## _cr06397 - Section 1

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---

### Overview
- This Joint Staff Advisory Note (JSAN) reviews the second Annual Progress Report (APR) of The Gambia’s PRSP covering the years 2002 to 2005; the PRSP was presented in July 2002.
- The PRSP’s five components:
  - (i) macroeconomic stability and effective public resource management;
  - (ii) promotion of pro-poor growth and employment through private sector development, particularly in the rural agricultural sector;
  - (iii) improved basic social services and infrastructure;
  - (iv) capacity building of local communities and civil society organizations (CSOs);
  - (v) strengthened multisectoral programs to reduce population growth, gender inequality, HIV/AIDS, malnutrition, and environmental degradation.
- APR timeline:
  - First APR covered July 2002 to December 2003 and was presented in April 2005.
  - Second APR covers 2004 and was finalized in March 2006.
- Coordination: Preparation and monitoring are coordinated by the Strategy for Poverty Alleviation Coordinating Office (SPACO) under the Department of State for Finance and Economic Affairs (DOSFEA).
- Staff recommendations (overview):
  - Produce APRs in a more timely manner.
  - Better integrate the PRSP process with the government’s budget preparation and policy making process (one option: incorporate an analysis of poverty-related expenditures in the annual budget reports).
- Summary of past performance:
  - First APR: uneven implementation; most progress in increasing access to basic social services; most macroeconomic targets not achieved; share of poverty reducing expenditures fell; Poverty Reduction Fund not implemented.
  - Second APR (2004): mixed performance; macroeconomic environment improved; education and health indicators compared favorably with similar countries; share of poverty reducing expenditures decreased further; divestiture and decentralization programs made little progress; PRGF-supported program remained off-track.
- Identified causes for mixed performance:
  - (i) large public debt service which crowded out poverty related expenditures;
  - (ii) lack of capacity of the civil service, exacerbated by high attrition and turnover rates;
  - (iii) reduced donor commitment;
  - (iv) delays in addressing governance problems, particularly with respect to the Central Bank.

### A. Macroeconomic Policies and Public Resource Management
- 2004 macroeconomic performance characterized as positive; improvement from earlier loose fiscal and monetary policies.
- Key macro indicators and facts:
  - Inflation: fell from a peak of 21 percent in August 2003 to 8 percent by end of 2004.
  - Exchange rate: stabilized in 2004.
  - Fiscal performance: improved significantly due to successful revenue mobilization.
  - Public debt: continued to rise, in part reflecting sales of treasury bills by the Central Bank of The Gambia (CBG) to sterilize the impact of rebuilding international reserves.
  - Interest rates: remained high.
  - Interest payments on domestic debt: accounted for more than 25 percent of government revenues and more than 30 percent of current expenditures.
- Staff recommendations:
  - Consolidate recent macroeconomic gains and reduce public debt through better control of public expenditures to allow interest rates to come down.
  - Future targets should take foreign capital inflows into consideration (deviations from PRSP macro targets for 2004 largely due to large inflows of foreign capital, including official loans and grants and foreign direct investment).
- Governance at the CBG:
  - Identified issues: inadequate internal controls, questionable audit practices, and government interference in CBG operations.
  - Re-audits and special audits (2001–2003) provided basis for an Action Plan to tighten internal controls implemented in 2005.
  - National assembly approved a new central bank law in 2005 to provide greater independence to the CBG.
- Public accounts and public financial management priorities:
  - Highest priority: updating the public accounts.
  - Ongoing implementation of the Integrated Financial Management Information System (IFMIS) and establishment of the Revenue Authority are critical.
  - Recurrent costs of reforms must be adequately funded for sustainability.
- Civil service capacity:
  - Staffs recommend a comprehensive assessment to provide a basis for civil service reform; little progress reported though a preliminary study on attrition rates was conducted.
- Declining share of poverty reducing expenditures:
  - APR notes decline and identifies large debt service as main cause.
  - Multidonor public expenditure reviews indicate a decline in education and health shares even when debt service excluded.
  - Staff recommendations:
    - Increase the share of budget allocation for poverty reducing expenditures.
    - Accelerate updating public accounts to verify that allocations result in actual outlays.
    - Ensure continued investments in social sectors are matched by recurrent expenditures.

### B. Pro-Poor Growth and Employment
- Staffs recommend preparing a comprehensive rural development strategy to focus on agricultural development, employment creation, and improvement of health, education, and physical infrastructure; APRs fall short of comprehensive assessment.
- Implementation constraints:
  - Frequent changes in top management of the Department of State for Agriculture hinder strategy development.
- Use ongoing analytical work:
  - Use the ongoing agricultural public expenditure review to assess whether emphasis on agricultural research, extension, and irrigation is matched by resource allocation.
- Investment climate and diversification:
  - Non-traditional exports stagnated; total domestic exports averaged only 15 percent of imports if re-exports are excluded.
  - Staffs advise a comprehensive Investment Climate Assessment to identify bottlenecks to private sector development and diversification (factors: judicial system, land transaction administration, legislation/administrative procedures for businesses, trade and investment promotion agencies).
  - Planned Diagnostic Trade Integration Study (DTIS) should analyze constraints to diversification.
  - Potential diversification opportunities: horticulture, agro-processing, tourism, reexport and transit trade, and light manufacturing, including through greater regional integration.
- Groundnut sector divestiture:
  - Staffs believe divestiture of groundnut processing plants should be accelerated and transparent.
  - PRSP and APR emphasize need to divest GGC (groundnut deshelling operator).
  - Staffs recommend sale of government shares in GAMCO (groundnut processing and marketing operator).
  - Private sector participation in supply of fertilizers and groundnut seeds minimal; authorities should gradually reduce direct subsidized interventions to encourage private participation.

### C. Basic Social Services and Infrastructure
- Education:
  - Staffs recommend prioritizing improvement of quality.
  - Enrollment rates compare favorably in West Africa, but high failure rates in standardized tests indicate poor quality.
  - Quality improvements: strengthen training, supervision, and support of teachers; increase supply of classroom materials.
  - Allowances for teachers in rural areas helped allocate qualified teachers.
  - Proposed civil service capacity assessment could analyze impact of low teachers’ salaries.
  - Non-formal, vocational, and technical training should be more demand driven and better monitored for quality.
- Health:
  - Staffs recommend greater emphasis on primary health and preventive care; strike right balance between primary and tertiary health delivery.
  - Preliminary data indicate public health expenditures have been decreasing in recent years.
  - Decentralize resources and responsibilities to regional units, particularly Divisional Health Teams; develop and expand community-based services.
  - Evidence indicates low drug availability, particularly in rural areas (contrary to APR views).
  - Staff recommendation: adopt a more transparent and competitive drug procurement process.
  - Need for comprehensive strategy to address lack of adequately trained and motivated personnel.
  - APR lacks information on private sector role and health sector financing/resource mobilization.
- Infrastructure and regulation:
  - Strengthening regulatory arrangements will improve infrastructural services.
  - Capacity and independence of the Public Utilities Regulatory Authority (PURA) could be strengthened via adequate staffing and fuller regulatory framework development.
  - PURA should more fully exercise regulatory mandate, including determining tariff levels.
  - Tendering for infrastructure licenses should adhere to open and competitive processes per the Gambia Public Procurement Act.
  - Expansion/rehabilitation of major road networks should be complemented by greater emphasis on feeder roads in rural areas.
- NAWEC (National Water and Electricity Company):
  - NAWEC needs strengthening; lack of investment capital and managerial capacity hamper electricity and water supply improvements.
  - Staffs recommend agenda including:
    - (i) strengthening legal regulatory environment including PURA;
    - (ii) strengthening institutional oversight for NAWEC, possibly via public sector organizational restructuring;
    - (iii) bringing in private sector participation.
  - Private capital needed for investments in generating capacity, distribution network, and maintenance; private investors require robust and independent regulatory environment.

### D. Local Governments, Communities, and Civil Society Organizations (CSOs)
- PRSP emphasizes decentralization and expansion of social development funds; APR indicates implementation slow.
- Little progress in decentralization since Local Government Act enactment in 2002.
- Staffs recommend preparing a country-owned implementation plan and a sensitization program to build public expectations and create momentum.
- Poverty Reduction Fund still not fully operationalized; was main PRSP instrument for supporting local communities and CSOs.
- Staffs recommend better incorporation of local participatory surveys (Participatory Poverty Assessments, Citizen Score Cards, Service Delivery Surveys) into APRs.

### E. Population, Nutrition, HIV/AIDS, Gender, and Environment
- Program successes:
  - Nutrition, HIV/AIDS, and girls scholarship programs among more successful PRSP programs.
  - Nutrition, vaccination, and fertility rates progressing well; consistent improvements in malnutrition.
  - HIV/AIDS infection rate recently decreased after years of gradual increase.
  - Increase in female enrolment rate supported by girls’ scholarship program noted as key gender promotion success.
- Staff recommendations:
  - Continue intensive promotion of family planning methods and social marketing of condoms, particularly targeting core transmitters.
  - Implement an education outreach program to change traditional views that limit opportunities for women and their access to resources.
- Gaps:
  - APR lacks comprehensive assessment of population and environment programs.
  - Staffs recommend assessment of National Population Policy implementation.
  - Recent decline in fertility rate highlighted as important given The Gambia is one of the most densely populated countries in Sub-Saharan Africa.
  - Staffs recommend comprehensive assessment of environmental pressures: coastal erosion, salinization of tidal lands, and deforestation.

### F. Monitoring and Evaluation
- Staffs recommend improving timely availability of reliable data for PRSP monitoring and evaluation.
  - Significant delays in producing public accounts undermine monitoring of poverty related expenditures.
  - APRs should be produced more timely, better integrated into budget process, and more fully utilized to update PRSP.
- Second PRSP (covering 2007 to 2011) is being prepared — opportunity to apply lessons learned from past implementation delays.
- Staff recommendations:
  - Further develop and prioritize PRSP quantitative targets and indicators, particularly outcome indicators.
  - Fully operationalize the poverty monitoring system.
  - Central Statistics Department (CSD) should prioritize finalizing the poverty analysis of the 2003 household survey data and widely disseminate the data files.
  - Implement CSD’s institutional restructuring program based on the new Statistics Act (2005).

### Conclusion
- Several PRSP initiatives remain incomplete and need further implementation in the new PRSP.
- Critical priorities for the second PRSP:
  - Consolidate recent macroeconomic gains and reduce public debt through fiscal discipline and continued improvement in public expenditure management.

*Prepared by the Staffs of the International Monetary Fund and the International Development Association. Approved by Michael Nowak and Carlo Cottarelli (IMF) and Gobind Nankani and Danny Leipziger (IDA). June 5, 2006.*

### Section 1

### _cr06397 - Section 1

### Overview
- This Joint Staff Advisory Note (JSAN) reviews the second Annual Progress Report (APR) of The Gambia’s PRSP. The PRSP covers the years 2002 to 2005 and was presented in July 2002.
- The PRSP’s five components: (i) macroeconomic stability and effective public resource management; (ii) promotion of pro-poor growth and employment through private sector development, particularly in the rural agricultural sector; (iii) improved basic social services and infrastructure; (iv) capacity building of local communities and civil society organizations (CSOs); and (v) strengthened multisectoral programs to reduce population growth, gender inequality, HIV/AIDS, malnutrition, and environmental degradation.
- First APR covered July 2002 to December 2003 and was presented in April 2005. The second APR covers 2004 and was finalized in March 2006.
- Preparation and monitoring are coordinated by the Strategy for Poverty Alleviation Coordinating Office (SPACO) under the Department of State for Finance and Economic Affairs (DOSFEA).
- Staff recommendations:
  - Produce APRs in a more timely manner.
  - Better integrate the PRSP process with the government’s budget preparation and policy making process (one option: incorporate an analysis of poverty-related expenditures in the annual budget reports).
- Summary of past performance:
  - First APR: uneven implementation; most progress in increasing access to basic social services; most macroeconomic targets not achieved; share of poverty reducing expenditures fell; Poverty Reduction Fund not implemented.
  - Second APR (2004): mixed performance; macroeconomic environment improved; education and health indicators compared favorably with similar countries; share of poverty reducing expenditures decreased further; divestiture and decentralization programs made little progress; PRGF-supported program remained off-track.
- Identified causes for mixed performance: (i) large public debt service which crowded out poverty related expenditures; (ii) lack of capacity of the civil service, exacerbated by high attrition and turnover rates; (iii) reduced donor commitment; and (iv) delays in addressing governance problems, particularly with respect to the Central Bank.

### PRSP policies and programs — A. Macroeconomic Policies and Public Resource Management
- 2004 macroeconomic performance characterized as positive; improvement from earlier loose fiscal and monetary policies.
- Inflation: fell from a peak of 21 percent in August 2003 to 8 percent by end of 2004.
- Exchange rate: stabilized in 2004.
- Fiscal performance: improved significantly due to successful revenue mobilization.
- Public debt: continued to rise, in part reflecting sales of treasury bills by the Central Bank of The Gambia (CBG) to sterilize the impact of rebuilding international reserves.
- Interest rates: remained high.
- Interest payments on domestic debt: accounted for more than 25 percent of government revenues and more than 30 percent of current expenditures.
- Staff recommendation: consolidate recent macroeconomic gains and reduce public debt through better control of public expenditures to allow interest rates to come down.
- Deviations from PRSP macro targets for 2004 largely due to large inflows of foreign capital, including official loans and grants and foreign direct investment.
  - Staff recommendation: future targets should take foreign capital inflows into consideration.
- Governance issues at the CBG: inadequate internal controls, questionable audit practices, and government interference in CBG operations.
  - Re-audits and special audits (2001–2003) provided basis for an Action Plan to tighten internal controls implemented in 2005.
  - National assembly approved a new central bank law in 2005 to provide greater independence to the CBG.
- Public accounts: highest priority should be placed on updating the public accounts.
  - Ongoing implementation of the Integrated Financial Management Information System (IFMIS) and establishment of the Revenue Authority are critical.
  - Recurrent costs of reforms must be adequately funded for sustainability.
- Civil service capacity: staffs recommend a comprehensive assessment to provide a basis for civil service reform; little progress reported though a preliminary study on attrition rates was conducted.
- Declining share of poverty reducing expenditures:
  - APR notes decline and identifies large debt service as main cause.
  - Multidonor public expenditure reviews indicate a decline in education and health shares even when debt service excluded.
  - Staff recommendations:
    - Increase the share of budget allocation for poverty reducing expenditures.
    - Accelerate updating public accounts to verify that allocations result in actual outlays.
    - Ensure continued investments in social sectors are matched by recurrent expenditures.

### PRSP policies and programs — B. Pro-Poor Growth and Employment
- Staffs recommend preparing a comprehensive rural development strategy to focus on agricultural development, employment creation, and improvement of health, education, and physical infrastructure; APRs fall short of comprehensive assessment.
- Frequent changes in top management of the Department of State for Agriculture hinder strategy development.
- Use the ongoing agricultural public expenditure review to assess whether emphasis on agricultural research, extension, and irrigation is matched by resource allocation.
- Investment climate:
  - Non-traditional exports stagnated; total domestic exports averaged only 15 percent of imports if re-exports are excluded.
  - Staffs advise a comprehensive Investment Climate Assessment to identify bottlenecks to private sector development and diversification (factors: judicial system, land transaction administration, legislation/administrative procedures for businesses, trade and investment promotion agencies).
  - Planned Diagnostic Trade Integration Study (DTIS) should analyze constraints to diversification.
  - Potential diversification opportunities: horticulture, agro-processing, tourism, reexport and transit trade, and light manufacturing, including through greater regional integration.
- Groundnut sector divestiture:
  - Staffs believe divestiture of groundnut processing plants should be accelerated and transparent.
  - PRSP and APR emphasize need to divest GGC (groundnut deshelling operator).
  - Staffs recommend sale of government shares in GAMCO (groundnut processing and marketing operator).
  - Private sector participation in supply of fertilizers and groundnut seeds minimal; authorities should gradually reduce direct subsidized interventions to encourage private participation.

### PRSP policies and programs — C. Basic Social Services and Infrastructure
- Education:
  - Staffs recommend prioritizing improvement of quality.
  - Enrollment rates compare favorably in West Africa, but high failure rates in standardized tests indicate poor quality.
  - Quality improvements: strengthen training, supervision, and support of teachers; increase supply of classroom materials.
  - Allowances for teachers in rural areas helped allocate qualified teachers.
  - Proposed civil service capacity assessment could analyze impact of low teachers’ salaries.
  - Non-formal, vocational, and technical training should be more demand driven and better monitored for quality.
- Health:
  - Staffs recommend greater emphasis on primary health and preventive care; strike right balance between primary and tertiary health delivery.
  - Preliminary data indicate public health expenditures have been decreasing in recent years.
  - Decentralize resources and responsibilities to regional units, particularly Divisional Health Teams; develop and expand community-based services.
  - Contrary to APR views, evidence indicates low drug availability, particularly in rural areas.
  - Staff recommendation: adopt a more transparent and competitive drug procurement process.
  - Need for comprehensive strategy to address lack of adequately trained and motivated personnel.
  - APR lacks information on private sector role and health sector financing/resource mobilization.
- Infrastructure and regulation:
  - Strengthening regulatory arrangements will improve infrastructural services.
  - Capacity and independence of the Public Utilities Regulatory Authority (PURA) could be strengthened via adequate staffing and fuller regulatory framework development.
  - PURA should more fully exercise regulatory mandate, including determining tariff levels.
  - Tendering for infrastructure licenses should adhere to open and competitive processes per the Gambia Public Procurement Act.
  - Expansion/rehabilitation of major road networks should be complemented by greater emphasis on feeder roads in rural areas.
- NAWEC (National Water and Electricity Company):
  - NAWEC needs strengthening; lack of investment capital and managerial capacity hamper electricity and water supply improvements.
  - Staffs recommend agenda including: (i) strengthening legal regulatory environment including PURA; (ii) strengthening institutional oversight for NAWEC, possibly via public sector organizational restructuring; and (iii) bringing in private sector participation.
  - Private capital needed for investments in generating capacity, distribution network, and maintenance; private investors require robust and independent regulatory environment.

### PRSP policies and programs — D. Local Governments, Communities, and Civil Society Organizations (CSOs)
- PRSP emphasizes decentralization and expansion of social development funds; APR indicates implementation slow.
- Little progress in decentralization since Local Government Act enactment in 2002.
- Staffs recommend preparing a country-owned implementation plan and a sensitization program to build public expectations and create momentum.
- Poverty Reduction Fund still not fully operationalized; was main PRSP instrument for supporting local communities and CSOs.
- Staffs recommend better incorporation of local participatory surveys (Participatory Poverty Assessments, Citizen Score Cards, Service Delivery Surveys) into APRs.

### PRSP policies and programs — E. Population, Nutrition, HIV/AIDS, Gender, and Environment
- Nutrition, HIV/AIDS, and girls scholarship programs among more successful PRSP programs.
  - Nutrition, vaccination, and fertility rates progressing well; consistent improvements in malnutrition.
  - HIV/AIDS infection rate recently decreased after years of gradual increase.
  - Increase in female enrolment rate supported by girls’ scholarship program noted as key gender promotion success.
- Staff recommendations:
  - Continue intensive promotion of family planning methods and social marketing of condoms, particularly targeting core transmitters.
  - Implement an education outreach program to change traditional views that limit opportunities for women and their access to resources.
- APR lacks comprehensive assessment of population and environment programs.
  - Staffs recommend assessment of National Population Policy implementation.
  - Recent decline in fertility rate highlighted as important given The Gambia is one of the most densely populated countries in Sub-Saharan Africa.
  - Staffs recommend comprehensive assessment of environmental pressures: coastal erosion, salinization of tidal lands, and deforestation.

### PRSP policies and programs — F. Monitoring and Evaluation
- Staffs recommend improving timely availability of reliable data for PRSP monitoring and evaluation.
  - Significant delays in producing public accounts undermine monitoring of poverty related expenditures.
  - APRs should be produced more timely, better integrated into budget process, and more fully utilized to update PRSP.
- Second PRSP (covering 2007 to 2011) is being prepared — opportunity to apply lessons learned from past implementation delays.
- Staff recommendations:
  - Further develop and prioritize PRSP quantitative targets and indicators, particularly outcome indicators.
  - Fully operationalize the poverty monitoring system.
  - Central Statistics Department (CSD) should prioritize finalizing the poverty analysis of the 2003 household survey data and widely disseminate the data files.
  - Implement CSD’s institutional restructuring program based on the new Statistics Act (2005).

### Conclusion
- Several PRSP initiatives remain incomplete and need further implementation in the new PRSP.
- Critical priorities for the second PRSP: consolidate recent macroeconomic gains and reduce public debt through fiscal discipline and continued improvement in public expenditure management.

*Prepared by the Staffs of the International Monetary Fund and the International Development Association. Approved by Michael Nowak and Carlo Cottarelli (IMF) and Gobind Nankani and Danny Leipziger (IDA). June 5, 2006.*

### Section 2

### _cr06397 - Section 2

### Rural development, economic diversification, and private sector promotion
- The staffs believe that a comprehensive strategy for developing the rural sector and diversifying the economy is the basis of a successful PRSP process.
- Promotion of the private sector will depend on accelerating the divestiture program and strengthening the regulatory regime.
- Further decentralization of public services and full implementation of the Poverty Reduction Fund are critical instruments for developing local communities and CSOs.

### Social sectors: education, health, nutrition, and HIV/AIDS
- Good progress has been achieved in the education and health sectors, including nutrition and HIV/AIDS.
- The next key steps will be to improve the quality of education services and to increase focus on primary and preventive health care.

### Institutionalization of the PRSP process (paragraph 23)
- The staffs recommend further institutionalization of the PRSP process as a comprehensive approach to overall public policymaking.
- Greater integration with the budget process and continued public education programs are particularly needed.
- Improving monitoring and data remain a priority.
- Strong political leadership is critical to a successful PRSP process.

### Governance priorities and transparency (paragraph 24)
- Strengthened governance is a fundamental cornerstone of the PRSP process.
- The staffs have worked closely with the authorities over the years in identifying governance weaknesses and putting in place appropriate measures.
- It will be critical for The Gambia to sustain ongoing efforts, especially in strengthening public expenditure management, the investment climate, and internal controls at the Central Bank.
- The PRSP process must be open, transparent and participatory to help identify governance problems.
- Free dissemination of information is critical and an independent media, supported by an enabling legal environment, is an essential participant in this process.

*Source: _cr06397 - Section 2*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06397.pdf_