## _cr08109

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### Executive summary — overview and completion point recommendation
- IDA and IMF staffs conclude The Gambia has met requirements for reaching the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- The Gambia prepared two full PRSPs since the decision point; the second PRSP covers 2007–2011 and was discussed by the Boards of IDA and IMF in July and August 2007 respectively.
- Of the eleven triggers for reaching the floating completion point, nine have been fully achieved and two have been partially achieved; staffs recommend waivers for the two partially achieved triggers.
- Recommendation: IDA and IMF staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for The Gambia under the Enhanced HIPC Initiative.

### HIPC decision point assistance, interim delivery, and creditor participation
- Decision point committed HIPC assistance (NPV terms): US$66.6 million.
- IDA and IMF commitments at decision point (NPV terms): US$22.3 million and US$2.3 million respectively.
- Interim assistance delivered as of end-November 2007 from IDA and IMF commitments: US$8.0 million and US$0.6 million (SDR 0.4 million) respectively.
- Total interim HIPC debt relief delivered by multilateral and bilateral creditors in 2001–07: US$17.5 million (NPV terms) (US$21.2 million in nominal terms).
- The Gambia has received financing assurances from creditors accounting for 80.7 percent of the NPV of HIPC assistance estimated at the decision point.
  - Multilateral creditors account for 73.5 percent of total committed assistance; bilateral creditors account for 26.5 percent.
  - HIPC assistance from multilateral creditors amounts to US$49.2 million in NPV terms.

### Macroeconomic performance and program implementation
- After uneven performance post-decision point, macroeconomic stability maintained since 2004.
- Economy grew at an annual average rate of 6.5 percent in the past five years.
- Inflation developments:
  - Inflation reached 17 percent in 2003; fell to 1.4 percent at end-2006.
  - A spike pushed inflation to over 6 percent in Q2 2007; expected end-year rate about 5 percent.
- Fiscal performance and indicators:
  - Basic primary balance moved from a deficit of over 1 percent of GDP in 2001 to an average surplus of 8.8 percent of GDP during 2004–06, and is expected to reach 9 percent in 2007.
  - Yields on treasury bills: 15 percent at end-2001; 31 percent at end-2003; 10–15 percent since mid-2005.
- Programs and reviews:
  - A new PRGF-supported program launched February 2007; first review completed August 2007; Fund staff recommended completion of the second review.
  - Fund’s Board approved the first review in August 2007.

### Poverty monitoring, social sector reforms, and service delivery
- Statistics and poverty database:
  - New Statistics Act (2005); CSD restructured into semiautonomous Gambia Bureau of Statistics (GBOS); Statistics Council established.
  - Poverty database strengthened via 2003 household expenditure survey, 2003 population census, and 2005/6 economic census.
  - GBOS benefited from IDA training and technical assistance; IDA working with GBOS on a Poverty Assessment.
- Education and teacher training:
  - Education Policy (2006–2015); over 1,000 classrooms built with World Bank support.
  - Gross enrollment rate: 77 percent (over 90 percent if Madrassa enrollments included).
  - Primary Teacher’s Certificate graduates: 192 (2001), 221 (2002), 227 (2003), 311 (2004), 331 (2005). Target of a 45 percent increase achieved: 331 in 2005 represents a 72 percent increase from base academic year 2000/01.
- Scholarship scheme for girls:
  - Two programs: Scholarship Trust Fund for Girls (STF) and President’s Empowerment of Girls Education Project (PEGEF).
  - Number of girls receiving scholarships increased annually, reaching Total 41,939 in 2005/06 (STF 13,217; PEGEF 28,722).
- Health and skilled birth attendance:
  - MICS 2005: 56.3 percent of births attended by skilled health personnel (baseline 44 percent; decision point target for 2005 was 61.9 percent).
  - Share of primary and secondary health care in health recurrent budget: 1999: 42; 2000: 41; 2001: 39; 2002: 42; 2003: 50; 2004: 51; 2005: 48; 2006: 44. Average since 2003: 48 percent.
  - Physical access: 85 percent of population within one-hour travel time (7.5 km) of a health facility. Hospital beds: 1.21 beds per 1,000.
- Use of interim HIPC relief:
  - Interim HIPC resources used in accordance with annual budgets approved by Cabinet and tracked; IDA and AfDB interim relief suspended in March 2005 and end-2003 respectively; IMF interim relief suspended in 2002 and resumed in 2007.

### Structural reforms and the groundnut sector roadmap
- Public utilities:
  - PURA Act (2001) established Gambia Public Utilities Regulatory Authority; Board established and staff recruited.
- Groundnut sector performance and reform roadmap:
  - Groundnut exports fell to US$2.0 million in 2005 from US$16.9 million in the previous year due to poor marketing and sector governance failures.
  - Privatization attempts in 2005–2006 attracted only one bidder (rejected); GAMCO undercapitalized and became bankrupt.
  - Sector reform roadmap prepared 2007; endorsed by Cabinet in June 2007; government publicly committed in July 2007 to full liberalization and open competition.
  - Actions implemented: free entry of operators at all levels; transfer of management responsibility to Agribusiness Service Plan Association (ASPA); GAMCO placed under receivership; Board of GGC dissolved for reconstitution; planned introduction of private management to GGC in 2008 under a performance-based contract with eventual privatization.
  - Fiscal implication: government assumption of nonperforming bank loans guaranteed by Social Security and Housing Finance Corporation equivalent to one percent of GDP to be repaid over three years beginning in 2008.
  - Donor support planned from IDA and the EU.

### Updated debt situation, DSA findings, and topping-up consideration
- Decision point projection vs actual (end-2006):
  - Decision point projection for NPV of debt-to-exports ratio: 139.8 percent.
  - Completion point analysis actual outturn for NPV of debt-to-exports ratio: 242.5 percent.
- Decomposition of deterioration (end-2006 gap: 102.6 percentage points above projection; 92.5 percentage points above HIPC threshold of 150 percent):
  - Exchange and discount rates: increased NPV-to-exports by 28 percentage points in total (discount rates 13 percentage points; exchange rates 15 percentage points).
  - New borrowing: decision point projected increase of 43 percentage points; actual new borrowing exceeded projections by US$84 million producing additional unanticipated deterioration of 56 percentage points.
    - Of the unanticipated increase: 25 percentage points reflect assumption multilateral borrowing on IDA terms; 7 percentage points reflect lower concessionality; 24 percentage points reflect higher-than-projected volume.
  - Export performance: projected export growth 63 percent (1999–2006); actual export growth 28 percent. Lower-than-projected export volumes accounted for 32 percent of the unanticipated increase in the NPV ratio. Price effects accounted for 5.5 percentage points.
  - Revisions of debt database and amortization contributed a remaining reduction of 20 percentage points.
- Assessment of exogeneity and topping-up eligibility:
  - Unanticipated changes in international prices and discount/exchange rates (exogenous factors) together explain less than a third of the unanticipated deterioration.
  - Staffs conclude The Gambia does not meet requirements for exceptional topping-up under the Enhanced HIPC Initiative because deterioration was primarily due to lower export volumes and higher new borrowing—factors not considered exogenous.
- Updated reconciliation and decision-point data revisions:
  - Nominal stock of debt at end-1999 decreased by US$7.9 million to US$444.7 million.
  - NPV of debt after traditional relief reduced by US$4.2 million to US$240.7 million.
  - Revised exports estimate: from US$118.8 million to US$119.4 million (3-year average 1997–99).
  - Revisions would imply downward revision of HIPC assistance by US$5.0 million to US$61.7 million, but Gambian authorities did not consent; committed HIPC assistance therefore remains US$66.6 million in NPV terms and common reduction factor remains 27.2 percent.

### MDRI implications and projected relief
- Contingent on completion point approval, The Gambia will qualify for MDRI relief from IDA, the IMF and the AfDF.
- MDRI debt relief (net of HIPC assistance) would lead to nominal debt service savings on debt owed to IDA, the IMF and the AfDF of US$373.5 million over 43 years.
- IDA:
  - Debt stock cancellation would reduce debt owed to IDA by US$206.4 million, of which US$183.4 million due to MDRI; remaining attributable to HIPC assistance.
  - Average annual debt service savings (net of HIPC assistance): US$4.6 million between 2008 and 2011, and US$6.1 million over the next 30 years.
  - Total debt service savings from MDRI: US$201.8 million (or SDR134.1 million).
- IMF:
  - MDRI relief amounting to SDR 9.4 million (or US$14.2 million) covering the full stock of debt owed at end-2004 remaining outstanding at completion point.
  - Of this, SDR 7.4 million (or US$11.2 million) financed from the MDRI-I Trust; remainder from the HIPC Umbrella sub-account.
  - IMF MDRI implies average debt service savings net of projected HIPC assistance of SDR 1.4 million (or US$2.1 million) per year over the next 5 years.
- AfDF:
  - MDRI relief would yield annual debt service savings (net of HIPC assistance) averaging US$1.6 million over the next 5 years and US$3.9 million over the following 39 years.
  - Total MDRI debt service savings from AfDF: US$160.2 million in nominal terms delivered in full at completion point.

### Updated DSA results, projections, and risk assessment
- End-2006 and end-2007 stock and projections:
  - Nominal stock of external debt: US$676.7 million at end-2006 versus US$453 million at end-1999.
  - NPV of external debt at end-2007, after full delivery of HIPC (decision point) assistance: estimated at US$347 million, equivalent to 236 percent of exports (decision point projection was 137 percent).
- DSA baseline macroeconomic assumptions (2007–27):
  - GDP growth: 6.2 percent in 2007–12, then 5.0 percent over medium term.
  - Real annual growth of exports: 7 percent over medium term.
  - External borrowing: average 5.8 percent of GDP between 2007 and 2012, declining to 1.8 percent by 2027.
  - External grants: about 3.6 percent of GDP through 2007–12, declining to about 0.7 percent by 2027.
  - Expenditures projected to decrease from 27.3 percent of GDP in 2007–12 to 22 percent long run.
  - Interest payments expected to decline from 8.6 percent of GDP in 2005 to 1.4 percent in 2027.
  - Domestic revenue collection expected to remain at 21 percent of GDP.
- Debt-burden indicator outcomes after relief:
  - After full delivery of HIPC and MDRI:
    - NPV of debt-to-exports estimated to fall to 107 percent (completion-point summary) / 108 percent in some tables — remains above policy-dependent threshold of 100 percent used in LIC DSA.
    - Policy-dependent threshold for NPV of debt-to-exports ratio: 100 percent.
    - NPV of external debt-to-GDP and all debt service indicators expected to fall substantially and remain below their respective thresholds.
  - Despite reductions, The Gambia remains at high risk of debt distress; sensitivity analysis shows indicators would substantially worsen under adverse shocks.
- DSA scenario and sensitivity highlights:
  - Baseline after MDRI: NPV debt-to-exports drops to 113 percent at end-2007, then increases above 150 percent through 2012 due to planned poverty-reducing new borrowing, then falls to 106 percent by end of projection period.
  - Scenario 1 — Lower export growth (real exports grow at 4 percent instead of 6 percent): NPV debt-to-exports after MDRI increases to above 170 percent from 2012 and remains high; debt service ratio increases to 10–11 percent of exports.
  - Scenario 2 — Less concessionality (grant element 25 percent vs baseline 45 percent): debt stock increases by approximately US$286 million in NPV terms by 2025 relative to baseline; NPV debt-to-exports increases by 33 percentage points by 2012 reaching 190 percent and remains around 160 percent over projection period.
  - Stress tests show one-time 30 percent nominal depreciation breaches debt-to-GDP threshold of 30 percent for much of projection period.
- Key drivers of risk:
  - Large remaining external debt owed to multilateral creditors not participating in MDRI and non-Paris Club bilateral creditors, much contracted since decision point.
  - Large domestic debt stock (about 30 percent of GDP) reinforces high risk assessment.

### Policy implications and government actions
- Critical policy priorities to reduce high risk of debt distress:
  - Continued fiscal prudence and sustained donor support.
  - Policies to support broad-based growth and export diversification (tourism, re-exports, agriculture/groundnuts).
  - Improved debt management and maintaining high concessionality on new borrowing.
  - Limit the volume of new concessional borrowing for the foreseeable future.
- Government measures taken or planned:
  - Increased the minimum grant element in new external borrowing to 45 percent.
  - Plans to limit the volume of new concessional borrowing.
  - Commitment to develop a comprehensive debt management strategy (DMS); DeMPA assessment in March 2007 provides basis for DMS.
  - Diagnostic Trade Integration Study (July 2007) to identify export expansion success factors.
  - PRSP prioritizes prudent fiscal and debt management policies and PRSP initiatives aligned with available funding.

### Debt management capacity assessment and recommendations (DeMPA findings)
- Institutional context:
  - PDU of DOSFEA responsible for managing, recording and reporting external debt; CBG issues Treasury Bills and makes payments on external debt upon DOSFEA instruction.
  - Government Budget Management and Accountability Act (2004) designates Secretary of State for Finance and Economic Affairs as only authority entitled to borrow or guarantee.
- Identified gaps and operational weaknesses:
  - Little formal co-ordination between fiscal policy, debt management and CBG.
  - No documented procedures for external borrowing; no formal cost-risk analysis of financing options.
  - Debt records validation procedures and archiving practices need strengthening; recording of debt relief and restructuring needs incorporation into systems.
  - PDU staff limited, weak analytical capacity, high turnover; lack of business continuity and disaster planning evident after loss/incapacitation of key staff in early 2007.
  - No entity responsible for recording total nonfinancial public debt (central government, state/local governments, public corporations).
- Reporting and systems improvements underway:
  - IFMIS began operations January 2007 covering entire central Government; expected to produce 2007 accounts by end-March 2008; phase one completion expected Q1 2008.
  - CBG maintains registry of government securities holders and plans to upgrade with electronic registry and auction features with Commonwealth Secretariat assistance.
- Key recommendations and planned actions:
  - Prepare a comprehensive debt management strategy by end-July 2008 with long-term debt management objectives tied to fiscal policy and budget framework.
  - Introduce debt management objectives, mandatory reporting to National Assembly, and regular external audits.
  - Strengthen formal coordination among fiscal, debt management and monetary authorities.
  - Establish documented procedures for external borrowing and undertake formal analysis of costs and risks of financing options.
  - Incorporate debt relief and restructuring records into debt management system; improve archiving and secure access to sensitive debt information.
  - Publish an annual Debt Statistical Bulletin or equivalent covering domestic and external central government debt and guarantees.
  - Build PDU staff analytical capacity, reduce turnover, and establish business continuity and disaster planning.

### Staff conclusions and recommendation to Executive Directors
- Staffs consider performance on completion-point conditions broadly satisfactory: nine of eleven triggers fully implemented; two partially implemented (annual increase by 5 percent in births attended by trained antenatal care staff; bringing public groundnut processing plants to point of sale); waivers recommended given substantial progress and contextual factors.
- Staffs conclude The Gambia does not meet requirements for exceptional topping-up.
- Staffs recommend Executive Directors determine that The Gambia has reached the completion point under the Enhanced HIPC Initiative.

*Source: Executive Summary and selected chapters from IMF staff report _cr08109 (as provided).*

### Executive Summary ......................................................................................................

### _cr08109 - Executive Summary ......................................................................................................

### Overview
- The staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) conclude that The Gambia has met the requirements for reaching the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- The Gambia has prepared two full PRSPs since the decision point; the second PRSP (2007–2011) was discussed by the Boards of IDA and IMF in July and August 2007 respectively.
- Of the eleven triggers for reaching the floating completion point, nine have been fully achieved and two have been partially achieved; the staffs recommend waivers for the two partially achieved triggers.
- Recommendation: the staffs of IDA and the IMF recommend that the Executive Directors of IDA and the IMF approve the completion point for The Gambia under the Enhanced HIPC Initiative.

### HIPC decision point assistance and interim delivery
- Decision point committed HIPC assistance (NPV terms): US$66.6 million (calculated to reduce the NPV of debt to 150 percent of exports on end-1999 data).
- IDA and IMF commitments at decision point (NPV terms): US$22.3 million and US$2.3 million respectively.
- Interim assistance delivered as of November 2007 from IDA and IMF commitments: US$8.0 million and US$0.6 million respectively.
- Total interim HIPC debt relief delivered by multilateral and bilateral creditors in 2001–07: US$17.5 million (NPV terms).

### Assessment of completion point conditions and macroeconomic performance
- PRSP and poverty monitoring:
  - Two full PRSPs produced since decision point: first PRSP covering 2002–2005 (presented July 2002), second PRSP covering 2007–2011 (discussed July–August 2007).
  - Second PRSP includes an implementation action plan with costed priority activities to improve monitoring and results orientation; greater attention to civil service reform and public financial management (PFM).
  - Implementation of education and health reforms satisfactory; significant progress in strengthening PFM.
- Macroeconomic performance:
  - After uneven performance post-decision point, macroeconomic stability has been maintained since 2004.
  - The economy grew at an annual average rate of 6.5 percent in the past five years; inflation has been reduced.
  - A new PRGF-supported program was launched in February 2007; the first review was successfully concluded in August 2007.
- Structural reforms:
  - Earlier attempts to restructure the groundnut sector were unsuccessful; in 2007 a sector reform “roadmap” was prepared and implementation started, including free entry of operators at all levels and intended privatization of management of public groundnut processing plants by 2008.
  - National Agricultural Development Agency (NADA) established; investment climate assessments under way.

### Updated debt situation, DSA findings, and topping-up consideration
- Actual deterioration of debt burden vs. decision point projections:
  - Decision point projection for NPV of debt-to-exports ratio at end-2006 (assuming full delivery of assistance committed at decision point): 139.8 percent.
  - Completion point analysis actual outturn for NPV of debt-to-exports ratio at end-2006: 242.5 percent.
- Causes of deterioration (staff assessment):
  - Factors considered exogenous (adverse changes in international export prices and in discount and exchange rates) account for approximately one-third of the unanticipated deterioration of the NPV of debt-to-exports ratio.
  - Larger impact came from lower than projected export volumes and higher than anticipated new borrowing—factors not considered exogenous.
- Exceptional topping-up under the Enhanced HIPC Initiative:
  - Staffs conclude The Gambia does not meet requirements for additional debt relief (exceptional “topping-up”).
  - Rationale: deterioration is primarily explained by policy-related/new borrowing and lower export volumes rather than predominantly exogenous shocks.
- Multilateral Debt Relief Initiative (MDRI) implications:
  - The Gambia will qualify for additional debt relief under the MDRI upon reaching the completion point.
  - MDRI debt relief would cover remaining debt service on eligible credit balances to IDA, the IMF and the African Development Fund (AfDF), after HIPC relief.
  - MDRI debt relief, net of HIPC assistance, would lead to nominal debt service savings on debt owed to IDA, the IMF and the AfDF of US$373.5 million.
- Updated Debt Sustainability Analysis (joint DSA framework for low-income countries):
  - After full delivery of HIPC and MDRI assistance, the NPV of debt-to-exports ratio is estimated to fall to 107 percent.
  - Policy-dependent threshold for the NPV of debt-to-exports ratio: 100 percent.
  - NPV of external debt-to-GDP ratio and all debt service indicators are expected to fall substantially and remain below their respective thresholds.
  - Despite reductions, The Gambia will remain at high risk of debt distress; sensitivity analysis shows external public debt indicators would substantially worsen under adverse shocks.
  - The continued high risk reflects substantial remaining external debt owed to multilateral creditors not participating in MDRI and non-Paris Club bilateral creditors, much of which was contracted since the decision point.

### Policy implications and government actions
- The continuing risk of debt distress underscores:
  - The importance of continued fiscal prudence.
  - Policies to support broad-based growth and export diversification.
  - Sustained donor support.
  - Improved debt management.
- Government measures:
  - Increased the minimum grant element in new external borrowing to 45 percent.
  - Plans to limit the volume of new concessional borrowing for the foreseeable future.

*Source: Executive Summary, _cr08109.*

### 11.      The poverty data base and monitoring capacity has been improved. Official

### 11.      The poverty data base and monitoring capacity has been improved. Official

### Strengthening of statistical institutions and data sources
- A new Statistics Act (2005) and a sector reform Master Plan outline a comprehensive strategy for strengthening official statistics.
- The Central Statistics Department (CSD) was restructured into the semiautonomous Gambia Bureau of Statistics (GBOS).
- A Statistics Council was established to provide oversight and strategic guidance to GBOS.
- The poverty database has been strengthened through:
  - the 2003 household expenditure survey,
  - the 2003 population census,
  - the 2005/6 economic census.
- GBOS benefited significantly from training and technical assistance provided under an IDA project.
- IDA is currently working with GBOS in preparing a Poverty Assessment.

### Box 1 — Status of Triggers for Reaching the Floating Completion Point (selected triggers and assessments)
- Trigger 1. Poverty reduction
  - (i) Full PRSP prepared through a participatory process and satisfactorily implemented for one year: Implemented. The country’s first full PRSP (2003–2005) was presented to the Boards of IDA and IMF in July 2002. Annual Progress Reports (APR) have been produced as required. The second PRSP and the accompanying JSAN were presented to the Boards of IDA and IMF on July and August 2007, respectively.
  - (ii) Improvement of the poverty database and monitoring capacity, evidenced by progress in restructuring the CSD or developing its capacity: Implemented. A new Statistics Act (2005) and a sector reform Master Plan outline the strategy for organizational restructuring of CSD and strengthening official statistics. The poverty database has been improved through household expenditure (2003), and population (2003) and economic (2005-06) censuses.
- Trigger 4. Social sector reforms (selected sub-triggers)
  - (ii)(a) Increase by at least 45 percent (from 192 graduates in the base academic year 2000/01) the number of teachers for lower basic education graduating from The Gambia College: Implemented. In 2005, the number of graduates reached 331, representing a 72 percent increase over the base year.
  - (ii)(b) Expand girls’ scholarship scheme to no less than 2,000 girls annually in at least 3 regions: Implemented. The number of girls that received a scholarship has been greater than 2,000 every year, and it increased every year to 41,939 in 2005-06. The scholarship program covers regions 1 to 6.
  - (ii)(c) Increase by at least 5 percent each year (from 44 percent in the base year of 1998) the number of births attended by a person trained in antenatal care: Partially Implemented. The share increased from 44 percent in 1998 to 56.3 percent in 2005. The decision point target would imply 61.9 percent in 2005 and 68.3 percent in 2007; staff note these targets are unrealistically high given long delays.
  - (ii)(d) Increase the share of primary and secondary health care within the recurrent budget for health (base year 1999): Implemented. The share increased from 42 percent in 1999 to 50 percent in 2003, and averaged 48 percent in the four years since then.
- Trigger 5. Structural reforms (selected sub-triggers)
  - (i) Establish a functional multisector regulatory agency: Implemented. The Gambia Public Utilities Regulatory Authority (PURA) Act was enacted in 2001; the Board has been established and staffs recruited.
  - (ii) Bring to the point of sale The Gambia’s two major public groundnut processing plants: Partially implemented. Privatization attempts in 2005–2006 attracted only one bidder, which was rejected. In 2007 the government prepared a comprehensive sector reform “roadmap” liberalizing the groundnut sector and outlining plans for privatization by 2008; management was transferred to an association of public and private stakeholders and free entry of operators was allowed.

### Macroeconomic performance and policy outcomes (summary of paragraphs 12–16)
- Two phases of macroeconomic policy since the decision point:
  - Phase 1 (2001–03): Fiscal slippages, accommodating monetary policy, and falling international reserves produced a sharp depreciation of the dalasi and high inflation.
    - The dalasi depreciated by 55 percent in nominal effective terms between end-2001 and end-2003.
    - Inflation reached 17 percent in 2003.
    - The second PRGF arrangement, approved in July 2002, went off-track and expired in 2005 without completion of a review.
  - Phase 2 (2004–07): Policy adjustments restored macroeconomic stability.
    - A Staff Monitored Program (SMP) was implemented from October 2005 to March 2006.
    - A new PRGF-supported program was approved by the IMF Board in February 2007; the first review was completed in August 2007 and concluded overall performance under the program has been strong.
    - Under the 3rd PRGF arrangement (2007–09), strong performance led to completion of the first review in August 2007 and Fund staff recommended completion of the second review.
- Fiscal and monetary tightening from late 2003 yielded lower inflation and sustained growth:
  - The basic primary balance moved from a deficit of over 1 percent of GDP in 2001 to an average surplus of 8.8 percent of GDP during 2004–06, and is expected to reach 9 percent in 2007.
  - Yields on treasury bills rose from 15 percent at end-2001 to 31 percent at end-2003 before declining to 10–15 percent since mid-2005.
  - Inflation fell from 17.6 percent at end-2003 to 1.4 percent at end-2006; a spike pushed inflation to over 6 percent in the second quarter of 2007, with an expected end-year rate of about 5 percent.
- Economic growth and sectoral dynamics:
  - After nearly 6 percent growth in 2001, real GDP fell by about 3 percent in 2002; subsequently growth averaged 6.5 percent a year.
  - Growth drivers included tourism, telecommunication, and construction; tourism grew by an annual average of 11.6 percent.
  - A new competitor entered the mobile telephone market in 2007, bringing the total to three operators.
  - Agriculture, particularly the groundnut sector, lagged; the government initiated measures under a sector reform roadmap based on full liberalization to revitalize the sector.
- External sector developments:
  - During 2001 and the initial year of the second PRGF arrangement, external current account deficits including official transfers remained below program projections.
  - Over 2001–03, reserves fell in response to instability; renewed stabilization and increased FDI widened the current account deficit but reserve coverage increased to approximately five months of import cover despite rising imports.

*Source: _cr08109 - 11.      The poverty data base and monitoring capacity has been improved. Official*

### 17.      Macroeconomic performance under the third PRGF-supported program has

### 17.      Macroeconomic performance under the third PRGF-supported program has

### Macroeconomic performance and program reviews
- The first review of the program was completed August 2007, and Fund staff are recommending completion of the second review.
- Under the program, robust growth and low inflation have been sustained through good policy implementation, in particular, strong fiscal performance.
- The second review included discussion of the authorities’ proposed budget for 2008 which aims at ensuring that past fiscal success will be continued, and translate into lower domestic debt looking forward.
- The authorities agreed to indicative limits on new borrowing under the program to prevent debt ratios quickly returning to pre-decision point levels.
- The staffs of IDA and the IMF conclude that The Gambia has met the trigger on the maintenance of macroeconomic stability, as evidenced by satisfactory implementation of the PRGF-supported program.
- After an initial period of uneven performance, a stable macroeconomic environment has been maintained through fiscal and monetary discipline.
- The Fund’s Board approved the first review of a new PRGF program in August 2007, and Fund staff recommend completion of the second review.

### Governance — public financial management and Central Bank reforms
- Significant reforms introduced on public financial management and Central Bank operations improved transparency and accountability and reduced opportunities for corruption; they addressed a backlog of unaudited public accounts and internal control failures at the Central Bank.
- Budget Management and Accountability Act (2004):
  - Updated legal framework to international standards.
  - Provides for fuller integration of the recurrent and development budgets, closer linkage between budget preparation and execution, consolidation of public funds.
  - Includes practices on limiting and publicizing government borrowings and guarantees, and timely preparation of annual public accounts.
- Central Bank reforms (Central Bank Act (2005) and related measures):
  - Increased operational independence of the CBG, including setting limits on lending to the government by the CBG.
  - Arrangements for external audits improved; internal audits and supervision departments strengthened via new recruits and training.
  - Actions taken in line with IMF Safeguards Assessment and external audits:
    - Action plan for improving internal controls approved by the CBG’s Board in July 2005 and being implemented.
    - Formal guidelines for foreign exchange reserves management approved by the Board in December 2005 and being implemented.
    - An audit committee comprising independent Board members formed to oversee external audit process and internal control structure.
    - New operating manuals for internal audit, finance, and foreign exchange departments prepared.
- Public procurement reforms:
  - Gambia Public Procurement Act (2001) provides an open, nondiscriminatory and transparent procurement system; GPPA created in 2002 to implement the framework and review large contracts; central tender board replaced by decentralized procurement committees and units.
- Gambia Revenue Authority (GRA) (GRA Act (2004)):
  - Created a semiautonomous GRA consolidating administration of income and sales tax with customs.
  - Enhanced legitimacy and professionalism of tax administration, improved taxpayer services, promoted uniform application of tax laws.
  - GRA Board comprises public and private sector representatives; tax administration capacity strengthened via restructuring, training, and technical assistance with positive effect on revenues.
- Integrated Financial Management Information System (IFMIS):
  - IFMIS began operations in January 2007 and covers the entire central Government; being developed and implemented through two phases with completion of phase one expected in the first quarter of 2008.
  - System currently processing all payments and the payroll, and producing fiscal accounts; incorporates commitment controls to facilitate fiscal discipline.
  - Budgeting module and full complement of fiscal reports expected to be completed by the end of phase one.
  - Treasury and DOSFEA staff have received extensive training on the system and basic IT and accounting skills.
  - Key challenge: ensure sustainability of the system, particularly retaining trained staff and preparing for staff turnover.
- Preparation of public accounts:
  - At the decision point, public accounts had not been prepared since 1992; accounts have now been updated to 2006.
  - IFMIS is expected to produce the 2007 accounts by end-March 2008.
- Reporting and accountability:
  - Government has issued annual public reports on overall budget execution and semi-annual reports on the use of interim HIPC Initiative debt relief.
  - Annual budgets report on actual public expenditures with a two year lag.
  - Annual Public Expenditures Reviews (PERs) conducted by authorities, IDA and other development partners analyzed effective use of public expenditures and improvements in public financial management.
  - Use of interim HIPC debt relief analyzed through semiannual and annual Poverty Reducing Expenditure Reports (PRERs) covering all poverty-reducing expenditures.
  - Cabinet reviews and approves annual budgets and the PRERs; HILEC is a Cabinet subcommittee.

### Social sector reforms — use of interim HIPC relief and service delivery
- Use of interim HIPC debt relief:
  - Resources freed by interim HIPC debt relief have been used in accordance with annual budgets approved by the Cabinet; use is explicitly specified in annual budgets as part of poverty-reducing expenditures.
  - IDA and the AfDB Group suspended their interim relief in March 2005 and end-2003, respectively.
  - IMF relief was suspended in 2002 when the PRGF went off-track, and it resumed in 2007 with the approval of a new PRGF.
  - The government continued to track poverty-reducing expenditures after cessation of interim HIPC relief; the entire Cabinet directly reviews and approves annual budgets and allocations to poverty-reducing expenditures.
- Education:
  - New comprehensive Education Policy (2006–2015) focuses on expanding and improving quality of education.
  - Education benefits from: (i) the largest government budget among all ministries; (ii) donor support including IDA’s second phase of its education project; and (iii) funding from the EFA FTI Catalytic Grant.
  - Extensive program of expanding infrastructure, teacher training and school materials; over 1,000 classrooms were built with World Bank support.
  - Gross enrollment rate of 77 percent which increases to more than 90 percent if Madrassa enrollments are included.
  - Programs to recruit and retain qualified staff include hardship allowances and improved working conditions for rural teachers.
  - Key next challenge: improve quality of education programs.
- Teacher training output:
  - Starting from 192 graduates in the base academic year 2000/01, number of graduates from The Gambia College with a Primary Teacher’s Certificate increased every year, reaching 331 in 2005.
  - This represents an increase of 72 percent from the base year, exceeding the decision point target of a 45 percent annual increase.
  - Table of PTC Graduates by year (as presented):
    - 2001: PTC Graduates 192
    - 2002: PTC Graduates 221
    - 2003: PTC Graduates 227
    - 2004: PTC Graduates 311
    - 2005: PTC Graduates 331
- Scholarship scheme for girls:
  - Two scholarship programs: Scholarship Trust Fund for Girls (STF) and President’s Empowerment of Girls Education Project (PEGEF).
  - Number of girls benefiting increased every year, reaching 41,939 in 2005–06.
  - Table of Scholarship Funds for Girls (selected values as presented):
    - 2000/01: STF 5,979; PEGEF -
    - 2001/02: STF 6,042; PEGEF -
    - 2002/03: STF 9,800; PEGEF -
    - 2003/04: STF 11,390; PEGEF -
    - 2004/05: STF 12,711; PEGEF 28,337; Total 41,048
    - 2005/06: STF 13,217; PEGEF 28,722; Total 41,939
    - 2006/07: STF 14,006; PEGEF N/A; Total N/A
- Health:
  - Country has National Health Policy, National Drug Policy, and National Nutrition Policy.
  - Health has the third largest budget among government ministries.
  - Primary and secondary health care expanded significantly, particularly construction of health centers through donor financing, mostly in poorer regions.
  - Physical access: 85 percent of the population living within one-hour travel time, or 7.5 km, of a health facility.
  - Hospital beds: 1.21 beds per 1,000.
  - Challenge: ensure health centers are properly equipped and staffed.
- Share of births attended by skilled health staff:
  - Multiple Indicator Cluster Survey (MICS) 2005 indicates 56.3 percent of births were attended by skilled health personnel.
  - Decision point baseline was 44 percent (noted that baseline was estimated in 1990 rather than 1998 as indicated in the decision point document).
  - Decision point target for 2005 was 61.9 percent; 56.3 percent is a significant increase from baseline but below the 2005 target.
  - The staffs observe that the decision point target percentages were unrealistically high given long delays in reaching completion point; current share of assisted births in The Gambia is significantly greater than the SSA average.
- Share of primary and secondary health care in health recurrent budget (percentage):
  - 1999: 42
  - 2000: 41
  - 2001: 39 (based on budget allocations)
  - 2002: 42
  - 2003: 50
  - 2004: 51
  - 2005: 48
  - 2006: 44
  - The share averaged 48 percent since 2003, greater than the baseline of 42 percent as required by the decision point trigger.

### Structural reforms — utilities, groundnut sector, and sector strategies
- Public Utilities:
  - PURA Act (2001) established the Gambia Public Utilities Regulatory Authority with mandate to regulate water, electricity, and telecommunication sectors; Board established and staff recruited; current focus on electricity and telecommunication; collaborates with DOSFEA and line ministries on licensing, tariffs, and competition policy.
- Groundnut sector:
  - Unsuccessful privatization attempt of Gambia Groundnut Corporation (GGC) in 2005–2006: due diligence done, bidding document prepared and advertised, only one bidder (local firm) whose bid was rejected as insufficiently qualified.
  - Groundnut exports fell sharply in 2005 due to poor marketing: exports decreased to US$2 million in 2005 from US$16.9 million in the previous year; GAMCO, established 2005 as public-private joint enterprise, was undercapitalized, lacked market experience, and became bankrupt.
  - In 2006 the Government reopened the groundnut market to multiple operators; GGC was given a license to export groundnuts in addition to processing, transport and storage activities.
- Sector reform roadmap for groundnuts:
  - Comprehensive sector reform strategy prepared in consultation with key stakeholders including World Bank, IMF and EU to revitalize the sector and attract international investors; roadmap outlines plans to fully liberalize the sector and privatize management of publicly-owned groundnut facilities.
  - Actions already implemented from the roadmap:
    - Allowing immediate free entry of operators at all levels of the value chain.
    - Transferring management responsibility for the sector to an association of public and private stakeholders, the Agribusiness Service Plan Association (ASPA), which will determine producer price among other roles.
    - Putting GAMCO under receivership as part of liquidation.
    - Dissolving the Board of Directors of GGC and initiating steps to reconstitute a new Board that will not intervene in daily operations.
  - Planned actions:
    - In 2008, government plans to introduce private management to GGC under a performance-based contract in preparation for eventual complete privatization.
  - Fiscal implication:
    - Only direct cost to the budget from roadmap implementation relates to government’s assumption of nonperforming bank loans, equivalent to one percent of GDP, that were guaranteed by the Social Security and Housing Finance Corporation.
    - The loans will be repaid over three years beginning in 2008.
  - Donor support:
    - IDA and the EU plan to support implementation of the roadmap through investment projects and budget support operations.

*Italic: Source — Chapter content from the IMF staff report (as provided in the supplied PDF content).*

### 33.      The groundnut sector reform roadmap was endorsed by the Cabinet in

### _cr08109 - 33.      The groundnut sector reform roadmap was endorsed by the Cabinet in

### Groundnut sector reform
- The groundnut sector reform roadmap was endorsed by the Cabinet in June 2007.
- In July 2007, the government made a public announcement of its commitment to implementation of the roadmap, and to full liberalization and open competition in the sector.
- The government formally communicated to IDA and IMF its commitment to the roadmap.
- IMF and IDA staffs broadly support the roadmap’s strategic focus on liberalizing the sector.

### Use of HIPC interim relief
- The Gambia has benefited from the full amount of the interim HIPC debt relief from IDA, AfDB and the EU.
- Interim assistance from IDA reached the ceiling of one third of expected total HIPC relief in December 2004.
- IMF interim relief was suspended in 2002 when the PRGF went off-track, and it resumed in 2007 with the approval of a new PRGF.
- IDA has delivered interim assistance in the amount US$8.0 million in NPV terms as of end-November 2007.
- The IMF has delivered interim debt relief of US$0.6 million (SDR 0.4 million) in NPV terms as of end-November 2007.
- Interim assistance from the AfDB Group was provided during 2001–2003 and ended in end-2003 when the 40 percent ceiling of total AfDB HIPC relief provided as interim relief was reached.
- Total assistance during the interim period amounted to US$17.5 million in NPV terms (US$21.2 million in nominal terms), of which US$17.0 million in NPV terms came from multilateral creditors and US$0.5 million in NPV terms from bilateral creditors.
- Note: "Interim relief for The Gambia was terminated in March 2005. All interim relief delivered counts towards the total amount of HIPC relief in NPV terms and this is reflected in the new IDA HIPC debt relief delivery schedule."

### Poverty-reducing expenditures (PREs) and budget outturns
- Government allocates between one quarter to one third of total locally funded expenditures to poverty-reducing spending.
- The share of poverty-reducing spending comprises approximately half of total expenditures when interest payments are excluded.
- PRSP priority sectors account for approximately a fifth of all expenditures, and approximately a third if interest payments are excluded.
- Departments with largest budgets: Education (largest), Department of State for Finance and Economic Affairs (second largest), Health (third largest).
- Other poverty reducing expenditures include agriculture, governance and civil service reform, decentralization and local government capacity building, and cross-cutting programs on nutrition, population, gender and HIV/AIDS.

Key figures from Table 6 (preserving exact values as presented):
- Total expenditures (mil. dalasis): 2001: 1,298; 2002: 1,408; 2003: 1,842; 2004: 2,252; 2005: 2,528; 2006: 2,661; 2007: 3,238.
- HIPC interim relief (mil. dalasis): 2001: 30.3; 2002: 39.2; 2003: 57.9; 2004: 63.7; 2005: 20.6; 2006: 0.0; 2007: 0.0.
- Total expenditures (US$ millions): 2001: 82.7; 2002: 70.7; 2003: 67.5; 2004: 75.0; 2005: 88.5; 2006: 94.8; 2007: 116.6.
- Percent of total expenditures — PRE: 2001: 35.2; 2002: 37.0; 2003: 30.0; 2004: - ; 2005: 24.3; 2006: 26.2; 2007: 33.6.
- Percent of total expenditures — Non-PRE, noninterest payment: 2001: 42.2; 2002: 36.7; 2003: 37.0; 2004: - ; 2005: 31.0; 2006: 39.2; 2007: 40.3.
- Percent of total expenditures — Interest payment: 2001: 22.6; 2002: 26.3; 2003: 33.0; 2004: 38.5; 2005: 44.7; 2006: 34.6; 2007: 26.1.
- Percentage increase wrt 2001 — PRE: -, 14.2, 21.0, -, 34.3, 52.6, 137.9.
- Percentage increase wrt 2001 — Non-PRE, noninterest payment: -, -5.7, 24.7, -, 43.1, 90.6, 138.6.
- Percentage increase wrt 2001 — Interest payment: -, 26.1, 106.8, 195.4, 285.0, 213.5, 188.1.
- Memorandum items:
  - PRE of total exp w/o int. payment: 45.5, 50.3, 44.7, -, 43.9, 40.1, 45.4.
  - PRSP priority sectors: 22.9, 23.9, 18.3, -, 18.7, 20.2, 18.9.
  - PRSP priority sectors w/o international: 29.6, 32.4, 27.3, -, 33.8, 30.8, 25.6.

Notes from table:
- "Detailed budget outturn data for 2004 are unavailable."
- "2007 figures are budget allocations, whereas the other years are budget outturns."
- "The denominator [for PRE of total exp w/o int. payment] is total locally funded expenditures excluding interest payments."
- "PRSP priority sectors are education, health and agriculture."

### Trends and interpretation
- The share of poverty-reducing expenditures declined from 2002 to 2005 due to rising domestic interest payments and efforts to restore fiscal discipline.
  - PRE increased to 37 percent in 2002, then declined to 24 percent in 2005.
  - Domestic interest payments increased from 23 percent of total recurrent expenditures in 2000 to 45 percent in 2005.
- Since 2005, the share of poverty-related expenditures has increased:
  - Domestic interest payments decreased from 45 percent in 2005 to 35 percent in 2006, and expected to decline to 26 percent in 2007.
  - PRSP priority spending increased from 24 percent in 2005 to 26 percent in 2006, and is expected to increase to 34 percent in 2007.
  - Compared to 2001, poverty-reducing spending was larger by 34 percent in 2005 and by 138 percent in 2007, while interest payments increased by 285 percent in 2005 and by 188 percent in 2007 (relative to 2001).

### Social development funds and PRF
- Social development funds have been used to target support to local communities; most established with support from development partners.
- The Board of IDA approved in August 2007 a Community Driven Development (CDD) project to support rural communities.
- The PRSP outlined plans for a Poverty Reduction Fund (PRF) as an accounting framework for monitoring pro-poor spending; it has evolved into an overall framework for tracking spending from social development funds.
- Once operationalized, the PRF is expected to facilitate coordination and monitoring of spending from the CDD project and other social development funds.

### Staff assessment of completion point triggers
- Staffs view: Government has fully implemented nine out of eleven completion point triggers.
- Two triggers were partially completed:
  - (i) annual increase by five percent of the share of births attended by a person trained in antenatal care;
  - (ii) bringing to the point of sale the publicly-owned groundnut processing plants.
- Staffs recommend waivers for nonobservance of these two triggers because:
  - substantial progress was made towards implementation of each trigger;
  - regarding assisted births, the target percentages are unrealistically high due to long delays in reaching the completion point, and progress makes the situation similar or better than in other comparable Sub-Saharan African countries;
  - regarding groundnut processing plants, a previous attempt to privatize them was unsuccessful and corrective actions are now being implemented.

### Updated debt reconciliation for the decision point
- Review of stock of debt at end-December 1999 against creditor statements led to revisions in NPV of debt owed to some creditors.
- Multilateral creditors:
  - Nominal stock of debt owed to multilaterals decreased by US$0.6 million to US$355.6 million.
  - NPV of multilateral debt reduced by US$0.5 million to US$180.3 million.
  - NPV of debt to IDA revised upwards by US$0.1 million.
  - EU loans administered by IDA amounting to US$0.3 million in NPV terms after traditional debt relief were not included at decision point.
  - NPV of debt owed to AfDB Group revised downwards by US$0.6 million.
  - NPV of debt to BADEA and the EU revised upwards by US$0.2 million and US$0.1 million, respectively.
  - NPV of debt owed to IsDB and IFAD revised downwards by US$0.3 million and US$0.02 million, respectively.
  - NPV of debt owed to OFID revised upwards by US$0.1 million.
- Bilateral creditors:
  - NPV of debt to Paris Club creditors after traditional relief revised upward from US$17.6 million to US$19.5 million.
  - Revision attributable to reclassification of EU loans administered by IDA (US$0.3 million in NPV terms) and changes in NPV to Norway and France.
  - NPV of debt to Norway increased from US$2.8 million to US$5.6 million.
  - NPV of debt to France revised downward from US$5.5 million to US$4.3 million.
  - NPV of debt to non-Paris Club creditors decreased from US$46.4 million to US$40.9 million due to revised NPV of debts to Kuwait, Taiwan Province of China, and Libya.
- Exports estimate revision:
  - Estimates of exports of goods and services used to evaluate HIPC assistance revised from an average of US$118.8 million per year over 1997–99 to US$119.4 million.
- Aggregate impact:
  - Nominal stock of debt at end 1999 decreased by US$7.9 million to US$444.7 million.
  - NPV of debt, after delivery of traditional debt relief, reduced by US$4.2 million to US$240.7 million.
  - Revisions to debt and export data together would result in a downward revision of HIPC assistance by US$5.0 million in NPV terms, from US$66.6 at the decision point to US$61.7 million.
- Policy decision:
  - Debt relief under the enhanced HIPC Initiative remains that agreed at the decision point.
  - For countries reaching decision point prior to adoption of decision on information reporting by Boards of IDA and the Fund, amount of enhanced HIPC assistance required at decision point cannot be adjusted downward without consent of country authorities.
  - Gambian authorities did not agree to a downward revision because it would reduce resources for ongoing PRSP program and weaken poverty reduction efforts.
  - As a result, committed debt relief under the enhanced HIPC Initiative remains US$66.6 million in NPV terms, and the common reduction factor remains at 27.2 percent.

### Status of creditor participation in the Enhanced HIPC Initiative
- The Gambia has received financing assurances from creditors accounting for 80.7 percent of the NPV of HIPC assistance estimated at the decision point.
- Multilateral creditors account for 73.5 percent of total committed assistance; bilateral creditors account for 26.5 percent.
- Several multilateral creditors and all Paris Club creditors have provided interim assistance.
- Multilateral creditors:
  - HIPC assistance from multilateral creditors amounts to US$49.2 million in NPV terms (about three-quarters of total HIPC assistance).
  - IDA, the IMF, the AfDB Group, and the European Union provided interim assistance in the form of debt service reduction.
  - All but one multilateral creditor have committed to provide required assistance at completion point.
- IMF:
  - Enhanced HIPC assistance from the IMF amounts to SDR 1.8 million (US$2.3 million) in NPV terms at decision point.
  - SDR 0.4 million (US$0.6 million) already disbursed as of end-November 2007 as interim assistance.
  - At completion point, IMF will provide remaining SDR 1.4 million (equivalent to US$2.0 million), together with accrued interest currently estimated at SDR 0.5 million.
  - IMF assistance represents an average annual reduction of 13 percent in debt service over 2001-09.
- IDA:
  - Debt relief from IDA amounts to US$22.3 million in NPV terms at decision point, equivalent to debt-service savings of US$35.9 million during 2001–16.
  - IDA has delivered US$8.0 million in NPV terms (US$9.1 million in nominal terms) as interim relief in the form of a 50 percent reduction of The Gambia’s debt service to IDA.
  - Upon completion point, remaining assistance from IDA: US$14.3 million in NPV terms (US$26.8 million in nominal terms) as a 50 percent reduction of debt service to IDA through February 2016.
- African Development Bank Group:
  - HIPC debt relief from the AfDB Group amounts to US$15.8 million in NPV terms.
  - AfDB Group has already provided US$6.3 million in end-1999 NPV terms (US$6.8 million in nominal terms) as interim relief.
  - At completion point, AfDB Group assumed to provide remaining relief through an 80 percent reduction of debt service on debt outstanding at end-December 1999, applied from January 2008 through 2013.
- BADEA, EU, IFAD, IsDB, OFID:
  - Assistance amounts to US$8.6 million in end-1999 NPV terms (US$14.0 million in nominal terms).
- Bilateral creditors:
  - Paris Club creditors have agreed in principle to provide their share of assistance, for US$4.8 million in end-1999 NPV terms.
  - Interim assistance provided through a flow treatment under Cologne terms, agreed on January 9, 2003 and extended on June 22, 2007.
  - Bilateral agreements have been signed with France and Norway.
  - Official Development Assistance loans administered by IDA and funded by EU members expected to be rescheduled per Paris Club Minutes.
  - Paris Club creditors expected to deliver their share through a stock-of-debt reduction under Cologne terms, leading to cancellation of all outstanding obligations of The Gambia towards Paris Club creditors.
  - Non-Paris Club creditors expected to provide relief on terms comparable to Paris Club.
  - NPV of debt to non-Paris Club creditors is US$80.6 million (18.9 percent of total debt stock).
  - Largest official non-Paris Club creditor: Taiwan Province of China, followed by Kuwait.
  - Gambian authorities have sent letters to non-Paris Club creditors seeking agreements on comparable terms to Paris Club.

### Pending and exceptional considerations
- ECOWAS had not confirmed participation at the time of writing.
- Gambian authorities have not consented to downward revision of HIPC assistance from US$66.6 million to US$61.7 million in NPV terms.
- The authorities are working toward reaching agreements with all remaining creditors.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08109.pdf*

### 54.      The enhanced HIPC Initiative allows for additional debt relief, or exceptional

### _cr08109 - 54.      The enhanced HIPC Initiative allows for additional debt relief, or exceptional

### Topping-up under the enhanced HIPC Initiative
- The enhanced HIPC Initiative allows for additional debt relief, or exceptional “topping-up,” at the completion point if the deterioration of the debt burden indicators could be primarily attributed to fundamental changes in a country’s economic circumstances due to exogenous factors. Additional debt relief may be provided to bring the NPV of debt-to-exports ratio down to the 150 percent threshold at the completion point.

### Key debt and exports-related variables (after HIPC assistance) — Table 7
- NPV of debt-to-exports ratio: Decision Point 150.0; Projections 139.8; Actual 242.5
- NPV of debt (US$ millions): Decision Point 178.2; Projections 254.5; Actual 333.9
- New borrowing (US$ millions): Decision Point - ; Projections 200.3; Actual 283.8
- Grant element of new borrowing: Decision Point - ; Projections 60.8; Actual 45.3
- Exports of GNFS (US$ millions): Decision Point 118.8; Projections 182.0; Actual 137.7
- SDR discount rate (percent): Decision Point 5.6; Projections 5.6; Actual 5.1
- SDR exchange rate (SDR per US$): Decision Point 0.73; Projections 0.73; Actual 0.66

### Magnitude and drivers of the deterioration in the NPV debt-to-exports ratio
- At end-2006 the actual NPV of debt-to-exports ratio was 242.5 percent versus the decision point projection of 139.8 percent — a gap of 102.6 percentage points above the projection and 92.5 percentage points above the HIPC threshold of 150 percent.
- Main explanatory factors: export performance, new borrowing (volume and concessionality), exchange rates, discount rates, revisions of the debt database, and amortization.

### Decomposition of changes (high-level quantitative findings from Table 8 and text)
- Unanticipated changes in exchange and discount rates increased the NPV of debt-to-exports ratio by 28 percentage points in total:
  - Discount rates contributed 13 percentage points.
  - Exchange rates contributed 15 percentage points.
- New borrowing:
  - At decision point, new borrowing was projected to increase the NPV ratio by 43 percentage points.
  - Actual new borrowing exceeded projections by US$84 million, resulting in an additional unanticipated deterioration of 56 percentage points.
  - Of the unanticipated increase in new borrowing:
    - 25 percentage points reflect the decision-point assumption that multilateral borrowing would be available on IDA terms (correction in concessionality).
    - A further 7 percentage points reflect lower concessionality than anticipated.
    - Higher-than-projected volume of new borrowing accounted for 24 percentage points of the unanticipated deterioration.
  - Disbursements of US$380,000 from an IDA Africa Regional Locust Project can be considered exogenous.
- Export performance:
  - Export growth between 1999 and 2006 was projected to be 63 percent; actual export growth was 28 percent.
  - Export growth lowered the NPV ratio by almost 13 percentage points between decision and completion points, but this was lower than projected.
  - Lower-than-projected export volumes accounted for 32 percent of the unanticipated increase of the debt-to-exports ratio (elsewhere summarized as 33 of the 39 percentage points shortfall for the three main export sectors).
  - Price effects were small: unanticipated changes in international prices of exports account for 5.5 percentage points of the deterioration.
- Other factors:
  - Revisions of the decision point debt database and amortization contributed a remaining reduction of 20 percentage points (i.e., repayment/amortization decreased the ratio relative to what it would have been).

### Sectoral export details and policy links
- Sector shares of total export earnings:
  - Re-export earnings: 30.0 percent
  - Groundnuts: 6.6 percent
  - Travel income (tourism): 58.3 percent
- Re-exports:
  - Shortfall mainly volume-driven rather than price-driven.
  - Policy shortcomings identified as major determinants: poor macroeconomic management (macroeconomic uncertainty and unstable exchange rate), slow improvement of customs clearance and ports, and adoption of ECOWAS CET with an increased import sales tax in early 2006 reducing competitiveness in re-export trade.
- Groundnuts:
  - Decision point projected cumulative increase of 50.4 percent by 2006; actual groundnut exports decreased by 25.5 percent compared to 2000.
  - Sector reforms and a 2005 change in licensing arrangements created a de facto monopoly; groundnut exports fell to US$2.0 million and recovered only partially by 2006 to approximately half of the decision point projection of US$19.4 million.
  - The 2006 shortfall cannot be attributed to low rainfall in 2002.
- Tourism:
  - Tourist arrivals projected at approximately 135,000 by 2006; actual arrivals were 121,000.
  - Travel income fell short of projections by 10.7 percent.
  - A major German tour operator withdrew after a government ban on all-inclusive tour packages; German tourists decreased from 25,393 in 1999 to 12,156 in 2000, then to 3,065 in 2001 and never recovered to previous levels.

### Assessment of exogeneity and topping-up eligibility
- Staff view: The Gambia does not meet requirements for exceptional topping-up under the enhanced HIPC Initiative.
- Exogenous factors identified and quantified:
  - Unanticipated changes in international prices of exports: 5.5 percentage points of deterioration.
  - Unanticipated changes in discount rate and exchange rate: 27.9 percentage points of deterioration.
  - These two exogenous factors together explain less than a third of the unanticipated deterioration of the NPV of the debt-to-exports ratio.
- Factors judged not exogenous and decisive:
  - Lower export volumes, larger new borrowing, and lower concessionality had a much greater impact. By themselves they would have produced an NPV debt-to-exports ratio of 204 percent, above the HIPC threshold of 150 percent.

### MDRI participation and projected debt relief (summary)
- Contingent on completion point approval, The Gambia will qualify for MDRI relief from three creditors: IDA, the AfDF, and the IMF.
- MDRI debt relief (net of HIPC assistance) would lead to debt service savings of US$373.5 million over 43 years on debt owed to IDA, the IMF and the AfDF.
- IDA:
  - Debt stock cancellation would reduce The Gambia’s debt stock owed to IDA by US$206.4 million, of which US$183.4 million due to MDRI and the remainder to HIPC assistance.
  - Average annual debt service savings (net of HIPC assistance): US$4.6 million between 2008 and 2011, and US$6.1 million over the next 30 years.
  - Total debt service savings from MDRI: US$201.8 million (or SDR134.1 million).
- IMF:
  - MDRI relief amounting to SDR 9.4 million (or US$14.2 million) covering the full stock of debt owed at end-2004 that remains outstanding at the completion point.
  - Of this, SDR 7.4 million (or US$11.2 million) financed from the MDRI-I Trust and the remainder from the HIPC Umbrella sub-account.
  - MDRI relief from the IMF implies average debt service savings net of projected HIPC assistance of SDR 1.4 million (or US$2.1 million) per year over the next 5 years.
- AfDF:
  - MDRI relief would yield annual debt service savings (net of HIPC assistance) averaging US$1.6 million over the next 5 years and US$3.9 million over the following 39 years.
  - Total MDRI debt service savings from AfDF: US$160.2 million in nominal terms delivered in full at the completion point.

### Updated debt sustainability analysis (DSA) — end-2007 and outlook
- Nominal stock of external debt: US$677 million at end-2006 versus US$453 million at end-1999.
- Multilateral creditors: 84 percent of total debt; bilateral creditors: 16 percent (of which 14 percentage points attributable to non-Paris Club creditors).
- Largest creditors: IDA 39 percent and African Development Fund 26 percent of total outstanding nominal debt.
- NPV of external debt at end-2007, after full delivery of assistance committed under the Enhanced HIPC Initiative at the decision point: estimated at US$347 million, equivalent to 236 percent of exports; decision point projection was 137 percent.
- Paris Club will not be in a position to provide “beyond HIPC” relief since full HIPC relief entails cancellation of all Paris Club claims.
- Medium-term macroeconomic framework assumptions (2007–27):
  - Higher annual growth of 6.2 percent in the near term, then gradual reduction to 5 percent over the medium term.
  - Real annual growth of exports of goods and services at 7 percent over the medium term.
  - Larger imports and current account deficits through 2012, before the current account declines as a share of GDP to 5 percent in 2025.
  - Improved fiscal balance in the medium term.
  - Increased external donor assistance, both loans and grants, over 2007–12, declining as a share of GDP over the medium term.
- Staff concern: The LIC DSA results indicate The Gambia remains at high risk of future debt distress despite HIPC and MDRI relief.
- Government response: increased the minimum grant element on new external borrowing and plans to limit the volume of new borrowing as part of an improved debt management framework.

*Source: _cr08109 - 54. The enhanced HIPC Initiative allows for additional debt relief, or exceptional topping-up (canonical URL: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08109.pdf)*

### 78. Full delivery of debt relief under the HIPC Initiative and the MDRI would

### _cr08109 - 78. Full delivery of debt relief under the HIPC Initiative and the MDRI would

### Impact of HIPC and MDRI on external public debt
- In NPV terms, the stock of external public debt:
  - was US$439 million at end-2007,
  - would be US$347 million after HIPC relief,
  - would be US$165 million after MDRI.
- Nominal debt service relief in 2008 would amount to US$23 million, of which MDRI relief would contribute US$9 million.
- Despite relief, the stock of external debt will remain relatively large post-completion point primarily due to outstanding debt owed to multilateral creditors that do not participate in MDRI and non-Paris Club bilateral creditors; together these creditors will account for two-thirds of The Gambia’s external debt stock in NPV terms after completion point.
- Most multilateral debt is owed to BADEA, IsDB, OFID and IFAD; the EXIM Bank of Taiwan and the Kuwait Fund for Economic Development account for the majority of debt owed to non-Paris Club creditors.

### Debt Sustainability Analysis (DSA) — baseline macroeconomic assumptions (2006–27)
- Baseline scenario assumptions:
  - Continuation of prudent macroeconomic management, sustained investment in infrastructure and tourism, and a near-term scaling up of donor assistance.
  - GDP growth projected to average 6.2 percent in 2007–12 before slowing to 5.0 percent over the medium-term.
  - FDI projected at 6.9 percent of GDP over 2007–12, declining as a share of GDP over time.
  - Nominal export growth: average of 5.6 percent through 2012, rising to 7.7 percent over the medium-term.
  - Imports projected to grow at 5.9 percent annually.
  - Current account deficits decline from 10.8 percent of GDP in 2007 to 5 percent in 2025.
  - External borrowing expected to average 5.8 percent of GDP between 2007 and 2012 before declining to 1.8 percent by 2027.
  - External grants expected to average about 3.6 percent of GDP through 2012 before declining to about 0.7 percent by 2027.
  - Expenditures projected to decrease from 27.3 percent of GDP in 2007–12 to 22 percent in the long run.
  - Interest payments expected to decline from 8.6 percent of GDP in 2005 to 1.4 percent in 2027.
  - Domestic revenue collection expected to remain at 21 percent of GDP.

### DSA findings on debt-burden indicators after relief
- NPV of debt-to-exports:
  - After Enhanced HIPC relief alone, projected to remain above the 150 percent threshold, but falls beneath the threshold by 2026.
  - After MDRI relief at completion point, drops to 113 percent at end-2007; increases to over 150 percent through 2012 (associated with planned poverty-reducing new borrowing), then falls to 106 percent by end of projection period.
- NPV of debt-to-GDP:
  - Falls from 84 percent at end-2006 to 26 percent at end-2007 after both Enhanced HIPC and MDRI relief; expected to remain beneath 30 percent over the projection period.
- NPV of debt-to-revenue:
  - Declines from 397 percent in 2006 to 121 percent in 2007; rises to 148 percent in 2012 and falls to 110 percent in 2026.
- LIC DSA result:
  - After full delivery of HIPC and MDRI assistance, the NPV-of-external-debt to export ratio declines significantly but remains above the LIC DSA’s policy-dependent external debt-burden threshold of 100 percent, indicating the risk of debt distress is high.
  - A large domestic debt stock at 30 percent of GDP further supports the assessment that risk of debt distress remains high.

### Debt service projections
- After HIPC and additional bilateral assistance:
  - Debt service-to-exports ratio expected to average 13 percent in 2007–16 and decline to approximately 11 percent on average in 2017–26.
- After MDRI:
  - Debt service-to-exports projected to average 9 percent over 2007–2016 and about 7.5 percent for the rest of the projection period.

### Sensitivity analysis and scenarios
- General conclusion:
  - Debt sustainability outlook hinges on sustained export-sector growth (mainly tourism) and prudent debt management; adverse shocks to exports or shortfalls in grant financing would push indicators above HIPC thresholds through much of the projection period.
- Scenario 1 — Lower export growth:
  - Assumption: real exports grow at 4 percent instead of 6 percent in the baseline, reflecting failures in tourism investment, slower agricultural export expansion, and loss of competitiveness in re-exports.
  - Result: NPV of debt-to-exports after MDRI would increase to above 170 percent from 2012 and remain through most of the projection period; debt service ratio increases to 10–11 percent of exports.
- Scenario 2 — Less concessionality on external financing:
  - Assumption: new borrowing has a grant element of 25 percent rather than 45 percent in the baseline.
  - Result: debt stock increases by approximately US$286 million in NPV terms by 2025 compared with the baseline; NPV of debt-to-exports increases by 33 percentage points by 2012 compared with the baseline, reaching 190 percent of exports, and remains high (160 percent) over the projection period—above the post-MDRI baseline debt-to-exports ratio in 2007.
  - Implication: borrowing on highly concessional terms or grant financing close to baseline projections is necessary to avoid returning to debt distress.

### Conclusions, assessments, and recommendations
- Completion-point triggers and program performance:
  - Staffs consider performance on the conditions established in 2000 for reaching the completion point under the Enhanced HIPC Initiative to be broadly satisfactory.
  - Nine out of eleven completion point triggers fully implemented; two partially implemented (share of births attended by trained antenatal personnel; groundnut processing plant privatization).
  - Staffs recommend waivers for nonobservance of these two triggers given progress and contextual issues.
- Debt relief outcomes and residual risks:
  - After full delivery of Enhanced HIPC, additional Paris Club relief and MDRI, the NPV of debt-to-exports ratio would be reduced from 236 percent to 113 percent in 2007 and is expected to remain below the HIPC threshold of 150 percent for most of the projection period.
  - NPV of debt-to-GDP and debt service indicators fall below debt distress thresholds immediately after relief.
  - LIC DSA indicates NPV of debt-to-exports will remain above the policy-based threshold of 100 percent for a protracted period; sensitivity analysis shows vulnerability to adverse export and borrowing shocks.
- Exceptional topping-up:
  - Staffs conclude The Gambia does not meet the requirements for exceptional topping-up because deterioration in debt burden indicators during the interim period cannot be explained primarily by exogenous factors.
- Government measures to strengthen debt sustainability:
  - The second PRSP outlines a national development strategy to encourage continued growth, particularly exports.
  - Diagnostic Trade Integration Study (July 2007) identifies success factors for expanding exports.
  - PRSP prioritizes prudent fiscal and debt management policies; the minimum grant element on new external borrowing raised to 45 percent.
  - Government plans to limit the volume of new concessional borrowing and prioritize PRSP initiatives in line with available funding.
  - Commitment to develop a comprehensive debt management strategy (DMS); DeMPA assessment by IDA in March 2007 provides a basis for DMS refinement and finalization.
- Recommendation:
  - Staffs of IDA and the IMF recommend that the Executive Directors determine that The Gambia has reached the completion point under the Enhanced HIPC Initiative.

*Source: IMF staff report _cr08109 - 78. Full delivery of debt relief under the HIPC Initiative and the MDRI would*

### 94. Executive Directors may wish to focus on the following issues and questions:

### _cr08109 - 94. Executive Directors may wish to focus on the following issues and questions:

### Issues and questions for Executive Directors
- Completion point
  - Do Directors agree that The Gambia has fully met nine out of eleven floating triggers and partially implemented another two triggers for reaching the completion point under the Enhanced HIPC Initiative, and that the waivers recommended by the staffs are warranted?
- Data correction
  - Do Directors agree with staffs’ recommendation, based on the paper on information reporting approved by the IMF and Bank Boards in March 2002, that the downward revision in the stock of debt in NPV terms does not warrant a revision in the amount of HIPC Initiative assistance?
- MDRI
  - Do IMF Directors agree that The Gambia qualifies for an amount of debt relief by the Fund equal to SDR 9.4 million, of which SDR 7.6 million would be financed from the MDRI-I Trust and the rest from The Gambia’s HIPC Umbrella sub-account?
- Creditor participation
  - Do Directors agree that sufficient assurances have been given by The Gambia’s creditors to commit HIPC assistance to The Gambia on an irrevocable basis?
- Topping-Up
  - Do the Directors agree with the staffs’ assessment that The Gambia does not meet the requirements for exceptional topping-up at the completion point?
- Debt Sustainability
  - Do Directors agree with the staffs’ assessment that The Gambia will remain at a high risk of debt distress after full delivery of HIPC and MDRI assistance?
  - Do Directors share the staffs’ assessment regarding possible risks that may emerge if the authorities do not actively pursue policies that encourage continued growth and prudent fiscal and debt management policies?
- Comparable treatment
  - Do Directors agree that The Gambia should continue to seek debt relief from its non-Paris Club creditors within the framework of the HIPC Initiative and that the staffs should continue to monitor the delivery of debt relief from all creditors?

### Discount rate and exchange rate assumptions (Table 9 — selected entries)
- Notes:
  - 1/ The discount rates used are the average commercial interest reference rates (CIRRs) for the respective currencies over the six-month period ending in December 2006 for the completion point and in December 1999 for the decision point.
  - 2/ For all Euro area currencies, the Euro CIRR is used. For the Kuwaiti Dinar, the US dollar CIRR is used for completion point calculations (compared to the decision point calculations, when the SDR CIRR was used).
  - Memorandum Item: Paris Club cut-off date: July 1 1986
- Selected currency assumptions (Completion point / Decision point where shown)
  - AfDF/AfDB Unit of account: Discount Rate 5.59 (In percent per annum); Exchange Rate 0.73 (Currency per U.S. dollar)
  - Domestic Currency: Dalasi: Discount Rate 5.59; Exchange Rate 13.00
  - Euro: Discount Rate 5.47; Exchange Rate 1.00
  - Japanese Yen: Discount Rate 1.98; Exchange Rate 102.20
  - United States Dollar: Discount Rate 7.04; Exchange Rate 1.00
  - Special Drawing Rights: Discount Rate 5.59; Exchange Rate 0.73
  - Swiss Franc: Discount Rate 4.27; Exchange Rate 1.60
  - Kuwaiti Dinar: Discount Rate 5.59; Exchange Rate 0.30
- Source data: OECD and IMF, International Financial Statistics.

### External debt stocks and NPV (selected figures from Tables 10–12)
- Table 10 — Nominal and NPV of External Debt Outstanding as of End-December 1999 (In millions of U.S. dollars)
  - Total nominal debt before rescheduling (From decision point): 452.6
  - Total nominal debt (Revised): 444.7
  - NPV of debt before rescheduling (From decision point): 258.0
  - NPV of debt (Revised): 251.1
  - NPV of debt after rescheduling (From decision point): 244.9
  - NPV of debt after rescheduling (Revised): 240.7
  - Multilateral institutions nominal: 356.2 (Revised 355.6); multilateral NPV before rescheduling 180.8 (Revised 180.3); after rescheduling 180.8 (Revised 180.3)
  - IDA nominal (decision point): 172.7; IDA NPV before rescheduling 81.9; after rescheduling 81.9
  - IMF nominal and NPV: 11.3 and 8.3 respectively (both decision point and revised)
  - Official bilateral nominal (decision point): 96.4 (Revised 89.2); official bilateral NPV before rescheduling 77.2 (Revised 70.8); after rescheduling 64.0 (Revised 60.4)
  - Paris Club nominal (decision point): 27.5 (Revised 29.8); Paris Club NPV before rescheduling 23.7 (Revised 25.3); Paris Club NPV after rescheduling 17.6 (Revised 19.5)
  - Non-Paris Club official bilateral nominal: 68.9 (Revised 59.3); NPV before rescheduling 53.5 (Revised 45.5); after rescheduling 46.4 (Revised 40.9)
- Table 11 — Estimated Assistance at Decision Point (In millions of U.S. dollars in NPV terms at end-1999)
  - Assistance at decision point (Total): 150.0; Bilateral: 66.6; Multilateral: 67.4; Memorandum item: NPV of debt 244.9; NPV of debt (revised) 240.7
  - 3-year average of exports: 118.8; 3-year average of exports (revised): 119.4
  - NPV of debt-to-exports: 206.1; NPV of debt-to-exports (revised): 201.7
- Table 12 — External Public and Publicly Guaranteed Debt at End-December 2006 (In millions of U.S. dollars)
  - Total nominal debt: 676.7; NPV of Debt (legal situation) 427.1; NPV of Debt after Enhanced HIPC Bilateral Assistance 333.9; NPV after Additional Assistance 333.9
  - Multilateral nominal: 566.2; Multilateral NPV (legal situation) 333.4; after Enhanced HIPC 286.7; after Additional 286.7
  - IDA nominal 263.6; IDA NPV after Enhanced HIPC 145.2; after Additional 125.1
  - IMF nominal 17.8; IMF NPV after Enhanced HIPC 15.8; after Additional 13.3
  - Bilateral and commercial nominal: 110.6; Bilateral and commercial NPV (legal situation) 93.7; after Enhanced HIPC 47.1; after Additional 47.1
  - Paris Club nominal 15.6; Paris Club NPV (legal situation) 3.1; Paris Club NPV after Enhanced HIPC 1.1; Paris Club shows expected delivery under Cologne terms (stock-of-debt reduction)

### Projected NPV of external debt under scenarios (selected lines from Table 13)
- Section I — After traditional debt-relief mechanisms (selected years; NPV in millions of U.S. dollars)
  - 2006: NPV of total debt (2+5): 422.7; NPV of outstanding debt (3+4): 422.7
  - 2016: NPV of total debt: 583.1; NPV of outstanding debt: 290.8
  - 2026: NPV of total debt: 710.6; NPV of outstanding debt: 155.6
  - 2006–16 average (NPV of total debt): 517.1; 2017–26 average: 650.1
  - Multilateral (2006): 333.4; IDA (2006): 145.2; IMF (2006): 15.8; AfDB Group (2006): 99.2
- Section II — After enhanced HIPC assistance (selected years)
  - 2006: NPV of total debt (2+5): 426.8; NPV of outstanding debt (3+4): 426.8
  - 2007: NPV of total debt: 347.4; NPV of outstanding debt: 319.7
  - 2016: NPV of total debt: 563.5; NPV of outstanding debt: 271.3
  - 2026: NPV of total debt: 705.2; NPV of outstanding debt: 150.2
  - Multilateral (2006): 333.4; IDA (2006): 145.2; IMF (2006): 15.8
  - Bilateral (2006): 47.1; Paris Club (2006): 12.8
- Section IV — After MDRI assistance and bilateral debt relief beyond HIPC (selected years)
  - 2006: NPV of total debt (2+5): 426.8; NPV of total debt after full delivery 3/: 154.2
  - 2007: NPV of total debt: 165.3; NPV of outstanding debt: 137.6
  - 2016: NPV of total debt: 384.0; NPV of outstanding debt: 91.8
  - 2026: NPV of total debt: 601.9; NPV of outstanding debt: 46.9
  - Multilateral (2006): 333.4; Multilateral after MDRI (2007): 97.8; IDA after MDRI (2006 onward series shown): 25.2, 26.0, 26.6, 27.3, 27.6, 27.6, 27.6, 27.7, 27.8, 27.8, 29.6, 26.7, 21.5, 37.9, 25.6
  - IMF after MDRI (selected): 15.8 (2006), 2.5 (2007), 0.0 thereafter in the series shown
- Memorandum trends and scenario context:
  - The tables present multi-scenario projections showing the effect of traditional debt relief, enhanced HIPC, additional bilateral relief, and MDRI on NPV of total and outstanding external public and publicly guaranteed debt over 2006–2026.

*Sources: The Gambian authorities; Bank-Fund staff estimates; OECD and IMF, International Financial Statistics.*

### 5. NPV of new borrowin

### _cr08109 - 5. NPV of new borrowin

### Projections: Total debt service (selected series and scenarios)
- I. Total debt service (annual): 32.8, 33.9, 34.6, 35.3, 34.0, 36.4, 38.4, 41.3, 43.3, 42.5, 50.1, 57.0, 37.3, 49.7
- I. After traditional debt-relief mechanisms 1/: 32.4, 33.5, 33.6, 33.6, 31.7, 31.4, 30.5, 30.3, 30.0, 26.9, 23.0, 20.2, 31.4, 24.1
  - Multilateral component (selected): 22.2, 23.5, 23.8, 24.1, 22.9, 22.8, 22.2, 22.3, 22.2, 21.3, 21.7, 19.8, 22.7, 21.4
  - Official bilateral component (selected): 10.2, 10.0, 9.8, 9.5, 8.8, 8.6, 8.3, 8.0, 7.8, 5.6, 1.3, 0.4, 8.7, 2.7
- II. Total debt service (alternative series): 31.9, 20.2, 21.0, 22.2, 21.4, 24.0, 28.6, 33.4, 35.6, 38.3, 49.4, 57.4, 27.6, 48.3
- II. After enhanced HIPC assistance: 31.4, 19.7, 19.9, 20.5, 19.1, 19.0, 20.6, 22.3, 22.3, 22.7, 22.3, 20.5, 21.8, 22.7
  - Multilateral after enhanced HIPC (selected): 21.1, 14.7, 15.0, 15.5, 14.1, 14.2, 16.0, 17.8, 17.9, 19.7, 21.5, 20.4, 16.6, 21.2
  - Official bilateral after enhanced HIPC (selected): 10.3, 5.0, 4.9, 4.9, 4.9, 4.8, 4.7, 4.5, 4.4, 3.0, 0.7, 0.1, 5.1, 1.5
- III. Total debt service (after bilateral debt relief beyond HIPC 2/): 31.9, 20.2, 21.0, 22.2, 21.4, 24.0, 28.6, 33.4, 35.6, 38.3, 49.4, 57.4, 27.6, 48.3
- IV. Total debt service (baseline shown further): 30.5, 11.3, 11.9, 12.7, 13.8, 16.2, 20.0, 22.7, 24.8, 24.8, 34.3, 43.0, 18.9, 33.5
- IV. After MDRI and bilateral debt relief beyond HIPC 2/: 30.1, 10.8, 10.9, 11.0, 11.5, 11.2, 12.0, 11.7, 11.4, 9.2, 7.2, 6.1, 13.0, 7.9

Notes on projections:
- Debt-service components are disaggregated by creditor groups (Multilateral, IDA, IMF, African Development Bank Group, Others, Official bilateral, Paris Club, Other official bilateral and commercial).
- All series are presented as given in the source without smoothing or rounding.

### Memorandum items: New debt and nominal HIPC relief (selected)
- NPV of debt (mem. item total): 165.3, 195.7, 233.1, 267.0, 293.9, 315.5, 333.7, 350.0, 365.7, 384.0, 402.9, 443.7, 486.6, 532.6, 578.8, 601.9, 290.4, 500.0
- Of which: new debt (NPV): 27.7, 64.2, 105.3, 143.4, 175.1, 201.5, 225.6, 247.9, 269.8, 292.2, 315.6, 366.1, 419.2, 473.0, 527.6, 555.0, 175.3, 433.5
- Debt service (mem. item): 30.5, 11.3, 11.9, 12.7, 13.8, 16.2, 20.0, 22.7, 24.8, 24.8, 25.9, 28.4, 31.7, 34.3, 38.9, 41.1, 18.9, 32.5
- Of which: debt service on new debt: 0.5, 0.5, 1.0, 1.7, 2.3, 5.0, 7.9, 11.0, 13.3, 15.6, 27.1, 36.8, 5.9, 25.6
- Nominal HIPC relief under the enhanced HIPC initiative (annual series): 1.0, 13.7, 13.6, 13.1, 12.6, 12.4, 9.9, 8.0, 7.7, 4.2, 0.8, -0.4, 9.6, 1.4

### External debt indicators (selected ratios and levels)
- After traditional debt relief mechanisms 2/:
  - NPV of debt-to-GDP ratio (selected): 83.4, 67.8, 58.4, 57.0, 55.4, 53.1, 50.6, 48.7, 46.2, 43.8, 41.8, 39.8, 33.0, 26.2, 52.3, 32.5
  - NPV of debt-to-exports ratio 3/ 4/ (selected): 306.9, 299.1, 291.7, 294.4, 289.1, 281.1, 270.8, 258.0, 244.0, 229.7, 218.0, 206.6, 166.0, 125.6, 267.6, 163.5
  - Debt service-to-exports ratio (selected): 21.2, 20.4, 19.4, 18.7, 16.9, 16.9, 16.6, 16.6, 16.2, 14.9, 14.1, 11.6, 9.1, 17.8, 11.4
- After enhanced HIPC assistance:
  - NPV of debt-to-GDP ratio (selected): 84.2, 53.6, 47.9, 48.5, 48.6, 47.7, 46.5, 45.5, 43.8, 42.1, 40.4, 38.7, 32.5, 26.0, 46.5, 32.0
  - NPV of debt-to-exports ratio 3/ 4/ (selected): 310.0, 236.4, 239.6, 250.6, 253.5, 252.7, 249.1, 241.4, 231.3, 220.5, 210.7, 200.8, 163.9, 124.7, 238.6, 161.0
  - NPV of debt-to-exports ratio (existing debt only) 3/ 4/ (selected): 310.0, 217.6, 199.2, 187.4, 172.9, 160.5, 149.1, 136.8, 124.3, 112.3, 101.5, 91.0, 55.4, 26.6, 156.2, 54.8
  - Debt service-to-exports ratio (selected): 20.6, 12.1, 11.7, 11.7, 10.6, 11.2, 12.3, 13.4, 13.3, 13.4, 13.0, 11.2, 9.1, 13.0, 11.0
- After MDRI and bilateral debt relief beyond HIPC:
  - NPV of debt-to-GDP ratio (selected): 84.2, 25.5, 24.7, 27.1, 28.7, 29.2, 29.2, 29.2, 28.6, 28.0, 27.5, 27.0, 25.0, 22.2, 27.8, 24.7
  - NPV of debt-to-exports ratio 3/ 4/ (selected): 310.0, 112.5, 123.3, 139.8, 150.0, 154.9, 156.4, 154.6, 151.1, 146.7, 143.6, 140.2, 125.9, 106.4, 143.3, 123.9
  - Debt service-to-exports ratio (selected): 19.7, 6.8, 6.7, 6.7, 6.8, 7.5, 8.6, 9.1, 9.3, 8.7, 8.4, 7.6, 6.7, 9.0, 7.5

Memorandum items (levels in millions of U.S. dollars):
- NPV of debt after enhanced HIPC assistance (selected): 426.8, 347.4, 380.5, 417.8, 451.3, 479.5, 502.3, 521.0, 535.8, 549.8, 563.5, 577.0, 633.2, 705.2, 474.9, 641.0
  - Of which: existing debt only (selected): 426.8, 319.7, 316.3, 312.4, 307.9, 304.4, 300.8, 295.3, 287.8, 280.0, 271.3, 261.4, 214.0, 150.2, 299.6, 207.4
- GDP (selected): 506.7, 648.4, 793.8, 861.4, 929.4, 1,005.1, 1,079.8, 1,144.4, 1,222.9, 1,306.8, 1,396.5, 1,492.3, 1,946.1, 2,712.1, 1,038.8, 2,048.6
- Exports of goods and services (selected): 155.0, 154.9, 166.5, 178.8, 188.8, 201.6, 214.6, 231.3, 248.9, 267.7, 285.6, 308.8, 415.6, 610.2, 213.9, 442.9
- Government Revenue (selected): 107.4, 136.7, 164.9, 175.0, 187.1, 199.3, 213.6, 226.7, 242.7, 259.8, 278.0, 297.6, 390.7, 549.0, 208.4, 412.0

### Sensitivity analysis (selected baseline and alternative scenarios)
- Baseline scenario (selected):
  - NPV of debt-to-revenue ratio (series): 120.9, 118.7, 133.2, 142.7, 147.5, 147.7, 147.2, 144.2, 140.8, 138.1, 135.4, 130.1, 124.5, 119.0, 112.8, 109.6, 138.1, 123.0
  - NPV of debt-to-exports ratio (series): 112.5, 123.3, 139.8, 150.0, 154.9, 156.4, 154.6, 151.1, 146.7, 143.6, 140.2, 133.2, 125.9, 118.6, 110.6, 106.4, 143.3, 123.9
  - Debt service-to-exports ratio (series): 19.7, 6.8, 6.7, 6.7, 6.8, 7.5, 8.6, 9.1, 9.3, 8.7, 8.4, 7.9, 7.6, 7.1, 6.9, 6.7, 9.0, 7.5
- Alternative scenario I (lower expenditure and lower growth) — selected outcomes:
  - NPV of debt-to-revenue ratio (series): 120.9, 119.7, 135.3, 146.0, 151.9, 153.2, 153.7, 151.7, 149.2, 147.3, 145.5, 141.8, 137.7, 133.5, 128.5, 125.9, 142.9, 136.3
  - NPV of debt-to-exports ratio (series): 112.5, 124.3, 143.6, 157.9, 167.3, 173.3, 175.6, 176.1, 175.3, 176.0, 176.3, 176.2, 175.2, 173.6, 170.2, 168.0, 158.2, 173.9
  - Debt service-to-exports ratio (series): 19.7, 6.9, 7.0, 7.3, 7.6, 8.6, 10.1, 10.9, 11.3, 10.9, 10.8, 10.7, 10.9, 10.6, 10.9, 10.9, 10.0, 10.7
- Alternative scenario II (lower concessionality on external debt) — selected outcomes:
  - NPV of debt-to-revenue ratio (series): 120.9, 126.7, 149.4, 165.5, 175.1, 178.9, 181.9, 181.9, 181.1, 180.8, 180.3, 178.7, 176.1, 172.9, 168.6, 166.1, 164.2, 174.6
  - NPV of debt-to-exports ratio (series): 112.5, 131.5, 156.8, 173.9, 183.9, 189.5, 191.1, 190.6, 188.7, 188.0, 186.7, 183.0, 178.1, 172.3, 165.2, 161.2, 170.6, 175.7
  - Debt service-to-exports ratio (series): 19.7, 6.8, 7.1, 7.9, 8.6, 8.6, 9.0, 9.8, 10.5, 10.5, 10.7, 11.0, 10.9, 10.5, 10.4, 10.3, 9.8, 10.7

Memorandum items in sensitivity analysis (selected):
- NPV of debt (scenario II mem. item): 165.3, 208.9, 261.3, 309.6, 348.9, 382.1, 412.5, 441.4, 470.4, 502.8, 536.6, 609.5, 688.1, 774.0, 864.6, 911.8, 350.3, 715.4
- Of which: new debt (scenario II mem. item): 27.7, 77.3, 133.6, 186.0, 230.1, 268.1, 304.5, 339.4, 374.4, 411.1, 449.2, 531.9, 620.7, 714.4, 813.4, 864.9, 235.2, 649.0
- Debt service (scenario II mem. item): 30.5, 11.3, 12.7, 14.9, 17.3, 18.5, 20.7, 24.3, 28.2, 29.9, 33.2, 39.4, 45.3, 50.8, 58.6, 62.7, 20.8, 47.0
- Of which: debt service on new debt (scenario II mem. item): 0.5, 0.5, 1.8, 3.9, 5.8, 7.4, 8.7, 12.6, 16.8, 20.6, 24.0, 30.0, 36.4, 43.6, 51.6, 55.9, 7.9, 38.9

### Creditor participation and HIPC/MDRI delivery (selected summaries)
- Total multilateral assistance (listed): 49.2 (in NPV terms), representing 73.8 percent of total assistance (table aggregates).
- Total bilateral and commercial (listed): 17.4 (in NPV terms), representing 26.2 percent of total assistance.
- TOTAL assistance (NPV terms): 66.6; 100.0 percent of assistance.
- Paris Club delivery modalities described country-by-country (table of Paris Club creditors provided with coverage percentages and flow/stock modality notes).
- IDA/IMF/AfDB/etc. delivery notes:
  - IDA: 22.3 (33.4 percent of total assistance) — interim assistance equivalent to a 50 percent reduction on The Gambia's debt service to IDA; remaining assistance delivered via 50 percent debt service reduction on IDA loans as of end-2000.
  - IMF: 2.3 (3.4 percent of total assistance) — assistance delivered from PRGF-HIPC Trust; IMF assistance represents an average annual reduction of 13 percent in debt service over 2001-09.

### IDA and IMF delivery specifics (selected tables)
- Table 17 (Delivery of IDA Assistance under Enhanced HIPC Initiative and the MDRI):
  - Debt service before HIPC Assistance (series 2001-annual averages): 3.9, 3.9, 4.2, 4.7, 4.9, 5.2, 6.9, 7.1, 8.3, 8.8, 9.5, 9.8, 10.0, 10.2, 10.2, 10.1, 10.1, 10.2, 11.1, 11.0 (with average 4.5 for 2001-06 and 7.6 for 2007-45)
  - IDA HIPC assistance 2/ (series): 1.9, 2.0, 2.1, 2.4, 0.7, 0.0, 0.0, 2.9, 3.0, 3.2, 3.3, 3.3, 3.4, 3.5, 3.5, 0.8, 0.0, 0.0, 0.0, 0.0 (mem. averages: 1.5 and 0.7)
  - Debt service after HIPC assistance (series): 1.9, 2.0, 2.1, 2.4, 4.2, 5.2, 6.9, 4.2, 5.3, 5.5, 6.1, 6.5, 6.6, 6.7, 6.7, 9.4, 10.1, 10.2, 11.1, 11.0 (averages: 3.0 and 6.9)
- Table 18 (Delivery of IMF Assistance under the HIPC Initiative and the MDRI):
  - HIPC-eligible debt service due on IMF obligations (annual series shown in SDRs and converted; selected totals): 0.4, 0.5, 0.3, 0.3, 1.0, 1.7, 2.3, 2.3, 0.0, 2.3, 1.6 (with supporting breakdowns of principal and interest)
  - Delivery schedule and shares of assistance (flow-basis percentages) and delivery from MDRI-I Trust and HIPC Umbrella Account shown in table (selected delivery: from MDRI-I Trust 7.4; from HIPC Umbrella Account 2.0; completion point disbursement 1.8)

### Additional tabulated and figure-based material (referenced but not reproduced here)
- Tables and figures present full time series (2006-2026 and beyond) for:
  - External Stock of Debt in Net Present Value Terms/Exports and /Revenue under alternative relief assumptions (After traditional debt relief mechanisms; After Enhanced HIPC assistance; After MDRI and bilateral debt relief beyond HIPC).
  - Sensitivity analysis charts contrasting Base Line scenario, Alternative scenario I (Lower exports and growth), and Alternative scenario II (Lower concessionality on external debt) for NPV of Debt-to-Exports, NPV of Debt-to-Revenues, and Debt Service-to-Exports.
  - External Debt Structure pie charts for End-Dec 1999 and End-Dec 2006 showing shares of IDA, IMF, AfDB Group, Other Multilateral, Paris Club, Other Bilateral.

*Sources: The Gambian authorities; and Bank-Fund staff estimates and projections.*

### 1.      This debt sustainability analysis (DSA) updates the last DSA presented to the

### _cr08109 - 1.      This debt sustainability analysis (DSA) updates the last DSA presented to the

### Summary findings and risk assessment
- The update suggests that The Gambia is at high risk of remaining in debt distress even after receiving HIPC and MDRI relief.
- With full delivery of HIPC and MDRI assistance:
  - The NPV of external debt-to-export ratio declines significantly but remains above the policy-dependent external debt-burden threshold.
  - The NPV of debt-to-GDP ratio and all debt service indicators fall below their respective thresholds.
- Standard stress tests show vulnerability: debt stock indicators deteriorate significantly and exceed thresholds when subject to negative shocks.
- Large domestic debt stock at approximately 30 percent of GDP supports the assessment that the risk of debt distress remains high.

### I. Evolution of public external debt since HIPC Decision Point
- The Gambia reached the Decision Point under the Enhanced HIPC Initiative in December 2000. Boards approved debt relief worth US$66.6 million in NPV terms (assuming participation of all creditors and full delivery of traditional debt relief).
- At end-2006 (latest comprehensive data):
  - Stock of external public debt: US$676.7 million (133.5 percent of GDP).
  - Multilateral creditors: 84 percent of external public debt.
  - IDA share: 39 percent of total outstanding debt.
- Changes since end-1999 (HIPC decision point reference):
  - Nominal debt growth: US$232 million (approximately 50 percent, or 30 percentage points of GDP).
  - Most increase due to new disbursements from IDA, AfDB, other multilateral creditors and non-Paris Club creditors.
- Changes since end-2005:
  - Nominal debt increased by US$49 million (about 8 percent); majority due to new borrowing in 2006 and some previously unrecorded debt revealed by data reconciliation.
- Gross domestic debt: 32.2 percent of GDP at end-2006 (up 8 percentage points from level at decision point). Increase attributed to large extra-budgetary spending in 2001 and central bank’s sale of government debt between 2003 and 2005 to sterilize rebuild of international reserves.
- Text table 1 (selected figures):
  - Total (1999): 444.9 (US$ millions)
  - Total (2005): 628.2 (US$ millions)
  - Total (2006): 676.7 (US$ millions)
  - Multilateral (1999): 355.8; (2005): 525.2; (2006): 566.2 (US$ millions)
  - IDA (1999): 172.7; (2005): 254.9; (2006): 263.6 (US$ millions)
  - AfDB (1999): 119.3; (2005): 168.4; (2006): 174.5 (US$ millions)
  - IMF (1999): 11.3; (2005): 14.6; (2006): 17.8 (US$ millions)
  - Bilateral (1999): 89.2; (2005): 103.1; (2006): 110.6 (US$ millions)
  - Paris Club (1999): 29.8; (2005): 71.0; (2006): 15.6 (US$ millions)
  - Non-Paris Club (1999): 59.3; (2005): 87.1; (2006): 95.0 (US$ millions)
  - GDP (millions US dollars): 1999: 431.9; 2005: 461.3; 2006: 506.7
  - Nominal debt-to-GDP: 1999: 103.0; 2005: 136.2; 2006: 133.5

### II. Key macroeconomic assumptions (baseline)
- Baseline assumes continuation of recent prudent macroeconomic management and the country reaching HIPC-completion point at end-2007.
- Revisions relative to last DSA: real growth revised up through 2012; inflation projected somewhat higher; export growth over medium term more conservative.
- Drivers and expectations:
  - Robust near-term output growth due to large foreign direct investment and donor-sponsored projects; sustained medium-term growth from tourism, telecommunications, and agriculture.
  - Increased exports from tourism, groundnuts and other agricultural exports.
  - Further growth in imports through 2012 (lower than recent experience); current account deficits from large externally-financed investment projects decline over medium term.
  - Improved fiscal balance in medium term due to sustained revenue performance, fiscal discipline and lower debt service.
  - Increased external donor assistance (concessional loans and grants) over 2007-12, declining as share of GDP over medium term.
    - External borrowing expected to average 5.8 percent of GDP between 2007 and 2012 before declining to 2 percent by 2026.
    - New borrowing expected evenly divided between multilateral and bilateral creditors, with an average grant element of 45 percent.
    - External grants increased in 2007 and expected to average about 4 percent of GDP through 2012 before declining to about 1 percent by 2027.
- Text table 2 (period averages; selected):
  - Real GDP growth:
    - 1998-2000: 6.1
    - 2001-03: 3.1
    - 2004-06: 6.2
    - 1998-06: 5.2
    - 2007-12: 6.2
    - 2013-27: 5.0
  - Inflation: 1998-2000: 4.75; 2001-03: 4.0
  - Growth exports of goods and services:
    - 1998-2000: 1.1
    - 2001-03: -0.1
    - 2004-06: 11.6
    - 1998-06: 4.2
    - 2007-12: 5.6
    - 2013-27: 7.7
  - Non-interest current account (percent of GDP) 1/: 1998-2000: -1.5; 2001-03: -2.1; 2004-06: -9.0; 1998-06: -4.2; 2007-12: -10.1; 2013-27: -6.8
  - Overall fiscal balance (percent of GDP) 1/: 1998-2000: -2; 2001-03: -1.7
  - 1/ Including official transfers and grants.

### III. External debt sustainability
A. Baseline
- Under staff baseline, all but one NPV indicator will remain below corresponding thresholds once completion point is reached and HIPC/MDRI relief is delivered.
  - NPV of debt-to-GDP ratio falls to 26 percent at the beginning of projection period.
  - New borrowing for increased investment pushes NPV debt-to-GDP toward threshold through 2012 before declining as investment levels off and growth is sustained.
  - NPV of debt-to-revenue and debt service ratios fall considerably beneath thresholds and remain at comfortable levels throughout projection period.
- Policy-dependent debt-burden thresholds for The Gambia (CPIA = “poor performer”):
  - NPV of debt-to-GDP: 30 percent
  - NPV of debt-to-exports: 100 percent
  - NPV of debt-to-revenues: 200 percent
  - Debt service–to-exports: 15 percent
  - Debt service-to-revenues: 25 percent
- NPV of debt-to-exports:
  - Expected to decline to 108 percent in 2007 following full impact of HIPC and MDRI (still above 100 percent threshold).
  - Increases through 2012 due to new borrowing and stays above threshold for a protracted period; gradually falls below threshold over medium term due to sustained growth in tourism, re-export services, and agricultural exports.
- Box A2 — alternative measures:
  - Official statistics likely understate reexports and remittances:
    - Re-exports are major component of exports; staff estimate re-exports as fraction of imports, adding a mark-up for re-export earnings.
    - Diaspora remittances possibly about 10 percent of GDP (DSA empirical analysis excludes remittances).
  - Two alternative scenarios illustrated:
    - (i) service exports revised upward by assuming re-exports of 50 percent of imports rather than 30 percent currently estimated;
    - (ii) remittances added to baseline goods and nonfactor service earnings.
  - Both alternatives drive NPV of debt-to-exports beneath threshold in 2007, though breaching persists due to new borrowing through 2010 before medium-term improvement; alternatives improve outlook but do not eliminate high risk of remaining in debt distress.
- Note: Outstanding debt at end-2007 before completion point estimated at NPV US$439 million. Following completion point:
  - HIPC assistance reduces NPV of existing debt by US$92 million.
  - MDRI results in additional US$182.1 million reduction.

B. Alternative scenarios and stress tests
- Alternative scenarios show external debt indicators are vulnerable to substantial deterioration under adverse external developments or if new borrowing is on less favorable terms.
- “Extreme shock” case reflects combined negative shock to all variables based on historical performance and if borrowing occurs on less favorable terms.
  - Less favorable terms scenario highlights importance of borrowing on highly concessional terms.
  - In this scenario interest rate on new borrowing is 2 percentage points higher than baseline, grace and maturity unchanged, and implies a lower grant element of 25 percent on new borrowing (versus 45 percent in baseline).
- Key stress-test findings:
  - NPV of debt-to-GDP and debt-to-exports deteriorate significantly above respective thresholds under adverse shocks or lower grant element.
  - Debt-to-revenue ratio deteriorates similarly.
  - Exchange rate depreciation stress: a one-time 30 percent depreciation results in debt-to-GDP breaching 30 percent threshold for much of projection period—illustrates importance of recent exchange rate appreciation on baseline debt-to-GDP ratio. If appreciation not permanent, debt-to-GDP will rise above indicative threshold in near term despite HIPC and MDRI relief.

### IV. Public debt sustainability
A. Baseline
- Domestic debt projected path:
  - Domestic debt expected to fall from 29.6 percent of GDP at end-2007 to 10.4 percent of GDP in 2012 and to 9.1 percent of GDP in 2027, reflecting sustained good fiscal performance.
  - Tax administration reforms expected to help maintain revenues around 21 percent of GDP.
  - Relatively tight fiscal policy programmed for medium term helps bring domestic interest rates close to single digits levels.
  - Over longer term, lower debt service (from drop in external debt after relief and lower interest rates on domestic debt) provides space to steadily increase basic primary expenditures and partially offset downward trend in externally-financed projects.
- NPV of public debt:
  - Projected to decline from about 54.9 percent of GDP in 2007 to 38.9 percent in 2012 and to 30.6 percent in 2027.
  - As ratio of domestic revenues, NPV of public debt projected to fall from about 247 percent in 2007 to 138 percent at end of projection period.

B. Alternative scenarios and stress tests
- Stress tests show public debt would not decline significantly under some adverse shocks.
  - Example: under permanently lower output growth rate (4.3 percent instead of 5 percent), NPV of total debt-to-GDP ratio would decline from 54 percent in 2007 to 50 percent in 2027, as opposed to declining to 31 percent under the baseline scenario.

### V. Conclusion
- Despite HIPC and MDRI relief and improvements under the baseline, The Gambia remains at high risk of remaining in debt distress due to:
  - NPV of external debt-to-exports remaining above threshold for a protracted period under baseline;
  - Vulnerability to adverse shocks and to borrowing on less favorable terms;
  - Large domestic debt stock near 30 percent of GDP.
- Alternative measurements that account for reexports and remittances improve debt sustainability metrics but do not eliminate the assessment of high risk of remaining in debt distress.

*IMF/World Bank staff joint DSA update as presented in the country report.*

### 13. It is the staffs’ view that The Gambia is at high risk of debt distress based on

### _cr08109 - 13. It is the staffs’ view that The Gambia is at high risk of debt distress based on

### Staff assessment
- The staff’s view: The Gambia is at high risk of debt distress based on external debt burden indicators.
- The debt situation: "has become more precarious since the last DSA due to the new borrowing."
- Conditional risks: Failure to achieve sustained export diversification and growth would offset gains from debt management.

### Policy recommendations
- Develop a comprehensive public debt management strategy as a priority.
- Maintain high levels of concessionality in new borrowing.
- Carefully control the volume of new borrowing "for the foreseeable future."
- Sustain efforts to promote exports and stimulate growth to complement debt-management measures.

### Key debt indicators and projections (selected reported figures)
- External debt (nominal): series showing values including 101.8, 102.5, 103.0, 110.6, 117.3, 143.0, 157.3, 146.5, 134.7, 133.6, 49.9, 47.5, 50.7, 52.7, 52.6, 51.7, 45.6, 33.9 (as reported in the table extract).
- Identified net debt-creating flows (sample annual values): -4.0, 0.1, 2.1, 0.9, 15.7, 8.3, -26.8, -17.3, -15.2, -5.7, 2.2, 1.7, 0.8, -0.2, -0.3, 0.0, 1.9.
- Non-interest current account deficit (selected values): -0.3, 1.0, 1.5, 2.0, 1.4, 1.6, 3.4, 4.1, 13.2, 9.8, 3.8, 4.3, 9.6, 11.8, 10.6, 9.4, 8.4, 7.9, 9.6, 6.6, 7.3, 6.8.
- Deficit in balance of goods and services (selected values): 5.7, 7.4, 5.8, 8.2, 5.2, 8.4, 7.5, 21.0, 22.7, 17.3, 19.1, 20.3, 16.6, 15.0, 13.0, 11.1, 9.0, 10.2.
- Exports (percent series sample): 27.0, 30.1, 28.0, 26.8, 25.8, 30.4, 31.8, 31.7, 28.4, 30.6, 23.9, 21.0, 20.8, 20.3, 20.1, 19.9, 20.7, 22.8.
- Imports (percent series sample): 32.7, 37.5, 33.8, 35.0, 31.0, 38.8, 39.3, 52.7, 51.1, 47.9, 43.0, 41.3, 37.3, 35.4, 33.0, 30.9, 29.7, 33.0.
- Net FDI (negative = inflow) (selected values): -3.8, -3.7, -0.1, -3.8, -2.4, -2.5, -3.6, -14.1, -13.3, -14.6, -7.8, 5.5, -9.2, -7.4, -6.4, -6.2, -6.0, -5.9, -4.8, -4.0, -4.6.
- NPV of external debt (selected values): 31.1, 25.5, 24.8, 27.1, 28.7, 29.2, 29.2, 26.9, 21.6.
- NPV of external debt in percent of exports (selected values): 101.7, 106.8, 118.5, 130.6, 141.5, 145.7, 146.9, 130.2, 94.7.
- NPV of PPG external debt in percent of government revenues (selected values): 146.8, 120.9, 119.6, 133.5, 142.8, 147.4, 147.6, 135.0, 106.3.
- Debt service-to-exports ratio (in percent) (selected values): 18.0, 16.0, 19.6, 16.8, 23.9, 11.1, 17.7, 17.7, 16.5, 18.5, 7.0, 7.0, 6.8, 6.9, 7.6, 8.3, 6.4.
- Total gross financing need (millions of U.S. dollars) (selected values): 14.5, 13.9, 23.6, 11.7, -17.6, 22.8, 1.2, 27.3, 47.2, 48.1, 42.5, 37.1, 37.4, 53.2, 136.8.
- Non-interest current account deficit that stabilizes debt ratio (selected values): 0.3, 0.9, -5.7, -5.3, -24.1, -10.9, 14.9, 25.0, 11.0, 93.2, 14.2, 7.4, 7.4, 8.4, 8.8, 7.9, 8.4.

### Scenario and stress-test results (highlights from tables and figures)
- Baseline and alternative scenarios reported for NPV of debt-to-GDP, debt-to-exports, and debt-to-revenue ratios for 2007-2027, including HIPC and MDRI.
- Alternative scenarios include:
  - A1. Key variables at their historical averages in 2008-27.
  - A2. New public sector loans on less favorable terms in 2008-27.
- Bound tests include shocks such as:
  - B1. Real GDP growth at historical average minus one standard deviation in 2008-09.
  - B2. Export value growth at historical average minus one standard deviation in 2008-09.
  - B3. US dollar GDP deflator at historical average minus one standard deviation in 2008-09.
  - B4. Net non-debt creating flows at historical average minus one standard deviation in 2008-09.
  - B5. Combination of B1-B4 using one-half standard deviation shocks.
  - B6. One-time 30 percent nominal depreciation relative to the baseline in 2008.
- Stress outcomes (samples from Table 2):
  - NPV of debt-to-GDP ratio projections under baseline and stress show values such as 107, 118, 131, 142, 146, 147, 130, 95 (as tabulated).
  - NPV of debt-to-exports and debt-to-revenue ratios, and debt service-to-exports and debt service-to-revenue ratios are reported under baseline, alternative scenarios, and bound tests, with higher ratios under less favorable financing and most extreme shocks.
- Memorandum item: "Grant element assumed on residual financing (i.e., financing required above baseline) 6/ 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45" (as reported).

### Macroeconomic assumptions and financing parameters (selected)
- Real GDP growth (in percent) (selected projections and assumptions): 6.5, 6.4, 5.5, 5.8, -3.2, 6.9, 7.0, 5.1, 6.5, 5.2, 3.2, 7.0, 6.5, 6.5, 6.0, 6.0, 5.5, 6.2, 5.0, 5.0, 5.0.
- GDP deflator in US dollar terms (change in percent) (selected): -3.6, -3.5, -7.7, -6.1, -8.6, -10.7, 6.1, 9.5, 3.1, -2.4, 7.0, 19.6, 15.0, 1.9, 1.8, 2.0, 1.8, 7.0, 1.8, 1.8, 1.7.
- Effective interest rate (percent) (sample series): 1.4, 1.4, 1.1, 1.1, 0.9, 1.1, 1.5, 1.5, 1.4, 1.3, 0.2, 1.2, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.8, 0.8, 0.8.
- Growth of exports of G&S (US dollar terms, in percent) (selected): 14.5, -4.2, -7.0, -4.3, 4.3, -0.3, 13.3, 2.9, 18.4, 4.2, 9.2, -0.1, 7.5, 7.4, 5.6, 6.8, 6.5, 5.6, 8.1, 8.17, 8. (table contains formatting breaks).
- Growth of imports of G&S (US dollar terms, in percent) (selected): 17.6, -7.4, 0.9, -12.0, 10.8, -3.3, 52.3, 11.6, 2.9, 8.1, 19.1, 14.9, 17.5, -1.9, 2.3, 1.0, 0.7, 5.7, 7.38, 8.1, 7.3.
- Grant element of new public sector borrowing (in percent) (selected values): 42.6, 43.2, 43.3, 44.1, 45.0, 45.0, 43.9, 45.0, 45.0, 45.0.
- Aid flows (in millions of US dollars) (selected series): 0.0, 19.7, 22.4, 18.5, 25.5, 33.3, 51.4, 35.1, 50.6, 41.5, 44.2, 60.8, 88.0, 98.9, 94.8, 84.2, 75.0, 76.0, 87.0.
  - o/w Grants (selected): 5.5, 8.2, 4.8, 10.5, 16.5, 12.4, 18.2, 7.7, 0.3, 24.2, 31.6, 36.2, 36.1, 35.4, 33.8, 29.8, 20.5.
  - o/w Concessional loans (selected): 0.0, 14.2, 32.3, 33.8, 43.9, 36.5, 56.5, 62.8, 58.7, 48.8, 41.2, 46.2, 66.5.
- Grant-equivalent financing (in percent of GDP) (selected): 6.9, 7.4, 7.7, 6.8, 5.7, 4.8, 3.4, 1.7, 2.9.
- Grant-equivalent financing (in percent of external financing) (selected): 61.8, 62.2, 62.9, 64.7, 68.1, 69.8, 66.6, 58.0, 64.3.

*Source: Staff simulations and projections as reported in the provided material.*

### 1.      In March 2007, the government’s debt management capacity and institutions

### _cr08109 - 1.      In March 2007, the government’s debt management capacity and institutions

### Background and context
- In March 2007, the government’s debt management capacity and institutions was assessed by a World Bank team using the Debt Management Performance Assessment (DeMPA) tool.
- The assessment revealed that, while there are a number of strengths in the government’s debt management operations, many components of debt management need significant improvement.
- The government has requested IMF and World Bank technical assistance to improve its debt management capacity and institutions.
- The government has undertaken to prepare a comprehensive debt management strategy by end-July 2008; the strategy will inter alia set limits on the amount and terms of new borrowing.
- Through ongoing Country Assistance Strategy discussions, the World Bank is discussing with the Government possibilities for providing support for capacity building of debt management.
- With support from the IMF, the government intends to strengthen the capacity of the Central Bank of The Gambia (CBG) in the areas of debt management, monetary policy framework and operations, and banking supervision.

### A. The Institutional Framework for Debt Management
- Legal and institutional roles:
  - The Government Budget Management and Accountability Act (2004) designates the Secretary of State for Finance and Economic Affairs as the only authority entitled to borrow from legal entities, or to enter into a guarantee or indemnity with third parties.
  - The Public Debt Unit (PDU) of the Department of State for Finance and Economic Affairs (DOSFEA) is responsible for managing, recording and reporting on external debt.
  - The CBG borrows in the domestic market by issuing Treasury Bills and is responsible for making payments to external creditors upon receipt of instructions from DOSFEA.
- Identified institutional gaps and improvements:
  - The government could strengthen the framework by introducing debt management objectives, strict requirements for mandatory reporting to the National Assembly and regular external audits, and by strengthening co-ordination of debt management with macroeconomic policies.
  - There appear to be little formal co-ordination between the government’s fiscal policy, debt management and the monetary policy authority (CBG).
  - There are no documented procedures for external borrowing.
  - Formal analysis of the relative costs and risks associated with alternative financing options is not undertaken.
  - Authorities have received training in the preparation of debt sustainability analyses (DSA) and plan to prepare DSAs on a regular basis.
  - The quality of cash flow forecasts is expected to improve with the implementation of the new integrated financial management information system (IFMIS).

### B. Assessment of Debt Management — Findings on operations, data, and capacity
- Debt data recording and systems:
  - The PDU records, monitors and settles external and guaranteed debt, and validates transactions on an ad-hoc basis.
  - Procedures for validating the completeness, consistency and accuracy of the debt records need to be strengthened.
  - The recording of debt relief and debt restructuring needs to be incorporated in the debt management system.
  - Weak archiving practices make data reconciliation cumbersome.
  - The quality of loan administration and payments is expected to improve with the introduction of the IFMIS.
  - The CBG records government domestic debt and reconciles Treasury bill stocks and flows with primary dealers regularly.
  - No government entity is responsible for recording total nonfinancial public debt (this consists of the central government (budgetary, extra-budgetary and social security funds), the state and local governments, and the public corporations).
  - The CBG maintains an up-to-date registry system of all holders of government securities and, with technical assistance from the Commonwealth Secretariat, plans to upgrade its debt management system with electronic registry and auction features.
- Reporting and audit:
  - Reporting of central government external and domestic debt meets statutory reporting requirements.
  - It is recommended that a Debt Statistical Bulletin or equivalent covering domestic and external central government debt and loan guarantees be prepared and published annually.
  - Procedures for securing and controlling access to sensitive debt information should be strengthened.
  - While external audits subject to third-party confirmation are conducted semi-annually on domestic debt activities, no internal, external or independent audit related to external debt has been carried in the past five years.
- Staff capacity and organizational issues:
  - PDU staff are limited and few are trained in the interpretation of loan agreements and standard debt recording and reporting procedures.
  - The PDU lacks analytical capabilities, although the government has plans to establish such capacity.
  - Practical training has been provided by the Commonwealth Secretariat, WAIFEM and Debt Relief International, but high turnover has led to loss of institutional memory and continuity.
  - In early 2007 a serious auto accident took the life of one staff and incapacitated two others, including the PDU head, for an extended period; there was no contingency as the government lacks a business continuity and disaster plan.

### Key recommendations and planned actions
- Develop a debt management strategy based on long-term debt management objectives set within the context of government’s fiscal policy and budget framework.
- Introduce debt management objectives, strict reporting requirements to the National Assembly, and regular external audits.
- Strengthen formal co-ordination between fiscal policy, debt management and monetary policy authorities (CBG).
- Establish documented procedures for external borrowing and undertake formal analysis of the costs and risks of alternative financing options.
- Prepare DSAs on a regular basis and improve cash flow forecasts through IFMIS implementation.
- Bolster debt data recording capacity, incorporate debt relief and restructuring records into the debt management system, and improve archiving practices.
- Publish an annual Debt Statistical Bulletin or equivalent covering domestic and external central government debt and loan guarantees.
- Strengthen procedures for securing and controlling access to sensitive debt information.
- Build PDU staff analytical capacity and reduce turnover; establish business continuity and disaster planning.

*Source: IMF staff report content unit titled "_cr08109 - 1.      In March 2007, the government’s debt management capacity and institutions"*

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