionable foreign exchange transactions. - Late and inadequate measures to restrain excessive growth in the money supply. - Data and audit deficiencies: - Absence of a complete and verified set of data revisions following acknowledged misstatements for 2001–03 has hampered detailed assessment. - Fiscal accounts not closed since 1999 and not audited since 1991. - Regular provision of data to the Fund, particularly by the CBG, was deficient in coverage, quality and timeliness during the PRGF-supported program. - Preconditions for resuming program discussions: - Integrity of key macroeconomic data must be addressed. - Special audit of CBG foreign exchange transactions and reaudits of 2001 and 2002 financial statements are necessary. - Governance imperative: - No sustained improvement possible without fundamental enhancement in governance. - Urgent action required to prevent further unprogrammed public expenditure and unauthorized CBG actions, tighten customs procedures and tax exemptions, and scrutinize public enterprise actions. - Medium-term prospects: - Depend heavily on agricultural performance, particularly groundnuts. - Coordinated policies on inputs, irrigation, marketing, and improved access to finance can substantially lessen adverse impacts of weather-related shocks and support diversification. *Source: IMF staff report content provided in the supplied PDF excerpt.* ### 58. It is proposed that the next Article IV consultation be held in accordance with the ### _cr04143 - 58. It is proposed that the next Article IV consultation be held in accordance with the ### Article IV consultation timing - It is proposed that the next Article IV consultation be held in accordance with the provisions of the decision on consultation cycles approved on July 15, 2002. ### Macroeconomic performance and projections (selected indicators) - National accounts and prices (annual percentage changes and indexes as presented): - GDP at constant prices: 5.5 5.8 6.0 -3.2 8.8 4.6 4.4 4.2 4.1 - GDP deflator: 3.6 15.2 6.7 16.1 28.3 27.0 28.5 22.5 22.8 20.0 - Consumer price index (period average): 0.9 4.5 5.5 8.6 17.0 21.0 22.5 20.0 20.0 17.5 - Consumer price index (end of period): 0.2 8.1 3.8 13.0 17.6 25.0 20.0 20.0 20.0 15.0 - External sector (annual percent changes in U.S. dollars): - Exports, f.o.b.: 5.3 -19.7 10.1 9.2 -8.1 34.0 5.9 5.2 4.2 4.2 - Imports, c.i.f.: 0.5 -23.8 4.5 10.7 -3.9 22.4 1.7 2.0 1.7 3.1 - Money and credit (annual changes): - Broad money: 34.8 19.4 13.2 35.3 43.4 31.5 30.7 23.4 20.3 19.3 - Net foreign assets: 22.5 -33.8 18.3 13.0 29.2 14.5 3.3 4.8 2.7 6.8 - Net domestic assets: 12.3 53.2 -5.1 22.3 14.2 17.0 27.4 18.6 17.6 12.5 - Credit to the government: 3.1 25.5 0.8 1.0 12.5 23.8 21.5 13.3 9.9 7.2 - Credit to the private sector and public enterprises: 4.4 4.4 0.0 23.7 20.0 9.1 9.2 9.8 10.2 9.7 - External and reserve positions: - Current account balance (excluding official transfers, percent of GDP): -10.6 -10.8 -13.2 -12.8 -13.8 -10.6 -10.2 -9.2 -8.0 -7.9 - Current account balance (including official transfers, percent of GDP): -3.1 -3.5 -5.0 -2.2 -5.1 -1.6 -3.1 -2.5 -1.5 -1.6 - Gross official reserves (in millions of U.S. dollars): 111.4 63.8 119.3 64.1 58.7 56.1 45.4 33.1 16.5 4.5 - Reserves in months of imports, c.i.f.: 7.0 5.3 5.1 4.8 4.6 3.6 2.8 2.0 1.0 0.3 - External debt service (including IMF, percent of exports and travel income): 15.4 18.5 11.9 7.8 9.8 10.3 11.4 11.8 12.2 12.4 - Debt sustainability (ratios): - Net present value of debt/exports: 196.4 241.9 197.8 283.9 303.4 270.3 246.4 220.2 213.0 203.1 - Net present value of debt/revenues: 309.0 404.6 353.1 476.9 537.4 551.1 560.6 537.4 509.8 471.0 ### Fiscal accounts and scenarios (highlights) - Central government budget aggregates (selected series presented in tables): - Balance, excluding grants (percent of GDP, Scenario A): -3.7 -14.9 -5.0 -8.1 -6.0 -8.3 -7.5 -4.2 -2.7 -1.4 - Balance, including grants (percent of GDP, Scenario A): -1.4 -13.9 -2.2 -4.6 -5.4 -7.4 -6.6 -3.5 -2.2 -1.0 - Basic primary balance (percent of GDP, Scenario A): 4.6 -8.1 3.3 2.7 3.6 5.1 8.5 6.7 7.2 7.8 - Total expenditure and net lending (percent of GDP, Scenario A): 22.1 31.1 23.7 25.4 22.7 25.0 25.1 23.1 22.2 20.4 - Domestic revenue (percent of GDP, Scenario A): 18.5 15.1 17.5 16.3 15.3 15.4 17.6 18.9 19.5 19.0 - Central government operations (Scenario A, levels in millions of dalasis, selected items): - Revenue and grants: 1,117.2 1,125.7 1,528.7 1,776.4 2,396.1 2,982.4 3,829.2 4,976.9 6,421.6 - Domestic revenue: 995.4 989.9 1,201.8 1,569.1 2,101.7 2,815.0 3,673.7 4,820.4 6,269.6 - Total expenditure and net lending (levels): 1,192.1 ... 2,037.4 1,870.7 2,327.9 3,407.4 4,593.5 5,406.8 6,640.1 7,633.3 - Overall balance (commitment basis), without new measures (levels): -75.0 -911.6 -342.0 -551.5 -1,011.3 -1,611.0 -1,577.6 -1,663.2 -1,211.6 - Overall balance (after measures), Scenario A (levels): ... -1,011.3 -1,211.0 -827.6 -663.2 -361.6 - Nominal GDP (memorandum): 5,382.4 6,555.9 7,364.3 10,275.2 13,646.9 18,314.5 23,373.4 29,879.5 37,333.1 - Scenario B highlights (percent of GDP and levels): - Revenue and grants (percent of GDP): 20.8 17.2 20.8 17.3 21.0 21.3 20.9 21.0 20.9 - Overall balance (commitment basis), without new measures (percent of GDP, Scenario B): -1.4 -13.9 -4.6 -5.4 -3.8 -1.7 -0.4 0.8 1.5 - Nominal GDP (memorandum, Scenario B): 5,382.4 6,555.9 7,364.3 10,275.2 12,486.8 13,899.1 15,230.1 16,382.9 17,601.3 ### Monetary and financial sector indicators - Monetary survey (Scenario A, end-period levels, in millions of dalasis): - Net foreign assets: 1,320 650 958 1,894 2,561 2,762 3,139 3,406 4,202 - Net domestic assets: 663 1,717 2,244 2,699 3,477 5,132 6,600 8,311 9,781 - Broad money: 1,982 2,367 3,203 4,593 6,038 7,894 9,739 11,717 13,982 - Currency outside banks: 540 601 797 1,183 1,555 2,033 2,508 3,018 3,601 - Deposits: 1,442 1,767 2,405 3,410 4,483 5,861 7,231 8,700 10,381 - Banking sector indicators (2001–2003, Table 9 and Table 15): - Total assets (end-2001, end-2002, end-March-2003): 2,903.0 4,338.5 5,012.2 (in million dalasis) - Total loans: 743.5 1,317.2 1,586.8 - Holdings of government and CBG bills: 1,129.3 1,004.5 1,014.6 - Total capital and reserves: 315.1 460.6 480.9 - Nonperforming loans (NPLs): 84.6 88.9 87.5 - Provisions against NPLs: 67.6 68.5 62.1 - NPLs/total loans (in percent): 11.4 6.7 5.5 - Total capital / total assets (simple capital adequacy ratio): 10.9 10.6 9.6 ### Balance of payments and external financing (scenario summary) - Balance of payments (Scenario A, selected lines in millions of U.S. dollars and percent of GDP): - Trade balance (1998–2003 series and projections): negatives throughout (e.g., -65.2, -79.0, -68.7, -63.3, -43.0, -49.1, -51.8,...) - Current account balance (excluding official transfers, percent of GDP): -8.0 -10.9 -9.8 -10.6 -10.8 -12.8 -13.8 -10.6 -10.2 -9.2 -8.0 -7.9 - Current account balance (including official transfers, percent of GDP): -1.2 -2.4 -2.8 -3.1 -3.5 -2.2 -5.1 -1.6 -3.1 -2.5 -1.5 -1.6 - Gross official reserves (end of period, U.S.$ millions): 97.8 102.0 98.0 111.4 63.8 64.1 58.7 56.1 45.4 33.1 16.5 4.5 - In months of imports, c.i.f. (end of period): 6.8 5.8 6.2 7.0 5.3 5.1 4.8 4.6 3.6 2.8 2.0 0.3 - External financing requirements and sources (summaries in Tables 8A/8B and 7A/7B): - Gross financing requirements examples (selected years, in millions of U.S. dollars): 68.1 53.7 83.9 26.3 61.2 53.8 50.3 - Foreign direct investment (net) examples: 15.6 0.4 15.8 10.2 9.1 12.7 13.8 - Official creditors and transfers are significant components (e.g., official unrequited transfers: 35.6 30.0 31.3 30.0 39.0 31.6 32.9) ### HIPC Initiative status and completion-point triggers - Decision point date: 12/11/2000. - Assistance committed (end-2000 NPV terms): Total assistance (US$ million) 66.6; IMF assistance (US$ million) 2.3; SDR equivalent, million 1.8. - Completion point: Floating (not reached as of report). - Progress on triggers: - PRSP launched mid-2002; first full-year progress report due in early 2004. - Central Statistics Department restructuring: "Making progress"; household survey and census under way; economic census to be launched in 2004. - PRGF-supported program: "off track." - Public reports on budget execution and HIPC use: first two semiannual reports submitted in May and November 2002; no subsequent updates. National budget reports with a two-year lag. - Social sector triggers: teacher graduation target attained; girls’ scholarship trust funding and expansion attained; maternal care and health recurrent budget targets on course per PHPNP and surveys. ### Structural benchmarks, technical assistance, and institutional reforms - Structural benchmarks under the PRGF (selected): - Enterprise survey completed end-July 2002. - Public reports on poverty-reducing expenditure: completed end-November 2002; subsequent report due end-May 2003 not submitted. - ASYCUDA II implementation: delayed due to technical problems; interim measures and stabilization targeted end-December 2003 with implementation delayed. - Anti-Money-Laundering Bill: submitted to National Assembly in June 2003 and approved in July 2003. - Organic Budget Law: considered by cabinet in November 2003; targeted for submission early 2004. - Household survey: data collection largely completed by end-2003. - Closing of public accounts for 2000-02: "Little progress." - Technical cooperation and resident advisors: - Long-term Fund resident macroeconomic advisor assignment extended through April 2004. - Statistics Department peripatetic advisor assisting CPI updates and national accounts. - FAD peripatetic advisor assisting revenue administration and large taxpayer unit establishment. - Long-term FAD resident budget expert extended until October 2003 (and returned in March 2002 for another one-year term). - FIN safeguards assessment (Stage One) missions in November and March 2003; safeguards assessment of the CBG completed February 3, 2004. - Multiple MAE, STA, and FAD missions on financial supervision, monetary and banking statistics, balance of payments, national accounts, and fiscal/expenditure management across 1999–2003. ### Program performance, quantitative targets, and structural reforms - Performance criteria and indicative targets (selected, Table 10): - Net bank credit to the central government (ceiling): illustrative adjusted and preliminary deviations recorded across the quarters (values shown in table). - Net domestic assets of the central bank (ceiling): illustrative adjusted and preliminary deviations recorded across the quarters. - Basic primary balance of the central government (floor): outcomes and adjustments shown (e.g., basic primary balance values in table: 67.4 17.4 -141.5 141.8 139.8 81.8 225.7 225.7 169.8). - Net official international reserves (floor): quarterly adjusted and preliminary outcomes reported (e.g., 0.8 -1.8 -3.9 4.0 4.0 -4.4 8.3 8.3 -3.7). - Structural reform implementation under the Technical Cooperation Action Plan (TCAP) and overall assessment (Table 13): - Resident macroeconomic advisor in place; macroeconomic and monetary policy committees established. - Revenue administration reforms in progress: domestic sales tax administration transferred; Income and Sales Tax Bill and Revenue Authority Bill scheduled for National Assembly early 2004. - Budget preparation reforms: new revenue and expenditure classification system introduced for 2004 budget; organic budget law expected early 2004. - Public expenditure management: NEFCOM established; flash reporting system introduced; little progress on closing and auditing fiscal accounts. - Central Bank and financial system: Acts passed on financial institutions, insurance and money laundering; revised Central Bank Act under consideration; limited implementation of broader financial sector reforms recommended by MFD missions. - Macroeconomic statistics: household survey nearing completion; limited progress on institutional reform and data quality. ### Social and income indicators (selected) - Population and social indicators (Table 14, selected): - Total population (millions): 0.5 0.7 1.2 1.2 1.3 1.3 1.4 1.4 - Population growth rate (percent): 3.3 3.0 2.8 3.0 4.2 3.0 2.8 2.6 - GNI per capita (Atlas method, U.S. dollars): ... 348 340 340 340 320 280 - Primary school enrollment (total, percent of age group): 21.0 62.0 65.0 ... 69.8 ... 75.0 91.0 - Life expectancy at birth (total, years): 37.0 41.0 53.0 53.0 53.2 53.2 ... 53.7 ... - Infant mortality rate (per thousand live births): 179.0 154.0 78.0 76.4 74.8 ... 91.0 ... - Under-five mortality rate (per thousand live births): 319.0 216.0 110.0 ... 110.0 ... 126.0 ... ### IMF relations, program, and financial position (Appendix I highlights) - Membership and arrangements: - Joined 09/21/1967; Accepted Article VIII, Sections 2,3 and 4 on 01/21/1993. - Latest PRGF approval: 07/18/2002 to 07/17/2005, Amount Approved (SDR Million) 20.22, Amount Drawn (SDR Million) 2.89. - Outstanding PRGF/ESAF purchases and loans (SDR Million): 23.50 (75.56 percent of quota shown). - Projected obligations to the Fund (SDR million, selected): - Principal forthcoming by 2006-07: 0.7 1.4 2.8 4.1 (by year as shown) - Charges/interest series examples: 0.1 0.2 0.2 0.2 0.2 - Total (selected years): 0.1 0.9 1.6 2.9 4.3 *Source: The Gambia: Selected sections, figures, tables, and appendices as provided in the content unit (IMF staff estimates, projections, and Gambian authorities' data).* ### 1998. It aims at improving the quality of services related to reproductive health, infant and ### _cr04143 - 1998. It aims at improving the quality of services related to reproductive health, infant and ### Health, HIV/AIDS, and population projects - Participatory Health/Pop./Nutrition project: aims at improving quality of services related to reproductive health, infant and child health, and nutrition for women of reproductive age, infants, and children, and improving the quality of management and implementation of a family health program. - HIV/AIDS Rapid Response operation (approved January 2001): project aims at (i) containing the HIV/AIDS pandemic; (ii) reducing the spread of the pandemic and mitigating its effects; and (iii) increasing access to prevention services, as well as treatment, care, and support for those infected and affected by HIV/AIDS. - IFC investments in health: IFC portfolio includes an investment for a medical clinic (Ndebaan) with a committed/held loan amount of 0.2 (million U.S. dollars) and disbursed loan amount of 0.2. ### Education and human-capacity projects - Third Education Sector Project (approved September 1998): supports implementation of the second half of the government's Education Sector Policy Framework, 1988–2005, and its accompanying investment program. - The AfDB Country Strategy 2002–04 includes financing for a Third Education Project (UA 10.0 million) to increase access to quality education and skills development, particularly for girls and pupils in the poorest areas. - Upcoming: next education and health projects, and a community-based rural development project, being prepared with expected Board approval in FY 2005. ### Poverty alleviation, municipal development, and trade - Poverty Alleviation and Municipal Development operation (approved March 1999) objectives: - (i) to reduce the backlog in public infrastructure development and improve the maintenance of public assets; - (ii) to alleviate poverty through the creation of temporary jobs and improvements in the selection of small and medium-sized investments, which should aim at upgrading the living environment of the poor; and - (iii) to strengthen the technical and managerial capacity of local authorities (with an emphasis on their financial situation), local private firms (namely, consultants and contractors), and Gamworks (a procurement agency). - Trade Gateway Project (approved February 2002): aims to help establish the country as a globally competitive export and processing center by laying the foundations for expanded private investment, export-oriented production, and employment through the establishment of a free zone and an improved institutional environment. ### Capacity building and governance - Capacity Building for Economic Management Project (approved July 2001) objectives: - (i) build government capacity for economic planning, policy formulation, and execution; - (ii) build the capacity of the judicial and financial systems to facilitate private sector development. - AfDB Capacity-Building Project (Grant of UA 2.0 million) to strengthen capacity of key departments and institutions involved in preparation and implementation of the PRSP/SPA-II, with support extended to institutions dealing in economic and political governance, including the Department of Justice, Auditor General’s Department, Public Divestiture Agency, parliament, and the Public Procurement Agency. ### World Bank (IDA) credits and project financing (As of November 16, 2003; in millions of U.S. dollars) - 24 credits closed: Commitment 171.8; Disbursed 172.8; Undisbursed 0.0 - Ongoing projects (Commitment / Disbursed / Undisbursed): - Gateway: 16.0 / 2.4 / 13.6 - CB for Economic Mgmt Project: 15.0 / 3.9 / 11.1 - HIV/AIDS Rapid Response: 15.0 / 2.9 / 12.1 - Participatory Health/Pop./Nutrition: 18.0 / 11.1 / 6.9 - Third Education: 20.0 / 17.3 / 2.7 - Poverty Alleviation and Municipal Dev.: 15.0 / 8.5 / 6.5 - Subtotal (ongoing projects): 99.0 (Commitment) / 46.1 (Disbursed) / 52.9 (Undisbursed) - Total (including closed credits): 270.8 (Commitment) / 217.3 (Disbursed) / 59.9 (Undisbursed) - Source: The World Bank Integrated Controller’s System. ### IFC portfolio (As of April 30, 2002; in millions of U.S. dollars) - IFC’s portfolio had two investments with a balance of about US$0.6 million. - Detailed approvals and amounts: - 1993 AEF Ndebaan (Medical Clinic): Committed/Held Loan 0.2; Disbursed Loan 0.2 - 1994 AEF Lyefish (Commercial Fishing): Committed/Held Loan 0.4; Disbursed Loan 0.4 - Total portfolio: Committed/Held Loan 0.6; Disbursed Loan 0.6 - Pending commitments: 0.0 ### AfDB involvement and strategy (as of September 2003) - AfDB lending operations in The Gambia began in 1974: 46 projects approved (11 financed by grants) in transport, social, public utilities, agricultural, and industrial sectors. - As of September 2003: 23 projects completed; 18 projects ongoing; total commitments UA 79.7 million (US$103.6 million). - AfDB participation in HIPC Initiative: due to grant debt relief of US$15.7 million in net present value (NPV) terms (23.6 percent of the total debt relief under the program). - AfDB Country Strategy 2002–04 objectives and instruments: - Meet the MDGs: Third Education Project (UA 10.0 million) — increase access to quality education and skills development, particularly for girls and pupils in the poorest areas. - Improve macroeconomic environment: Budgetary support (UA 4.38 million) — complement donor efforts in consolidating the fragile macroeconomic environment and meeting exceptional financing needs during 2002–04. - Implement multisector capacity building: Capacity-Building Project (Grant of UA 2.0 million) — strengthen capacity of key departments and institutions involved in PRSP/SPA-II implementation and broader governance institutions. - Allocation scenarios: - If policy and institutional framework improves (measured by PRGF performance, HIPC completion point conditions, and AfDB portfolio performance), an additional UA 4.38 million may be allocated for an agricultural-related project. - Low-case scenario: if deterioration occurs, The Gambia will qualify for only UA 1.74 million of its basic allocation and the appraised policy-based operation will not be granted. - AfDB strategy for 2005–07 to be prepared in early 2005. ### Statistical issues and data weaknesses - General: substantial weaknesses in economic and financial statistics, especially national accounts, balance of payments, and external debt statistics; poor quality and gaps hamper analysis; data reporting to the Fund has become increasingly irregular over the past year. - Real sector / national accounts: - Annual national accounts compiled using production approach only; rely heavily on indicators. - Central Statistics Department (CSD) program focuses on: (i) strengthening quality of source statistics by improving and expanding existing surveys; (ii) improving coverage and methodology of GDP estimates, including implementation of the 1993 System of National Accounts (SNA); (iii) rebasing constant price estimates (currently based on 1976/77) to a more recent period; and (iv) developing independent estimates of expenditure aggregates. - CPI data produced based only on 1976/77 weights for the low-income population of the greater Banjul area; CSD requires adequate resources in both quantity and quality. - Government finance: - Authorities provide central government revenue data with a lag of about five-six weeks and expenditure “flash” reporting with a lag of up to two months. - Treasury ledger reporting subject to considerable delay; central government accounts have neither been audited since 1991 nor closed since 1999. - Weaknesses compiling data on an economic basis and tracking foreign-financed expenditure, including HIPC Initiative and PRSP implementation resources. - Data on domestic government financing available monthly with a lag of three-four weeks. - Three-year rolling public investment program not updated for some time; execution needs closer monitoring. - Authorities acknowledged substantial payments in 2001 and 2002 not recorded in government accounts. - Monetary statistics: - Data reporting by the Central Bank of The Gambia (CBG) increasingly irregular over the past six months. - Monthly balance sheet data should be available within two weeks; monetary survey with a lag of about three weeks. - No follow-up on STA recommendations (August 2001) regarding inclusion of noncommercial bank depository corporations (Postal Savings Bank and VISACAs) in the monetary survey. - Commercial banks follow a uniform chart of accounts; flash reports sent weekly. - CBG introduced several reclassifications over past two years; substantial revisions to foreign exchange transactions and lending to central government for 2001–03 have recently been transmitted. - Balance of payments: - Large proportion of external transactions, including reexports, occur in the informal sector and are estimated by crude procedures (e.g., reexports assumed a fixed share of total imports; tourism revenue a simple function of tourist arrivals). - Trade, customs collection, and tourist arrivals data available with long lags; private capital flow data are poor. - Official grant and loan disbursements and repayments relatively well recorded, with some gaps in project disbursements. - Gross and net international reserves data available with short lags but substantially revised for 2001–03. - TA on balance of payments provided by the Fund in June-July 1999 and September 2000; some progress noted but several TA recommendations remain outstanding, including better estimates of reexport trade, data collection on foreign-owned construction enterprises, and periodic surveys of Gambians traveling abroad. - External public debt: - Government has fully computerized its external public debt database using the Commonwealth Secretariat’s debt-reporting and management system with World Bank TA. - Recent problems operating the system due to staff changes in the debt unit of the finance ministry; data have become unreliable. - Publication and dissemination: - Regular provision of macroeconomic data to the public limited to references in the annual budget speech. - Central bank annual report and quarterly bulletins have not been published since 2000; CSD publications have also not been appearing. - No reporting of data for publication in the Government Finance Statistics Yearbook since 1993 or in Balance of Payments Statistics and International Financial Statistics (IFS), other than monetary and CPI data, since 1997. ### Key statistical indicators (As of January 31, 2004) — dates and frequencies - Date of latest observation: Exchange Rates 31/1/2004; International Reserves 31/1/2004; Reserve/Base Money 12/2003; Central Bank Balance Sheet 12/2003; Broad Money 12/2003; Interest Rates 31/1/2004; Consumer Price Index 12/2003; Exports/Imports 12/2002; Current Account Balance 12/2002; Overall Government Balance 9/2003; GDP 2002; External Debt 12/2002. - Date received: 5/02/2004 for several series; other dates include 1/2004, 2/2003, 10/2003, 7/2003, and 2/2003 as reported. - Frequency of data: W (weekly), M (monthly), A (annually). - Frequency of reporting: W, M, A, Q depending on series. - Source of data: A = direct reporting by Central Bank of The Gambia, Ministry of Finance, or other official agency. - Mode of reporting: C = cable or facsimile; V = staff visits. - Confidentiality: C = unrestricted use; D = restricted until officially published. - Frequency of publication: W, M, A as applicable. ### IMF staff statement (March 8, 2004) - Statement reports on: - (i) response of President Jammeh to a Managing Director letter concerning internal controls and auditing of foreign exchange activity at the Central Bank of The Gambia (CBG); - (ii) an announcement by President Jammeh about potential oil reserves and exploitation; - (iii) data on foreign exchange reserves, groundnuts production and customs revenue received since issuance of the staff report and the Managing Director’s Report on Noncomplying Disbursements. - A letter dated February 12, 2004 (received February 20, 2004) from President Jammeh responded to the Managing Director’s letter of December 9, 2004 (EBS/04/30, Supplement 1). In the letter, President Jammeh indicated actions taken regarding outstanding foreign currency purchase contracts from foreign exchange bureaus and expressed willingness to meet IMF staff in Banjul to discuss: - (i) a possible change in the auditor of the CBG; - (ii) possible reaudits of the 2001 and 2002 CBG financial statements; - (iii) a possible “separate and independent examination of the CBG external reserves”. - No timing for the proposed meeting with the President had been indicated to staff. - The information does not alter the thrust of the staff appraisal or the Managing Director’s recommendation on corrective action. *Source: _cr04143 - 1998. It aims at improving the quality of services related to reproductive health, infant and child health, and nutrition... (PDF content provided).* ### 3. President Jammeh announced on February 13, 2004 that the results of a three- ### 3. President Jammeh announced on February 13, 2004 that the results of a three- ### Oil exploration and government statement - President Jammeh announced on February 13, 2004 that the results of a three-dimensional seismic survey of the oil potential of 500 square kilometers of maritime territory had been “very positive”. - He referred to the existence of large quantities of oil in The Gambia, especially in the study area. - The President said that it was intended to have a test well drill before the end of this year. ### Recent data and key statistics - The Gambia’s gross international reserves stood at SDR49.0 million on February 27, 2004 compared with SDR42.0 million on December 31, 2003. - Authorities’ current estimate for groundnut production in 2003 is 90,000 tons compared with the provisional FAO figure of 127,000 tons used in the staff report; this would imply real GDP growth in 2003 of about 7 percent, rather than 8.8 percent. - Customs and Excise Department reported improved revenue collection in the last quarter of 2003 and continued at a high level into January and February 2004. ### Introduction and key points (authorities’ summary) - Favorable conditions in the agricultural sector during 1998-2001 led to an average GDP growth rate of 6 percent and an average inflation rate of below 3 percent. - The economy remains highly vulnerable to external shocks. - Key Points highlighted by the authorities: - GDP grew by 6 percent and inflation fell below 3 percent largely due to good performance of the agricultural sector during the period 1998-2001. - Tourism, the re-export trade, and groundnuts provided the main domestically generated sources of foreign exchange. - The authorities have eliminated subsidies, doubled the price of fuel products, increased excise taxes on selected items and raised administrative fees. - To support monetary tightening the authorities have extended the requirements for minimum reserves to include foreign currency deposits. - Government is on track in establishing the Revenue Authority scheduled by mid 2004. - The exchange rate has now been relatively stable. - The authorities intend to intensify efforts to build upon the gains already achieved to ensure fiscal prudence, strengthen governance, and institute broad-based economic and financial reforms to reduce poverty. - The authorities request a period of twelve months within which to complete repayment of the non-complying disbursement in view of the lean foreign exchange inflows into the country particularly during the June to October 2004 period, and the need to further stabilize the exchange rate. - The authorities agree to the publication of the staff report. ### Developments during 2002 and 2003 - 2002: - GDP fell by about 3 percent. - Strong growth in construction and services sectors despite overall GDP decline. - Current account deficit (excluding grants) estimated at about 13 percent of GDP. - Overall fiscal deficit (excluding grants) reached 8.1 percent of GDP. - Basic primary fiscal surplus was 2.7 percent of GDP (fell only slightly short of target). - High monetary growth led to nominal exchange rate decline and inflation rose to 13 percent year on year. - Authorities shifted budget execution to a cash basis via the National Emergency Fiscal Committee (NEFCOM) and removed subsidies, doubled fuel prices, increased selected excise taxes and raised administrative fees. - 2003: - Heavy and sustained rain facilitated full recovery in agricultural output leading to real GDP growth of 8.8 percent. - Dalasi depreciated by 34 percent in nominal terms with inflation rising to 18 percent due to drop in groundnut exports and re-export trade barriers. - Fiscal deficit excluding grants declined to 6 percent. - Monetary growth increased largely due to entire financing of fiscal deficit by the CBG. - Authorities extended minimum reserve requirements to include foreign currency deposits to support monetary tightening. ### Structural reforms undertaken - Central Revenue Department took over administration of the sales tax from the Customs and Excise Department. - Majority of below-the-line accounts were eliminated. - A draft organic budget law to clarify procedures and responsibilities for public sector fiscal management is to be discussed by cabinet prior to submission to the National Assembly. - Passage of the Financial Institutions, Insurance and Money Laundering Acts strengthened regulatory reforms in the financial sector. - Three out of five structural benchmarks under the first annual program under the PRGF arrangement were completed before time. - Trade Gateway Project launched with World Bank support; Free Zones Authority of The Gambia established to facilitate export growth. - “Operation no compromise” launched to address unfair business practices and poor governance; legal action taken against tax evasion and fraud by several businesses and alleged collaborators. - Five senior officials of the CBG were indicted for offences relating to foreign currency transactions. ### Macroeconomic policies and developments for 2003–2005 - Outlook and risks: - Suspension of donor support will have adverse impact on the fiscal deficit, projected to increase due to increased reliance on bank financing. - Authorities committed to decisive action to correct growing fiscal imbalances, supported by improved external competitiveness and possible exploitation of offshore hydrocarbon deposits. - Sustained GDP growth rates at 6 percent are envisaged in line with the PRSP for 2002-2005, conditional on favorable donor and external inflows, FDI, and expansion in regional trade. - a. Fiscal policy - Authorities target revenue measures to reduce the fiscal financing gap projected at about 9 percent of GDP for 2004 in the absence of external budgetary support. - Plans to broaden the sales tax base and raise the applicable rate to imported goods in line with domestic services. - Measures to reduce spending and increase revenues, especially in tourism and re-export sectors. - Enforcement of revenue collection, collection of tax arrears, and redress of customs procedure and tax exemption shortcomings. - Licensing and other fees increases in the 2004 budget are expected to yield additional revenue of about 0.7 percent of GDP in 2004. - b. Monetary and exchange rate policy - Banking sector described as reasonably healthy; non performing loans and provisioning considered stable. - Central Bank of The Gambia will continue to tighten monetary policy. - Measures to reduce overshooting in monetary aggregates include reducing bank borrowing and encouraging the non-banking sector to increase holdings of government treasury bills to limit expansion in private sector credit. - CBG will streamline foreign exchange operating procedures by separating back-office from trading functions, provide clear investment guidelines regarding foreign exchange, and ensure effective control procedures. - c. Structural reforms - Address deficiencies in infrastructure (electricity, water) and attract private finance. - Continue privatization program, encourage microfinance sector, and implement land tenure reforms. - Improve legal and judicial framework to build investor confidence and protect property rights. - Speedy review of the CBG Act and facilitate independence of the central bank with full accountability. - Establishment of the Revenue Authority scheduled for mid-2004 to be accelerated, including creation of a large taxpayer unit with IMF and World Bank assistance. ### The PRSP and HIPC Initiative - Crop failures in 2002 hampered PRSP implementation and progress towards MDG targets, resulting in rising inflation and declining resources for social services and poverty reduction. - Shortfall in donor assistance creates a big shortage in resources for financing PRSP priorities and recurrent expenditure needs, envisaging a delay in meeting the HIPC completion point. - Authorities report considerable effort in financing social priority sectors with marked improvements in gross school enrollment rates at the lower basic and secondary levels for girls, immunization rates, and provision of basic health facilities. ### Non-complying disbursement - Weak operational accounting and internal control procedures in the CBG caused misreporting leading to non-complying disbursements. - Measures taken: - Enforcement of immediate payment by foreign exchange bureaus of overdue foreign currency through financial penalties. - Legal action against defaulting forex bureaus and enforcement of new foreign exchange bureau licensing regulations. - Replacement of several senior management personnel at the CBG, including the Governor and heads of foreign exchange, financial control, and research departments. - Tightening of policy in the second half of 2003 leading to a slowdown in rapid depreciation of the dalasi and moderate inflation. - Authorities agreed to invite Fund staff to discuss a re-audit for financial years 2001 and 2002, including a separate and independent examination of the CBG external reserves to facilitate conducting the special audit. - Given very low foreign exchange inflows into the country, particularly during the June to October 2004 period, and the need to further stabilize the exchange rate, the authorities requested to be allowed a period of twelve months within which to repay the non-complying disbursement. *Statement by Mr. Ismaila Usman, Executive Director for The Gambia and Peter J. Ngumbullu, Alternate Executive Director, March 8, 2004* ### 7. Conclusion ### 7. Conclusion ### Authorities' stance and commitments - The authorities are committed to implementing sound economic policies despite unexpected setbacks. - They intend to intensify efforts to: - ensure fiscal prudence; - strengthen governance; - implement broad-based economic and financial reforms to reduce poverty and achieve sustainable growth. - The authorities seek continued understanding and support from the IMF and the international community. ### Macroeconomic deterioration and causes (2002–2003) - Collapse of the groundnut harvest in 2002 led to a contraction of real GDP by 3 percent and affected export revenues in 2003. - Lax execution of monetary and fiscal policy and serious deficiencies in governance caused: - dalasi depreciation by 60 percent in terms of the euro and by 45 percent in terms of the dollar in the two years to end December 2003; - consumer price index rise of 18 percent in the year to December 2003. - Critical quantitative performance targets and benchmarks under the PRGF arrangement were missed; the program is far off track. ### Fiscal and monetary developments and corrective measures - 2002: - Reported overall fiscal deficit (excluding grants) reached 8.1 percent of GDP (target was 5.0 percent). - Reserve money grew by 34 percent. - Central Bank of The Gambia (CBG) liquidity injections associated with foreign exchange losses and questionable currency transactions with local bureaus involving exceptionally wide spreads. - Monetary consequences: 70 percent increase in credit to the private sector and 35 percent increase in broad money during 2002. - Policy responses in 2002–2003 included: - substantial fuel price increases from October 2002 to eliminate fiscal losses; - creation of a National Emergency Fiscal Committee to monitor and approve weekly expenditure allocations; - closure of the majority of below-the-line government accounts; - treasury bill yields raised from 15 percent in July 2002 to 31 percent by September 2003; - minimum reserve requirements extended to include foreign currency and increased from 14 percent to 18 percent in two steps. - 2003: - Fiscal deficit estimated to have declined to 6.0 percent of GDP (budget target 4.5 percent). - Domestic revenue undershot the budget by 2.7 percent of GDP in 2003, largely due to Customs and Excise underperformance in the first nine months. - The fiscal deficit (including grants) was financed in full by the central bank, fueling a 63 percent increase in reserve money and a 43 percent growth in broad money. ### Data misstatements and audits - Authorities informed IMF staff in October 2003 of substantial data errors for 2001–2003: - US$28.5 million of public spending from foreign exchange reserves not recorded in 2001; - foreign exchange reserves wrongly credited during 2001–2003 with receipts of up to US$16 million from foreign exchange bureaus which had not been delivered; - nearly US$2 million in payments from foreign exchange reserves for commissions not reported. - Including these items would: - raise public expenditure from 24 percent to 31 percent of GDP in 2001; - raise the fiscal deficit (excluding grants) in 2001 from 8 percent to 15 percent of GDP; - reduce gross official foreign exchange reserves at end-2003 from around 7 months of imports’ cover to around 4½ months. - Executive Board recommendations on audits and disclosure: - conduct a special audit covering the CBG’s foreign exchange activities since end-2000 and a re-audit of the 2001 and 2002 financial statements; - improve CBG internal organization, procedures, and controls to prevent recurrence of losses; - comply with the Fund’s safeguards assessment policy and agreed disclosure and accounting procedures; - bring recording of government accounts up to date, close accounts from 2000 onwards, and audit 1991–99 accounts without further delay; - resume systematic publication of economic data. ### Structural reforms, poverty, and medium-term prospects - Progress on structural reforms in 2002–03 was limited: - Trade Gateway Project launched; The Gambia Investment and Free Zones Authority established; - eligibility under the U.S. African Growth and Opportunities Act in January 2003; - little achieved on privatization or on central bank governance and statistics improvements under the Technical Cooperation Action Plan. - Poverty and social indicators: - In 2001 The Gambia ranked 149th on the human development index. - Likely marked increase in poverty since 2001 due to crop failures, rising inflation, and limited income support and social services. - Macroeconomic performance fell short of the PRSP framework; completion point under enhanced HIPC Initiative cannot be reached before 2005 at the earliest. - Directors’ policy recommendations to support growth and poverty reduction: - improve governance and management of fiscal and monetary policy; - tighten fiscal and monetary policy immediately to combat inflationary pressures; - rein in budget deficit to reduce CBG financing and crowding out of private investment; - strengthen control of cash outlays (NEFCOM), strengthen tax administration, form Revenue Authority and large taxpayer unit in 2004, collect arrears, improve customs and duty exemptions administration; - consider revenue-raising measures (broaden sales tax base, raise its rate on imported goods, enhance taxation of tourist and re-export sectors) while minimizing adverse effects on the poor; - use greater flexibility in interest rates and strictly enforce reserve requirements; review the CBG Act to conform with a modern central bank law and provide more operational independence; - separate liquidity management from government debt management and reduce reliance on primary issuance of treasury bills for liquidity management; - coordinate agricultural policy for seed supply, irrigation, input supply, marketing arrangements, and improve access to finance for smallholders and SMEs; - resume privatization and implement measures to provide redress against abuse of property or contractual rights to improve the business environment. ### Executive Board assessment and outlook - Directors concluded that sustained shortcomings in governance and policy conduct, compounded by poor weather in 2002, contributed to deteriorating macroeconomic performance. - Restoring macroeconomic stability and creating conditions for sustainable growth and poverty reduction requires resolute actions to improve governance, fiscal and monetary management, and structural reforms. - Directors regretted program supported by the PRGF went far off track in 2003 and that the prospect for reaching the enhanced HIPC completion point has receded. - If authorities address the deteriorating economic situation and major governance issues, this would facilitate resumption of discussions and possible support under a PRGF arrangement. - Directors noted technical assistance under the Technical Cooperation Action Plan can help, but stressed resolute action is needed to implement prior recommendations. ### Key statistics and indicators (selected, as presented) - Real GDP: 2000 = 5.5; 2001 = 5.8; 2002 = -3.2; 2003 = 8.8 (Prel./Proj. notation as in source) - Nominal GDP: 2000 = 9.4; 2001 = 21.8; 2002 = 12.3; 2003 = 39.5 - GDP deflator: 2000 = 3.6; 2001 = 15.2; 2002 = 16.1; 2003 = 28.3 - Consumer price index (period average): 2000 = 0.9; 2001 = 4.5; 2002 = 8.6; 2003 = 17.0 - Groundnut production (thousands of metric tons): 2000 = 138.0; 2001 = 151.0; 2002 = 71.5; 2003 = 127.0 - Current account balance excluding official transfers (percent of GDP): 2000 = -10.6; 2001 = -10.8; 2002 = -12.8; 2003 = -13.8 - Current account balance including official transfers (percent of GDP): 2000 = -3.1; 2001 = -3.5; 2002 = -2.2; 2003 = -5.1 - Exports, f.o.b. (annual percent changes): 2000 = 5.3; 2001 = -19.7; 2002 = 9.2; 2003 = -8.1 - Imports, c.i.f. (annual percent changes): 2000 = 0.5; 2001 = -23.8; 2002 = 10.7; 2003 = -3.9 - Broad money (end-of-period stocks, percent changes): 2000 = 34.8; 2001 = 19.4; 2002 = 35.3; 2003 = 43.4 - Credit to the private sector and public enterprises (percent changes): 2000 = 10.3; 2001 = 12.8; 2002 = 72.3; 2003 = 48.0 - Reserve money (percent changes): 2000 = 16.8; 2001 = 21.0; 2002 = 34.1; 2003 = 62.7 - Treasury bill rate (percent; end of period): 2000 = 12.0; 2001 = 15.0; 2002 = 20.0; 2003 = 31.0 - Central government balance, excluding grants (percent of GDP): 2000 = -3.7; 2001 = -14.9; 2002 = -8.1; 2003 = -6.0 - Central government balance, including grants (percent of GDP): 2000 = -1.4; 2001 = -13.9; 2002 = -4.6; 2003 = -5.4 - Total expenditure and net lending (percent of GDP): 2000 = 22.1; 2001 = 31.1; 2002 = 25.4; 2003 = 22.7 - Domestic revenue (percent of GDP): 2000 = 18.5; 2001 = 15.1; 2002 = 16.3; 2003 = 15.3 - Stock of domestic debt (percent of GDP): 2000 = 31.5; 2001 = 38.1; 2002 = 36.6; 2003 = 24.6 - Current account balance excluding official transfers (in millions of U.S. dollars): 2000 = -44.5; 2001 = -45.0; 2002 = -47.0; 2003 = -50.5 - Current account balance including official transfers (in millions of U.S. dollars): 2000 = -13.2; 2001 = -14.5; 2002 = -8.0; 2003 = -18.8 - Gross official reserves (in millions of U.S. dollars): 2000 = 111.4; 2001 = 63.8; 2002 = 64.1; 2003 = 58.7 - Gross official reserves (in months of imports, c.i.f.): 2000 = 7.0; 2001 = 5.3; 2002 = 4.8; 2003 = 4.6 - External debt service (percent of exports and travel income): 2000 = 15.4; 2001 = 18.5; 2002 = 7.8; 2003 = 9.8 *Public Information Notice (PIN) No. 04/58 — IMF Concludes 2003 Article IV Consultation with The Gambia (May 18, 2004).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04143.pdf_