## Appendix I. Views of the Authorities (_cr1115)

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### I. Introduction and objectives
- Update of the full 2005 EPA, focusing on the period 2006–10.
- Update concentrates primarily on fiscal policy because fiscal adjustment is the cornerstone under the current ECF arrangement and was the area where slippages resurfaced in the second half of the arrangement.
- Objective of the EPA update: identify The Gambia’s policy challenges over the medium term and distill lessons for future Fund involvement.

### II. Assessment of recent Fund involvement and program design
- Background and program history
  - Engagement with the Fund since the mid 1980s through a series of Fund-supported programs.
  - Full ex-post assessment (EPA) in 2005 highlighted: lack of transparency, accountability, and governance; difficulties in containing government expenditure; limited economic management capacity.
  - 2005–06 SMP addressed some EPA recommendations; SMP performance broadly satisfactory and paved the way for an ECF arrangement approved February 2007.
  - ECF augmented by SDR 6.22 million (20 percent of quota) in early 2009 and extended by one year in February 2010.
- Program objectives
  - Central objective: bring about fiscal adjustment to lower real interest rates and create fiscal space for growth-promoting and poverty-reducing expenditures.
  - Fiscal discipline aimed to contain domestic borrowing requirement and reduce the domestic debt service burden.
  - Structural reforms focused on strengthening public financial management (PFM) to ensure effective use of aid and domestic resources and to avoid extra-budgetary expenditures.
- Program design
  - Quantitative performance criteria (PCs) on a cumulative flow basis starting end-December 2006 covering:
    - net domestic assets of the central bank,
    - the basic balance of the central government,
    - net usable international reserves,
    - external debt,
    - and arrears.
  - Indicative targets initially focused on domestic budget arrears and later complemented by the present value of new contracted external debt.
  - Adjustors to program targets were introduced over time.
  - Structural conditionality, including prior actions, was used extensively at program outset.

### III. Program performance — summary findings
- Key outcomes and observations
  - Program helped reach the HIPC completion point in 2007.
  - First six ECF reviews completed on schedule; all but the first review required waivers on quantitative or structural PCs.
  - Fiscal performance deteriorated over time; fourth and sixth reviews required waivers for the fiscal target; seventh review could not be completed on time because of renewed fiscal slippages.
  - Net usable international reserves (NIR) target was missed by a very narrow margin.
  - Authorities requested completion of the seventh review with waivers for two missed PCs and a re-phasing of the eighth review to sustain improved fiscal performance observed in the second half of 2010.
  - Reduction in public debt was lower than envisaged because the target on the cumulative basic fiscal balance was progressively eased during the second half of the program.
  - Real interest rates fell from about 16 percent in 2005 to just over 8 percent in 2009.
  - Interest payments declined from 50 percent of tax revenues in 2005 to just over 20 percent in 2010, reflecting HIPC/MDRI relief and a shortening of domestic debt maturity profile.
  - Authorities struggled to meet the target of 25 percent of revenues allocated to PRSP-expenditures; actual share hovered around 20 percent.

### IV. Macroeconomic performance (2005–10)
- Growth and inflation
  - Economic growth averaged close to 6 percent per year during 2005–09.
  - Real GDP grew by 5.6 percent in 2009; projected to grow by about the same rate in 2010.
  - Monetary policy effective in controlling inflation, which fell to single-digit levels but generally exceeded program projections.
- External sector and exchange rate
  - Current account deficit fluctuated around 14 percent of GDP, slightly above program projections.
  - Exchange rate stabilized around 26–28 dalasi per US dollar after appreciation pre-2007 HIPC completion and sharp depreciation thereafter.
  - Reserves buttressed by the SDR allocation, bringing reserve coverage above the CBG’s comfort level of 4½–5 months of imports.
  - CBG occasionally intervened to meet reserves target or alleviate exchange rate pressures.
- External shocks
  - 2007–08 food and fuel price shock reversed gradual reduction in the current account deficit.

### V. Poverty and social indicators
- Real per-capita GDP
  - Economic growth outpaced population growth since 2006, generating a cumulative gain in real per-capita GDP of 10 percent.
- Poverty and MDGs
  - Poverty rate fell modestly to 58 percent in 2008, well above the MDG target.
  - MDGs expected to be met primarily in education and health.
- Priority spending
  - Authorities adopted target that 25 percent of government revenues should be used for priority spending in PRSP II; actual priority spending accounted for about 20 percent of revenues in recent years.
- New strategy
  - A new Programme for Accelerated Growth and Employment (PAGE) expected to cover 2012–15.

### VI. Fiscal policy stance — key drivers of slippage and statutory debt limit
- SMP period
  - Customs revenue shortfalls from two-month closure of border with Senegal led to nonobservance of two fiscal targets for end-December 2005.
  - March 2006 cumulative targets met after revenue improvements; large expenditure overruns thereafter due to higher-than-budgeted outlays for the June 2006 African Union summit.
- ECF period
  - Basic balance targets met until June 2008; revenue higher than expected in early 2007 supported by strong activity and GAMCEL privatization proceeds.
  - 2008 revenue shortfalls from lower import tax revenues and absence of an appropriate petroleum pricing formula; nonobservance of end-September 2008 basic balance target and downward revision of 2009 targets.
  - 2009 expenditure overruns caused wide miss of basic balance target at sixth review; waiver required for end-September 2009. Causes included:
    - sharply higher capital spending financed mainly by domestic borrowing,
    - re-purchase of equity in previously privatized GAMCEL,
    - infrastructure spending in GRTS,
    - overruns on wages and allowances.
  - 2010 budget adopted with a near-zero floor on the basic balance to correct 2009 slippage.
  - Larger-than-anticipated rise in international oil prices not transmitted into controlled domestic fuel prices, and lower-than-expected corporate income taxes and taxes on international trade, led to revenue shortfalls and a missed basic balance target—postponing the seventh review.
  - Budget support envisaged but not forthcoming further complicated financing.
  - Policy response: limits on government borrowing from the central bank were put in place.
- Statutory Debt Limit (SDL)
  - SDL breached in mid-2008.
  - Temporary increase in SDL approved January 2009 retroactively raised limit from 10 to 20 percent of preceding year’s tax revenues and intended to be phased out in December 2009.
  - Higher SDL was also breached; original limit restored in August 2010.
  - With securitization of government borrowing from the CBG, the government restored compliance with the SDL.
- Fiscal pattern and program design issues
  - Fiscal stance exhibited significant volatility and frequent, substantial target revisions; continuous easing of the originally programmed fiscal path.
  - Basic balance target (including indicative targets for June and December) met only once since June 2008.
  - Basic balance tended to deteriorate immediately after program test dates, suggesting expenditure restraint often meant postponing expenditures.
  - Cumulative nature of basic balance target posed challenges.
  - Program could have addressed fuel pricing earlier and called for expanded budget coverage to reduce extra-budgetary spending risks.
- Conditions agreed to bring seventh review to the Board (broadly met):
  - (i) meet an adjusted fiscal target for end-September 2010 that would still achieve a small reduction in domestic debt;
  - (ii) implement an appropriate fuel pricing mechanism that allows for sufficient pass-through;
  - (iii) expand the coverage of the 2011 budget to reduce the risk of spending overruns.

### VII. Debt position and management
- Post-HIPC debt risk
  - Despite HIPC completion point in December 2007, The Gambia exited with a high risk of debt distress.
  - Reasons:
    - (i) Since the completion point The Gambia has borrowed about US$20 million net.
    - (ii) Continued weak export performance has adversely affected repayment capacity.
- Going-forward priorities
  - Pursue prudent debt management and enhance institutional capacity to carry debt.
  - Reverse recent increase in domestic debt.
  - Update the national debt strategy (finalized with delay in September 2009) regularly.
  - Boost exports through agricultural development toward higher-value crops (rice seeds and cashews).
  - Secure predictable donor funding to minimize recourse to domestic financing and engage more actively with donors.
- Policy suggestion
  - Consider partially and gradually replacing expensive domestic debt with less costly, largely concessional external debt, particularly if The Gambia lowers its risk classification on external debt distress.

### VIII. Public financial management (PFM) and structural reforms
- Achievements and progress
  - Introduction of the Integrated Financial Management Information System (IFMIS) in January 2007 (coverage still needs broadening).
  - Clearing backlog of unaudited government accounts up to 2006 (with delays); 2007 audited accounts to be submitted to the National Assembly in the first quarter of 2011.
  - June 2010 FAD TA mission recommendations are being implemented to strengthen budget preparation, introduce an MTEF and program budgeting.
- Remaining weaknesses
  - Budget preparation, commitment control, and cash management.
  - Partial implementation of a register of government expenditure commitments for externally financed projects (waiver required).
- Needs
  - Continued TA to overcome capacity constraints.
  - Donor support on procurement, audits, PFM systems, debt management, and institutional capacity building (World Bank, DfID, COMSEC, AfDB noted).

### IX. Tax administration and revenue mobilization
- Revenue performance and rebasing
  - Tax administration improved since establishment of the Gambia Revenue Authority (GRA) in 2006, but further steps needed.
  - Revenue performance volatility and GDP rebasing revealed low revenue levels: 13½ percent of GDP in 2009 compared to 18½ under the unadjusted GDP series.
- Specific issues and initiatives
  - Excise taxes not applied evenly across imports and domestically-produced goods and not enforced on domestic goods.
  - Inefficient nuisance taxes remain (e.g., earmarked environment tax on salaries and private practitioners’ tax).
  - Tax incentives undermining the tax base and complicating administration.
  - Ongoing preparation for introduction of VAT by 2013 (with continued FAD TA).
  - Authorities initiated assessing and collecting excise taxes in December 2010.

### X. Monetary policy, financial sector developments, and supervision
- Monetary performance
  - Monetary policy generally more accommodating than programmed; CBG brought inflation under control relative to earlier levels.
  - Broad and reserve money growth tended to exceed program targets, except in 2007 when CBG tightened money supply.
  - Monetary performance criteria met throughout the program except the end-March 2010 NIR floor, missed by a small margin.
  - Reserve money remains the monetary anchor; clarity needed on the monetary anchor under a potential successor arrangement.
- Banking sector developments
  - Rapid expansion in second half of EPA period; number of banks doubled to 14 since 2007.
  - Financial intermediation low: credit as a share of GDP about 17 percent.
  - Strong competition raised banks’ cost of funds, provisions, and staff remuneration in 2009–10, weakening earnings and credit quality due to adverse effects on tourism and real estate.
- Supervision and regulatory responses
  - Expansion and weakening conditions stretched CBG supervisory capacity.
  - Four IMF TA missions to strengthen banking supervision between 2005 and 2010.
  - Planned IT platform for electronic processing of regulatory returns and hiring of additional staff addressing resource constraints.
  - CBG mandated increase in statutory capital requirement, effective end-December 2010, to preserve solvency.
  - Capital requirements increased to GMD150 million and GMD200 million to be observed by December 2010 and December 2012, respectively.
  - Banking system incurred cumulative losses of GMD95 million in 2009; system expected to recoup some losses by end-2010.

### XI. Other structural reforms, private sector, and statistics
- Structural reform performance broadly satisfactory for non-fiscal items; most non-fiscal PCs met in time, some with delay.
- Delays and needs
  - Delays in issuance of audit reports on monetary program data at test dates; historical audited accounts submission to National Assembly remained problematic.
  - Credit Reference Bureau became operational in July 2009 after delays.
  - GDP rebasing implemented but continued need for TA to improve national accounts statistics.
- Private sector challenges
  - Promoting private sector investment and privatization of key public enterprises remains a challenge.
  - Large infrastructure investments (e.g., ACE fiber optic cable project) increase urgency to solicit private sector participation and secure funding.
  - Privatization of GAMCEL failed in 2009; revival important to ease budget pressures.

### XII. Structural conditionality, benchmarks, and technical assistance
- Structural conditionality under 2007–2010 ECF
  - Prior actions and structural benchmarks covered expenditure measures and arrears clearance, debt management, expenditure auditing and financial controls, fiscal transparency, central bank reforms, and economic statistics.
  - Examples of prior actions met include: verify mutual claims between government and NAWEC and draw timetable for settlement (06/30/2009); implement action plan to bring government borrowing from CBG in line with CBG Act within one year (12/31/2007); launch IFMIS (01/15/2007).
  - Several items experienced waivers, delays, descriptor changes, or conversion between benchmark categories.
- Selected structural performance criteria (delays and outcomes)
  - Prepare a national debt strategy after receiving TA — not met at R3; delayed; subsequently met by 09/30/2009 (R4).
  - Submit audited accounts for 2000–04 to national assembly — not met.
  - Launch IFMIS — met.
  - Revise fuel pricing formula — introduced at R7 (12/31/2010).
- Technical assistance (TA) missions (selected)
  - Jun. 2010: TA on strengthening budget preparation and prioritization of PFM reforms.
  - Apr./May 2010 and Mar./Apr. 2009: TA on tax policy and revenue administration in preparation for VAT introduction by January 2013.
  - Multiple DfID-funded missions (2006–2009) focused on national accounts rebasing using 2004 Economic Census.
  - Jan. 2010 and Feb. 2010: TA on monetary operations, liquidity forecasting, and monetary and financial statistics.
  - Several missions advising CBG on banking supervision, internal audit, and monetary operations (2005–2009).
- Structural benchmarks compliance pattern
  - Frequent "Met" outcomes, several "Met with delay", and some "Partially met".
  - Key data improvements prioritized: rebasing GDP series and improving national accounts, monetary and financial statistics, and balance of payments statistics.

### XIII. Authorities’ assessment and requests
- Authorities’ assessment of performance
  - Assessed recent performance as strong, highlighting:
    - stable environment and sustained high GDP growth averaging around 6 percent since 2006;
    - strong performance of mining, construction, financial services, transport, telecommunications and social sectors;
    - manageable fiscal deficits despite missed basic balance targets;
    - declining and moderate inflation and declining interest rates since 2005;
    - enabling environment for FDI and public-private partnerships;
    - relatively open trade policies and limited administrative barriers;
    - comfortable foreign exchange reserves (equivalent to 7 months of imports);
    - declining ratios of external debt to GDP and low external debt-service ratios;
    - substantial remittances and significant non-debt creating financial flows.
  - Risks and weaknesses highlighted:
    - small open economy with low domestic demand, narrow resource base, undiversified production and export base;
    - vulnerability to weather shocks;
    - high domestic interest rates;
    - low domestic savings and industrial activity;
    - employment heavily dependent on agriculture;
    - dependence on groundnuts and re-exports and vulnerability to neighboring countries’ growth and terms of trade shocks.
- Policy stance and preferences
  - MOF fully committed to achieving program targets but considered program implementation too rigid during global food, fuel, and financial crises and placed too much emphasis on the basic balance.
  - Authorities see merit in exploring other deficit measures (e.g., overall fiscal deficit as percent of GDP including grants).
  - Preference for more flexibility and more fiscal space at times when program aimed for a near-zero floor on the basic balance.
- Technical assistance requests
  - Continued Fund support requested for capacity building and TA in:
    - PFM reform implementation (introducing MTEF and program-based budgeting);
    - Implementation of VAT;
    - Statistical capacity building at GBOS.
- Monetary authority views
  - CBG broadly agrees with EPA on banking system and monetary policy.
  - CBG intervenes occasionally in foreign exchange market to meet reserves target or alleviate exchange rate pressures.
  - CBG views exchange rate as important macro stability indicator and is open to fine tuning the monetary anchor.
  - Working with WAMZ member countries under a Supervisory College for cross-border supervisory cooperation.

### XIV. Key statistics and fiscal/sector projections highlighted by authorities (selected figures)
- GDP growth: averaging around 6 percent since 2006; Program 2005–2010 annual percent change series: 5.0, 4.5, 7.0, 6.0, 6.0, 6.0.
- Inflation (period average): Program 2005–2010: 4.3, 4.0, 3.2, 3.5, 3.2, 3.0.
- Total revenue and grants (percent of GDP): Program 2005–2010: 22.0, 23.6, 29.9, 26.3, 25.8, 26.5.
- Tax revenue (percent of GDP): Program 2005–2010: 17.7, 18.9, 18.6, 18.6, 18.6, 18.8.
- Total expenditure and net lending (percent of GDP): Program 2005–2010: 28.1, 28.2, 28.4, 27.4, 26.5, 25.3.
- Interest Expense (percent of GDP): Program 2005–2010: 8.7, 6.7, 5.3, 4.2, 3.4, 3.1.
- Capital expenditure (percent of GDP): Program 2005–2010: 9.0, 10.1, 12.0, 11.2, 10.5, 9.5.
- Basic Balance (percent of GDP): Program 2005–2010: 0.3, 2.8, 3.1, 2.4, 2.6, 3.2.
- Current account balance, including official transfers (percent of GDP): Program 2005–2010: -13.1, -11.8, -12.9, -11.7, -10.7, -10.4.
- Gross international reserves (months of imports): Program 2005–2010: 4.4, 4.5, 4.1, 4.3, 4.6, 4.6.
- Gross international reserves (millions of U.S. dollars): Program 2005–2010: 93.7, 99.2, 109.5, 120.5, 133.0, 139.0.
- Domestic debt (percent of GDP): Program 2005–2010: 34.6, 33.3, 30.3, 26.4, 23.1, 19.0.
- External debt (millions of U.S. dollars): First Actual and Final Actual series include values such as First Actual 2005: 614.7 and Final Actual 2005: 628.2.

### XV. Lessons learned and medium-term strategy
- Continued close Fund engagement recommended to:
  - (i) put fiscal policy on a sound footing;
  - (ii) further advance the structural reform agenda;
  - (iii) catalyze donor assistance.
- Resident representation
  - In hindsight, appointing a full-time resident representative earlier may have enhanced program ownership and guidance; a full-time resident representative has been stationed recently in Banjul.
- Policy priorities and specific recommendations
  - Fiscal consolidation to reduce heavy debt burden; focus on strengthening debt management to reduce domestic interest bill.
  - Consider partially and gradually replacing expensive domestic debt with less costly, largely concessional external debt if risk classification improves.
  - Secure financing for ACE project to minimize risks to 2011 budget.
  - Enhance revenue mobilization:
    - Swift introduction of an automatic fuel pricing mechanism to ensure pass-through of international prices.
    - Apply and enforce excise tax regime evenly.
    - Ease reporting requirements for SMEs; eliminate alternative turnover-based tax; abolish nuisance taxes that cost more to administer than they raise.
    - Exploit full potential of property taxation to fund local governments.
    - Limit tax incentives and exemptions.
    - Prioritize introduction of the VAT.
  - Strengthen expenditure control under a new arrangement:
    - Broaden budget coverage and consolidate expenditure oversight of line ministries and spending agencies, including the Office of the President.
    - Enhance budget planning, prioritization, costing, and aid coordination by line ministries.
    - Strengthen commitment control of externally-financed capital spending.
    - Continue IFMIS roll-out to all line ministries and spending agencies; make IFMIS fully implemented and functional by 2013.
    - Continue MTEF and program budgeting reforms to improve budget preparation.
  - Program design suggestions:
    - Consider setting targets for each fiscal year (in line with the budget cycle) rather than cumulative from program start.
    - Consider setting a PC on net domestic financing to link directly to domestic debt accumulation.
    - Consider an indicative target on tax revenue collection to focus policy on the revenue side.
  - Continue parsimonious use of structural conditionality, focusing on macro-critical reforms; combine tax reform measures with PFM measures.
  - Continue efforts in the financial sector to address risks identified during the 2010 Article IV consultation.
  - Broaden dialogue with the highest political level to enhance ownership and push difficult reforms (e.g., fuel pricing, reviving privatization).

*IMF staff compilation based on Gambian authorities’ submissions and IMF program documents contained in the Appendix I text.*

### Appendix I. Views of the Authorities ...................................................................................

### Appendix I. Views of the Authorities

### I. Introduction
- The document updates the full 2005 EPA, focusing on the period 2006–10.
- The update concentrates primarily on fiscal policy because fiscal adjustment is the cornerstone under the current ECF arrangement and was the area where slippages resurfaced in the second half of the arrangement.
- Objective of the EPA update: identify The Gambia’s policy challenges over the medium term and distill lessons for future Fund involvement.

### II. Assessment of Recent Fund Involvement

#### A. Background and program history
- The Gambia has been engaged with the Fund since the mid 1980s through a series of Fund-supported programs (Table 1).
- A full ex-post assessment (EPA) was conducted in 2005 that cited: lack of transparency, accountability, and governance; difficulties in containing government expenditure; and limited economic management capacity as key factors for mixed/weak program performance.
- The 2005–06 SMP addressed some EPA recommendations; performance under the SMP was broadly satisfactory and paved the way for an ECF arrangement approved by the Board in February 2007.
- The ECF was augmented by SDR 6.22 million (20 percent of quota) in early 2009 and extended by one year in February 2010.

#### B. Program objectives
- Central objective of the ECF: bring about fiscal adjustment to lower real interest rates and create fiscal space for growth-promoting and poverty-reducing expenditures.
- Fiscal discipline aimed to contain domestic borrowing requirement and reduce the domestic debt service burden.
- Supporting structural reforms focused on strengthening public financial management (PFM) to ensure effective use of aid and domestic resources and to avoid extra-budgetary expenditures.

#### C. Program design
- Quantitative performance criteria (PCs) set on a cumulative flow basis starting end-December 2006 and covered:
  - net domestic assets of the central bank,
  - the basic balance of the central government,
  - net usable international reserves,
  - external debt,
  - and arrears.
- Indicative targets initially focused on domestic budget arrears and were complemented at the time of the second review by the present value of new contracted external debt.
- Adjustors to program targets were introduced over time.
- Structural conditionality, including prior actions, was used extensively at program outset (Figure 1).

#### D. Program performance — summary findings
- The program helped reach the HIPC completion point in 2007.
- Performance characteristics:
  - First six ECF reviews completed on schedule; all but the first review required waivers on quantitative or structural PCs.
  - Fiscal performance deteriorated over time; fourth and sixth reviews required waivers for the fiscal target; seventh review could not be completed on time because of renewed fiscal slippages.
  - Net usable international reserves (NIR) target was missed by a very narrow margin.
  - Authorities requested completion of the seventh review with waivers for two missed PCs and a re-phasing of the eighth review to sustain improved fiscal performance observed in the second half of 2010.
- The reduction in public debt was lower than envisaged because the target on the cumulative basic fiscal balance was progressively eased during the second half of the program.
- Real interest rates fell from about 16 percent in 2005 to just over 8 percent in 2009.
- Interest payments declined from 50 percent of tax revenues in 2005 to just over 20 percent in 2010, reflecting HIPC/MDRI relief and a shortening of domestic debt maturity profile.
- Authorities struggled to meet the target of 25 percent of revenues allocated to PRSP-expenditures; actual share hovered around 20 percent.

### III. Macroeconomic Performance (2005–10)

- Economic growth:
  - Averaged close to 6 percent per year during 2005–09, broadly in line with program projections.
  - Real GDP grew by 5.6 percent in 2009 despite global demand shock (supported by strong agricultural output growth).
  - Real GDP projected to grow by about the same rate in 2010.
- Inflation and monetary policy:
  - Monetary policy effective in controlling inflation, which has come down to single-digit levels, albeit generally exceeding program projections.
- Current account and exchange rate:
  - The current account deficit fluctuated around 14 percent of GDP, slightly above program projections.
  - Exchange rate: after appreciation in run-up to HIPC completion in late 2007 and sharp depreciation thereafter, stabilized around 26–28 dalasi per US dollar.
  - Reserves were buttressed by the SDR allocation, bringing reserve coverage above the CBG’s comfort level of 4½–5 months of imports.
  - The CBG occasionally intervened to meet the reserves target or alleviate exchange rate pressures.
- Fuel and food price shock:
  - The 2007–08 food and fuel price shock reversed the gradual reduction in the current account deficit.

### IV. Poverty and Social Indicators
- Economic growth outpaced population growth since 2006, generating a cumulative gain in real per-capita GDP of 10 percent.
- Poverty rate fell modestly to 58 percent in 2008, well above the MDG target.
- MDGs expected to be met are primarily in education and health (Appendix Table 2).
- The authorities adopted a target that 25 percent of government revenues should be used for priority spending in PRSP II; actual priority spending accounted for about 20 percent of revenues in recent years.
- A new Programme for Accelerated Growth and Employment (PAGE) is expected to cover 2012–15.

### V. Fiscal Policy Stance — Key developments and drivers of slippage
- Under the SMP:
  - Shortfalls in customs revenues due to a two-month closure of the border with Senegal led to nonobservance of two fiscal targets for end-December 2005 (basic balance and net domestic borrowing).
  - Cumulative March 2006 targets were met after revenue improvements; large expenditure overruns occurred thereafter because of higher-than-budgeted outlays for the June 2006 African Union summit.
- Under the ECF:
  - Basic balance targets met until June 2008; revenue was higher than expected in early 2007 supported by strong activity and proceeds from GAMCEL privatization.
  - Revenue shortfalls in 2008 were due to lower import tax revenues and lower revenues from petroleum products absent an appropriate pricing formula; led to nonobservance of the fiscal basic balance target for end-September 2008 and downward revision of 2009 targets.
  - Expenditure overruns in 2009 caused a wide miss of the fiscal basic balance target at the sixth review, requiring a waiver for end-September 2009. Causes included:
    - sharply higher capital spending, mainly financed by domestic borrowing,
    - re-purchase of equity in previously privatized GAMCEL,
    - infrastructure spending in GRTS,
    - overruns on wages and allowances.
  - 2010 budget adopted with a near-zero floor on the basic balance to correct for 2009 slippage.
  - A larger-than-anticipated rise in international oil prices not transmitted into controlled domestic fuel prices, and lower-than-expected corporate income taxes and taxes on international trade, led to revenue shortfalls and a missed basic balance target—postponing the seventh review.
  - Budget support envisaged but not forthcoming further complicated financing of expenditures.
- Policy response:
  - Limits on government borrowing from the central bank were put in place (text ends here).

*IMF staff compilation based on Gambian authorities’ submissions and IMF program documents contained in the Appendix I text.*

### introduction of the CBG Act in 2005.

### _cr1115 - introduction of the CBG Act in 2005.

### Statutory Debt Limit (SDL) and government borrowing
- The Statutory Debt Limit (SDL) was breached in mid-2008.
- A temporary increase in the SDL, approved in January 2009, retroactively raised the limit from 10 to 20 percent of preceding year’s tax revenues and was intended to be phased out in December 2009.
- The higher SDL was also breached; the original limit was only restored in August 2010.
- With the securitization of government borrowing from the CBG, the government restored compliance with the SDL.

### Fiscal performance and program implementation
- The fiscal stance exhibited significant volatility and frequent, substantial target revisions, resulting in a continuous easing of the originally programmed fiscal path.
- The basic balance target (including indicative targets for June and December) was met only once since June 2008.
- The basic balance tended to deteriorate immediately after program test dates, suggesting expenditure restraint often meant postponing expenditures.
- Program design issues:
  - Cumulative nature of the basic balance target posed challenges for the authorities.
  - The program could have addressed fuel pricing earlier and called for expanded budget coverage to reduce extra-budgetary spending risks.
- To bring the seventh review to the Board, authorities agreed to:
  - (i) meet an adjusted fiscal target for end-September 2010 that would still achieve a small reduction in domestic debt;
  - (ii) implement an appropriate fuel pricing mechanism that allows for sufficient pass-through; and
  - (iii) expand the coverage of the 2011 budget to reduce the risk of spending overruns.
- These conditions were broadly met as highlighted in the staff report for the seventh review.

### External shocks and program ownership
- Poor performance in the second half of the ECF was partly due to unforeseen external shocks (the food and fuel price shock and the global financial crisis).
- There is concern that full ownership of the program at all levels of government may have eroded over time.
- Continued high turnover of senior officials was noted as a structural weakness in economic governance.

### Debt position and management
- Despite reaching the HIPC completion point in December 2007, The Gambia exited with a high risk of debt distress.
- Reasons for continued high risk:
  - (i) Since the completion point The Gambia has borrowed about US$20 million net.
  - (ii) Continued weak export performance has adversely affected repayment capacity.
- Going forward priorities:
  - Pursue prudent debt management and enhance institutional capacity to carry debt.
  - Reverse the recent increase in domestic debt.
  - Update the national debt strategy (finalized with delay in September 2009) regularly.
  - Boost exports through agricultural development toward higher-value crops (rice seeds and cashews).
  - Secure predictable donor funding to minimize recourse to domestic financing and engage more actively with donors.
- Policy suggestion: There may be merit in partially and gradually replacing expensive domestic debt with less costly, largely concessional external debt, particularly if The Gambia lowers its risk classification on external debt distress.

### Fiscal structural reforms and public financial management (PFM)
- Structural reform focus primarily on PFM; important strides made with FAD technical assistance and other development partners, though implementation has been slower than expected.
- Achievements:
  - Introduction of the Integrated Financial Management Information System (IFMIS) in January 2007 (coverage still needs broadening).
  - Clearing backlog of unaudited government accounts up to 2006 (with delays); 2007 audited accounts to be submitted to the National Assembly in the first quarter of 2011.
- Remaining weaknesses:
  - Budget preparation, commitment control, and cash management.
  - Partial implementation of a register of government expenditure commitments for externally financed projects (waiver required).
- Progress and needs:
  - June 2010 FAD TA mission recommendations are being implemented to strengthen budget preparation, introduce an MTEF and program budgeting; continued TA needed to overcome capacity constraints.
  - Donor support on procurement, audits, PFM systems, debt management, and institutional capacity building cited (World Bank, DfID, COMSEC, AfDB).

### Tax administration and revenue mobilization
- Tax administration improved since the establishment of the Gambia Revenue Authority (GRA) in 2006, but further steps are needed.
- Revenue performance volatility and GDP rebasing revealed low revenue levels:
  - 13½ percent of GDP in 2009 compared to 18½ under the unadjusted GDP series.
- Specific tax issues:
  - Excise taxes not applied evenly across imports and domestically-produced goods and not enforced on domestic goods.
  - Inefficient nuisance taxes remain, e.g., earmarked environment tax on salaries and private practitioners’ tax.
  - Tax incentives undermining the tax base and complicating administration.
- Positive initiative: Ongoing preparation for the introduction of VAT by 2013 (with continued FAD TA).

### Monetary policy and financial sector developments
- Monetary policy generally more accommodating than programmed; CBG managed to bring inflation under control relative to earlier levels.
- Broad and reserve money growth tended to exceed program targets, except in 2007 when CBG tightened money supply.
- Monetary performance criteria were met throughout the program, except the end-March 2010 NIR floor, missed by a small margin.
- Reserve money remains the monetary anchor; clarity needed on the monetary anchor under a potential successor arrangement given a fairly stable dalasi/US$ rate and shortfalls in reserves.
- Banking sector:
  - Rapid expansion in the second half of the EPA period; number of banks doubled to 14 since 2007.
  - Financial intermediation remains low: credit as a share of GDP remains low at about 17 percent.
  - Strong competition raised banks’ cost of funds, provisions, and staff remuneration in 2009–10, weakening earnings and credit quality due to adverse effects on tourism and real estate.
- Supervision:
  - Expansion and weakening conditions stretched CBG supervisory capacity.
  - Four IMF TA missions to strengthen banking supervision between 2005 and 2010.
  - Planned IT platform for electronic processing of regulatory returns and hiring of additional staff are addressing resource constraints.
  - CBG mandated an increase in the statutory capital requirement, effective at end-December 2010, to preserve solvency.

### Other structural reforms and private sector challenges
- Non-fiscal structural reform performance broadly satisfactory; most non-fiscal performance criteria met in time, some with delay.
- Delays: issuance of audit reports on monetary program data at test dates; establishment of Credit Reference Bureau, which became operational in July 2009.
- Historical audited accounts submission to the National Assembly remained problematic.
- GDP rebasing implemented but continued need for TA to improve national accounts statistics.
- Promoting private sector investment and privatization of key public enterprises remains a challenge:
  - Large infrastructure investments (e.g., ACE fiber optic cable project) increase urgency to solicit private sector participation and secure funding.
  - Privatization of GAMCEL failed in 2009; revival important to ease budget pressures.

### Collaboration with the World Bank and donors
- Fund–Bank cooperation and dialogue on PFM reforms remained close with clear division of labor:
  - Bank leading project to make IFMIS reporting tool fully operational.
  - Fund leading projects to introduce MTEF and program budgeting.
- Progress has been gradual due to implementation delays and limited IFMIS comprehensiveness; communication between institutions improved.

### Lessons learned and medium-term strategy
- Continued close Fund engagement recommended to:
  - (i) put fiscal policy on a sound footing;
  - (ii) further advance the structural reform agenda; and
  - (iii) catalyze donor assistance.
- In hindsight, appointing a full-time resident representative earlier may have enhanced program ownership and guidance; a full-time resident representative has been stationed recently in Banjul.

### Specific policy recommendations
- Fiscal consolidation to reduce heavy debt burden; focus on strengthening debt management to reduce domestic interest bill.
- Consider partially and gradually replacing expensive domestic debt with less costly, largely concessional external debt if risk classification improves.
- Secure financing for the ACE project to minimize risks to the 2011 budget.
- Enhance revenue mobilization more forcefully:
  - Swift introduction of an automatic fuel pricing mechanism to ensure pass-through of international prices.
  - Apply and enforce excise tax regime evenly.
  - Ease reporting requirements for SMEs; eliminate the alternative turnover-based tax; abolish nuisance taxes that cost more to administer than they raise.
  - Exploit full potential of property taxation to fund local governments.
  - Limit tax incentives and exemptions to avoid eroding the tax base.
  - Prioritize introduction of the VAT.
- Strengthen expenditure control under a new arrangement:
  - Broaden budget coverage and consolidate expenditure oversight of line ministries and spending agencies, including the Office of the President.
  - Enhance budget planning, prioritization, costing, and aid coordination by line ministries.
  - Strengthen commitment control of externally-financed capital spending.
  - Continue IFMIS roll-out to all line ministries and spending agencies; make IFMIS fully implemented and functional by 2013.
  - Continue MTEF and program budgeting reforms to improve budget preparation.
- Program design suggestions:
  - Consider setting targets for each fiscal year (in line with the budget cycle) rather than cumulative from program start.
  - Consider setting a performance criterion on net domestic financing to link directly to domestic debt accumulation.
  - Consider an indicative target on tax revenue collection to focus policy on the revenue side.
- Continue parsimonious use of structural conditionality, focusing on macro-critical reforms; combine tax reform measures with PFM measures.
- Continue efforts in the financial sector to address risks identified during the 2010 Article IV consultation.
- Broaden dialogue with the highest political level to enhance ownership and push difficult reforms (e.g., fuel pricing, reviving privatization).

*Source: _cr1115 - introduction of the CBG Act in 2005.*

### APPENDIX I. VIEWS OF THE AUTHORITIES

### APPENDIX I. VIEWS OF THE AUTHORITIES

### Background
- Authorities assessed recent performance as strong, highlighting:
  - stable environment and sustained high GDP growth averaging around 6 percent since 2006;
  - strong performance of the mining, construction, financial services, transport, telecommunications and social sectors;
  - manageable fiscal deficits, even though basic balance targets were missed under the program;
  - declining and moderate inflation and declining interest rates since 2005;
  - enabling environment for FDI and public-private partnerships;
  - relatively open trade policies and limited administrative barriers;
  - comfortable foreign exchange reserves (equivalent to 7 months of imports);
  - declining ratios of external debt to GDP and low external debt-service ratios;
  - substantial inflows of remittances in recent years as well as significant inflows of non-debt creating financial flows.
- Authorities also highlighted prevailing risks and weaknesses:
  - The Gambia is a small open economy with low domestic demand, a narrow resource base, and an undiversified production and export base;
  - growth remains vulnerable to unfavorable weather shocks;
  - high domestic interest rates continue to put a toll on economic activity;
  - domestic savings and industrial activity remain low;
  - employment heavily depends on agriculture;
  - the economy is heavily dependent on exports of groundnuts and re-exports and is therefore subject to growth volatility in neighboring countries;
  - growth, government revenue, and the balance of payments remain vulnerable to terms of trade shocks.

### Assessment of EPA findings
- Authorities agreed broadly with the EPA report, noting program contributions to:
  - restoring compliance with rules on government borrowing from the CBG following securitization arrangements between the government and the CBG;
  - allowing for CBG bridge financing in the absence of programmed EU budget support;
  - paving the way for significant TA in tax policy and administration, PFM, and liquidity forecasting.

### Fiscal policy
- Commitment and concerns:
  - Ministry of Finance (MOF) is fully committed to achieving program targets.
  - Program implementation provided too little flexibility during the global food and fuel, and financial crises, and placed too much emphasis on the basic balance.
  - Authorities would have preferred more flexibility and more fiscal space, particularly when the program aimed for a near-zero floor on the basic balance.
  - They consider merit in exploring other measures of fiscal deficits, for example the overall fiscal deficit as percent of GDP including grants.
  - Setting PCs on a cumulative flow basis appears static and does not take into account changes in the structure of the economy.
- Revenue administration:
  - Authorities highlighted enormous tax administrative challenges regarding the informal sector.
  - They initiated assessing and collecting excise taxes in December 2010.
- Donor coordination:
  - Authorities see a need for greater donor coordination and predictable donor funding in support of The Gambia’s development agenda.
  - They identify further TA in the area of PFM and the budget as particularly important.

### Monetary and financial sector policies
- Monetary policy and exchange rate:
  - The CBG broadly agrees with the EPA on the banking system and monetary policy.
  - CBG occasionally intervenes in the foreign exchange market to meet the reserves target under the ECF or to alleviate pressures on the exchange rate.
  - Given The Gambia is a small open economy, the CBG considers the exchange rate an important indicator of overall macroeconomic stability and a determinant of inflation expectations.
  - CBG believes the monetary targeting framework has served The Gambia well but is open to fine tuning the monetary anchor.
- Financial sector stability:
  - Capital requirements increased to GMD150 million and GMD200 million to be observed by December 2010 and December 2012, respectively.
  - Banking system incurred cumulative losses of GMD95 million in 2009; system expected to recoup some of the losses by end-2010 reflecting the improved macroeconomic environment.
  - Strong capital and stable net income give banks a high risk bearing capacity and the resource base to efficiently lend to the productive sectors of the economy.
  - The Gambia is working with other WAMZ member countries under a Supervisory College to enhance cross-border cooperation and information sharing among supervisors.

### Technical assistance requests
- Authorities request continued Fund support for capacity building and TA in:
  - PFM reform implementation in the area of introducing the MTEF and program based budgeting;
  - Implementation of the VAT;
  - Statistical capacity building at The Gambia Bureau of Statistics (GBOS).

### Key statistics and outcomes highlighted by the authorities
- Macroeconomic and fiscal outcomes and projections (selected figures cited in the Appendix Table 1 and text):
  - GDP growth: averaging around 6 percent since 2006; programed and actual series show values such as Program 2005–2010: 5.0, 4.5, 7.0, 6.0, 6.0, 6.0 (annual percent change).
  - Inflation (period average): Program 2005–2010: 4.3, 4.0, 3.2, 3.5, 3.2, 3.0.
  - Total revenue and grants (percent of GDP): Program 2005–2010: 22.0, 23.6, 29.9, 26.3, 25.8, 26.5.
  - Tax revenue (percent of GDP): Program 2005–2010: 17.7, 18.9, 18.6, 18.6, 18.6, 18.8.
  - Total expenditure and net lending (percent of GDP): Program 2005–2010: 28.1, 28.2, 28.4, 27.4, 26.5, 25.3.
  - Interest Expense (percent of GDP): Program 2005–2010: 8.7, 6.7, 5.3, 4.2, 3.4, 3.1.
  - Capital expenditure (percent of GDP): Program 2005–2010: 9.0, 10.1, 12.0, 11.2, 10.5, 9.5.
  - Basic Balance (percent of GDP): Program 2005–2010: 0.3, 2.8, 3.1, 2.4, 2.6, 3.2.
  - Current account balance, including official transfers (percent of GDP): Program 2005–2010: -13.1, -11.8, -12.9, -11.7, -10.7, -10.4.
  - Gross international reserves (months of imports): Program 2005–2010: 4.4, 4.5, 4.1, 4.3, 4.6, 4.6.
  - Gross international reserves (millions of U.S. dollars): Program 2005–2010: 93.7, 99.2, 109.5, 120.5, 133.0, 139.0.
  - External debt (millions of U.S. dollars): First Actual and Final Actual series show values such as First Actual 2005: 614.7 and Final Actual 2005: 628.2 (see Appendix Table 1 for full series).
  - Domestic debt (percent of GDP): Program 2005–2010: 34.6, 33.3, 30.3, 26.4, 23.1, 19.0.

*Appendix I. Views of the Authorities*

### Appendix Table 1. The Gambia: Projections and Outcomes under the SMP and ECF, 2005-2010 (concluded)

### _cr1115 - Appendix Table 1. The Gambia: Projections and Outcomes under the SMP and ECF, 2005-2010 (concluded)

### Millennium Development Goals indicators (selected values, 1990–2008)
- Goal 1: Eradicate extreme poverty and hunger
  - Employment to population ratio, 15+, total (%) : 73 73 72 72
  - Employment to population ratio, ages 15-24, total (%) : 59 57 55 55
  - Income share held by lowest 20% : 4.0 4.8 ..
  - Malnutrition prevalence, weight for age (% of children under 5) : .. 15 16 ..
  - Poverty headcount ratio at national poverty line (% of population) : .. 64 58 .. 61
  - Prevalence of undernourishment (% of population) : 20 31 29 29 ..
- Goal 2: Achieve universal primary education
  - Primary completion rate, total (% of relevant age group) : .. 42 79 73 79
  - School enrollment, primary (% net) : .. 72 74 69
- Goal 3: Promote gender equality and empower women
  - Proportion of seats held by women in national parliaments (%) : 8 .. 21 39
  - Ratio of girls to boys in primary and secondary education (%) : .. 82 .. 102
  - Share of women employed in the nonagricultural sector (% of total nonagricultural employment) : 21 ........
- Goal 4: Reduce child mortality
  - Immunization, measles (% of children ages 12-23 months) : 86 91 92 89 91
  - Mortality rate, infant (per 1,000 live births) : 104 102 93 83 80
  - Mortality rate, under-5 (per 1,000) : 153 149 131 112 106
- Goal 5: Improve maternal health
  - Adolescent fertility rate (births per 1,000 women ages 15-19) : .. 118 94 88
  - Births attended by skilled health staff (% of total) : 44 .. 55 57 ..
  - Contraceptive prevalence (% of women ages 15-49) : 12 .. 10 ....
  - Maternal mortality ratio (modeled estimate, per 100,000 live births) : ...... 690 ..
  - Pregnant women receiving prenatal care (%) : .. 91 98 ..
- Goal 6: Combat HIV/AIDS, malaria, and other diseases
  - Children with fever receiving antimalarial drugs (% of children under age 5 with fever) : .. 55 63 ..
  - Incidence of tuberculosis (per 100,000 people) : 185 204 225 253 263
  - Female adults with HIV (% of population ages 15+ with HIV) : .. 5 9 .. 60
  - Prevalence of HIV, total (% of population ages 15-49) : .. 0.3 0.8 0.9 ..
  - Tuberculosis case detection rate (all forms) : 63 .. 55 54
- Goal 7: Ensure environmental sustainability
  - Annual freshwater withdrawals, total (% of internal resources) : ........ 1.0
  - CO2 emissions (kg per PPP $ of GDP) : 0.3 0.2 0.2 0.2 ..
  - CO2 emissions (metric tons per capita) : 0.2 0.2 0.2 0.2 ..
  - Forest area (% of land area) : 44 45 46 47 ..
  - Improved sanitation facilities (% of population with access) : .. 47 49 52 ..
  - Improved water source (% of population with access) : .. 85 86 86 ..
  - Marine protected areas (% of total surface area) : ........ 1.5
  - Terrestrial protected areas (% of total surface area) : ........ 2.0
- Goal 8: Develop a global partnership for development
  - Net ODA received per capita (current US$) : 109 42 38 47 57
  - Total debt service (% of exports of goods, services and income) : 22.2 15.5 .. 11.8 ..
  - Internet users (per 100 people) : 0.0 0.0 0.9 5.2 6.9
  - Mobile cellular subscriptions (per 100 people) : 0.0 0.1 0.4 25.7 70.2
  - Telephone lines (per 100 people) : 0.7 1.8 2.6 2.9 2.9
- Other
  - Fertility rate, total (births per woman) : 6.1 5.9 5.6 5.2 5.1
  - GNI per capita, Atlas method (current US$) : 310 350 330 290 400
  - GNI, Atlas method (current bil US$) : 0.3 0.4 0.4 0.5 0.7
  - Gross capital formation (% of GDP) : 22.3 20.2 17.4 28.4 25.1
  - Life expectancy at birth, total (years) : 51 53 54 55 56
  - Population, total (millions) : 0.9 1.1 1.3 1.6 1.7
  - Trade (% of GDP) : 131 122 105 97 79

*Source: World Development Indicators database.*

---

### Quantitative performance criteria and indicative targets (selected lines)
- Performance criteria (stock and flow measures, end-period and test dates)
  - Net domestic borrowing by the central government (ceiling) : values listed in table (e.g., 359.7, 420.3, 450.7, 220.2)
  - Net domestic assets of the central bank (ceiling) : sample values include 303.0, 59.1, -78.8, 9.2, -76.4, -44.3, -194.3, -74.1, -168.6, 38.7, 41.2, -121.3, -87.8, -926.1, 504.5, 603.2, -48.8, 759.0, 964.6, 767.3, 756.1, 983.2
  - Adjusted for privatization proceeds and budget support : selected values include 262.5, -270.4, 361.2, -334.5, 94.2, -365.9, 905.3, 530.4, 984.9, 292.3, 764.5, 695.9, 1010.0, 1167.0
  - Basic balance (floor) : sample values include -178.6, -193.5, -108.4, -133.7, -73.3, -107.0, 45.0, -16.4, 88.6, 205.0, 292.9, 446.0, 537.1, 806.3, 659.4, 628.5, 760.6, 793.4, 781.1, 616.9, 772.7, 204.6, 266.8, 141.0
  - Adjusted for budget support : examples include 659.4, 613.6, 628.5, 760.6, 793.4, 781.1, 616.9, 681.3, 772.7, 444.6, 204.6, 116.2, 266.8, -2.9
  - New external payments arrears of the central government (ceiling) : 0.0 across listed periods
  - Net usable international reserves (floor) : sample values include 55.4, 5.5, 8.5, 11.3, 10.6, 13.3, 15.7, 15.8, 20.9, 94.9, 9.2, 13.4, 9.7, 42.3, 12.3, 15.8, 27.0, -2.9, -5.9, 50.7, 47.3, 47.0
  - Adjusted for privatization proceeds and budget support (reserves) : examples include 23.3, 32.0, 26.8, 27.5, 20.5, 32.7, -9.6, 0.9, 32.2, 48.1, 50.8, 50.6, 35.7, 32.0
  - New nonconcessional debt contracted or guaranteed by the government with original maturity of more than one year (ceiling) : 5.9, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0
  - Outstanding stock of external public debt with original maturity of one year or less (ceiling) : 0.0 across listed periods
- Indicative targets
  - Domestic budgetary arrears : series includes values such as 561.5, -258.2, -448.5, -421.0, -585.0, -440.2, -369.5, -486.5, -441.6, -561.5, -494.3, -531.3
  - Net present value of new contracted external debt (cumulative ceiling) : selected values include 4.2, 0.0, 20.7, 31.7, 40.1, 36.7, 45.6, 46.3
- Memorandum items
  - Program exchange rate (D/$) : 22.0 (listed repeatedly)
  - Privatization proceeds ($ millions) : sample values include 17.5, 28.5, 35.0, 28.5, 28.9, 29.9
  - Privatization proceeds (D millions at program exchange rate) : sample values include 385.0, 627.0, 770.0, 634.7, 657.8
  - Expenditure from privatization receipts (D millions) : 70.0, 158.6, 179.0, 180.1, 548.6, 612.0, 657.8
  - Budget support grants ($ million) : 0.0, 7.0, 11.5, 11.6, 23.2
  - Budget support grants (D millions at program exchange rate) : 0.0, 154.0, 253.0, 255.8, 509.7
  - SDR allocation (SDR millions) : 0.0, 24.7
  - SDR allocation (dalasi at program exchange rate) : 0.0, 859.2

Notes (as presented in source):
- MDRI debt relief took place in the fourth quarter of 2007.
- March 2009, September 2009, March 2010, and September 2010 are performance criteria; December 2007, December 2008, June 2009, December 2009, June 2010, and December 2010 are indicative targets.
- Adjustments specified for privatization proceeds, budget support, and external budget support with explicit dollar limits (e.g., cumulative maximum in of US$10 million in 2009 and 2010).
- Definitions and treatment of nonconcessional debt use OECD CIRRs and exclude IMF borrowing; excludes normal import-related credits.
- Actual domestic budgetary arrears revisions noted for December 2007, March 2008, and March 2009 (e.g., new arrears owed to NAWEC).
- Net present value cumulative from October 1, 2007.

*Source: Gambian authorities.*

---

### Structural benchmarks under the SMP (implementation status, deadlines)
- Strengthening internal controls and operational independence of the Central Bank of The Gambia (CBG)
  - Provide quarterly audit reports on selected accounts of the CBG: (1) 2005 Q4 report — End-February 2006 — Status: Met (with delay)
  - (2) 2006 Q1 report — End-May 2006 — Status: Met (with delay)
  - Provide audited financial statements for 2004, including auditors’ report and management letter — End-January 2006 — Met (with delay)
  - Strengthen controls in foreign reserves management at CBG, including separation of duties — End-March 2006 — Met
  - Formalize and implement accounting regulations and procedures (transactions review/approval, timely recording, supporting documentation, regular reconciliations) — End-December 2005 — Met
- Strengthening public financial management
  - Review all below-the-line accounts and develop guidelines for opening/closing such accounts — End-December 2005 — Met
  - Provide Fund staff one-month lag copies of monthly reports:
    - (1) flash reports on government expenditure and revenue — Starting with provision of October 2005 reports by end-November 2005 — (1) Met regularly from January 2006
    - (2) poverty-reducing expenditures in the GLF budget — Starting with provision of January 2006 reports by end-February 2006 — (2) Met
  - Reduce backlog of unaudited public accounts:
    - Submit restated accounts for 2000 to Auditor-General — End-December 2005 — Met
    - Submit accounts for 2001 to Auditor-General — End-March 2006 — Met
  - Additional submissions and actions recorded as Met (e.g., accounts for 2003; central register of capital expenditure commitments by July 15, 2008)
- Central bank operations and reforms
  - Prepare action plan to bring government borrowing from CBG in line with CBG Act — Met
- Economic statistics
  - Resubmit corrected monthly budget execution reports for July and August 2007 and complete reports for September and October 2007 — Met

---

### Structural conditionality under the 2007–2010 ECF Program — Prior actions (selected) and status
- Expenditure measures, including arrears clearance
  - Verify mutual claims between government and NAWEC and draw timetable for settlement — Target 06/30/2009 (R4) — Status: Met
- Debt management
  - Implement action plan to bring government borrowing from CBG in line with CBG Act within one year — Target 12/31/2007 (R1) — Status: Met
- Expenditure auditing, accounting, and financial controls (prior actions)
  - Establish comprehensive commitment control system — 04/30/2007 (R0) — Met
  - Submit accounts for 2004 to Auditor-General — 02/28/2007 (R0) — Met
  - Submit accounts for 2005 to Auditor-General — 07/31/2007 (R0) — Met
  - Establish central register of capital expenditure commitments in CP MACD — 04/30/2008 (R2) — Partially met (converted into prior action for completion of third review)
  - Submit accounts for 2006 to Auditor-General — 12/31/2007 (R1) — Met
  - Submit accounts for 2007 to Auditor-General — 09/30/2008 (R2) — Met (for R4)
- Fiscal transparency
  - Issue comprehensive monthly budget execution report (including commitments) with one-month lag, starting with April 2007 report — 05/31/2007 (R0) — Met (met for R1; subsequent test dates waived/modified and later met)
- Central bank operations and reforms
  - Implement segregation of duties in management of international reserves — 03/31/2007 (R0) — Met
  - Complete gap analysis and establish Action Plan for moving to IFRS — 12/31/2007 (R1) — Met
- Central bank auditing, transparency, and controls
  - Provide special audit reports on monetary program data at program test dates (September 2007, March 2007, end-March 2008) — various dates — Waived or met with delay; waivers granted in multiple cases
  - Prepare Pro-forma financial statements for 2007 based on IFRS and have reviewed by CBG external auditor — 09/30/2008 (R3) — Met
- Civil service and public employment reforms
  - Make operational the Central Project Management and Aid Coordination Directorate (CPMACD) at DoSFEA — 06/30/2007 (R0) — Waived then Met (10/31/2007)
- Financial sector legal reforms, regulation, and supervision
  - Make the credit reference bureau operational — 03/31/2008 (R1) — Waived then partially met; new test dates set and waived; condition met with delay by R5
- Economic statistics
  - Start publishing monthly consumer price index series based on 2003 household budget survey weights — 06/30/2007 (R0) — Met

---

### Structural conditionality under the 2007–2010 ECF Program — Structural performance criteria (selected items)
- Debt management
  - Prepare a national debt strategy after receiving TA — 07/31/2008 (R1) — Not met at R3; revised test date 02/28/2009 (R3) — Delayed; subsequently met by 09/30/2009 (R4)
- Expenditure auditing, accounting, and financial controls
  - Provide quarterly information on selected public enterprises — 09/30/2007 (R1) — Met with delay
  - Submit audited accounts for 2000–04 to national assembly — 12/31/2007 (R0) — Not met
  - Submit audited accounts for 2005, 2006, and 2007 to national assembly — modified and rescheduled with 09/30/2009 (R4) test date — Delayed (at R6, audited accounts for 2005 and 2006 submitted; 2007 delayed)
  - Launch Integrated Financial Information Management System (IFMIS) — 01/15/2007 (R0) — Met
  - Establish internal audit unit at Ministry of Finance and Economic Affairs and hire core staff — 06/30/2010 (R6) — Met (at R7 for Executive Board consideration)
- Tax reform
  - Revise fuel pricing formula: replace flumara with specific excise tax and raise sales tax rate on fuels to general rate of 15 percent — 12/31/2010 (R7) — Introduced at R7
- Inter-governmental relations
  - Adopt MOU ensuring regular flow of government revenue and expenditure data to the T-bill committee — 03/31/2010 (R6) — Met (at R7)
- Central bank auditing, transparency, and controls
  - Prepare pro-forma financial statements for 2008 based on IFRS and have reviewed by CBG external auditors — 06/30/2009 (R4) — Met
- Financial sector legal reforms, regulation, and supervision
  - Establish and staff the credit reference bureau — 05/31/2007 (R0) — Met
- Economic statistics
  - Rebase national accounts to 2003/04 prices and begin estimating GDP by expenditure components — 06/30/2008 (R1) — Partially met; descriptor changed and later Met (09/30/2008 R3)
  - Publish quarterly balance of payments statistics, with one quarter lag beginning with 2007 Q1 — 06/30/2007 (R0) — Met

Note: Rx refers to which review the prior action or structural benchmark applies to, with x = 0 (Program), x = 1 (First Review), etc. Several items experienced waivers, delays, descriptor changes, or were converted between benchmark categories; commentary in the source records these adjustments.

*Source: Gambian authorities.*

### 2007.  At R1, descriptor changed from "prepare and publish quarterly

### _cr1115 - 2007.  At R1, descriptor changed from "prepare and publish quarterly balance of payments statistics, with a one quarter lag beginning with 2007 Q1", to current sb.

### Structural benchmarks: review dates and compliance status
- 09/30/2007 R1 Met Met for R2.
- 06/30/2008 R2 Met with delay At R3, met with delay (met for 12/07; met with delay for 3/08 and 6/08).
- 09/30/2008 R3 Met Met for R4.
- 12/30/2008 R3 Met Met for R4.
- 03/31/2009 R3 Met with delay
- 06/30/2009 R3 Met Met for R5.
- 09/30/2009 R4 Met At R5, macroeconomic rationale: to facilitate policy formulation through timely provision of economic statistics.
- 12/31/2009 R4 Met
- 03/31/2010 R6 Met At R7 (to be considered by the IMF's Executive Board in January 2011).
- 06/30/2010 R6 Met At R7 (to be considered by the IMF's Executive Board in January 2011).
- 09/30/2010 R6 Met At R7 (to be considered by the IMF's Executive Board in January 2011).
- 12/31/2010 R6 ...
- 03/31/2010 R6 Partially met At R7 (to be considered by the IMF's Executive Board in January 2011). Some improvements were completed, but a number of data quality and integrity issues remain unresolved.

### Specific structural benchmark introduced
- Improve GDP estimates by developing better indicators of subcomponents (e.g. wholesale and retail trade).
  - 03/31/2010 R6 Partially met At R7 (to be considered by the IMF's Executive Board in January 2011). Some improvements were completed, but a number of data quality and integrity issues remain unresolved.
- Publish quarterly balance of payments statistics, with a one quarter lag.
  - 12/31/2010 R7 ... Introduced at R7 (to be considered by the IMF's Executive Board in January 2011).

### Technical assistance (TA) missions: topics, timing, and objectives (selected entries)
- Jun. 2010: TA mission advised on strengthening the budget preparation process and the prioritization and sequencing of the PFM reform strategy over the medium term.
- Apr./May 2010: TA mission advised on tax policy and revenue administration in particular in preparation for the scheduled introduction of VAT by January 2013.
- Mar./Apr. 2009: TA mission advised on measures to reform the tax system.
- Jul. 2008: Peripatetic regional advisor followed up on the work of the Aug./Sep. 2007 FAD mission.
- Aug./Sep. 2007: TA mission assessed all areas of public financial management and provided an action plan to secure the actual implementation of reforms initiated in the recent past.
- Sep. 2004–May 2006: Peripatetic regional advisor assisted the authorities in putting the new organic budget law into effect, strengthening public expenditure management, and improving the reporting of budget execution.
- Jan-10: TA missions advised on monetary operations and liquidity forecasting.
- Jan-09: Technical expert advised the CBG on banking supervision.
- Sept. 2007: Mission advised on improving the monetary policy framework and enhancing the effectiveness of monetary, foreign exchange, and debt management operations for the CBG.
- Mar./May 2007: Technical expert advised the CBG on banking supervision.
- Mar./Apr 2007: Technical expert advised the CBG in strengthening its capacity in internal auditing.
- Jan./Feb. 2007: Technical expert advised the CBG on improving monetary operations.
- Jul./Aug. 2006: Technical expert advised the CBG on banking supervision.
- Jul./Aug. 2006: Mission reviewed progress made in strengthening the CBG’s capacity in monetary operations and liquidity forecasting, foreign exchange operations, and foreign reserves management.
- Apr./May 2006: Technical expert advised the CBG on banking supervision.
- Apr./May 2006: Technical expert advised the CBG on improving monetary operations.
- Nov. 2005: Technical expert advised the CBG on improving monetary operations.
- Mar. 2005: Follow-up to the October 2004 mission.
- Feb-10: TA mission advised on measures to improve monetary and financial statistics.
- Jun. 2008: Fourth visit of the U.K. Department of International Development (DfID)-funded TA mission helped the authorities improve the compilation of national accounts statistics, particularly in rebasing the GDP series and calculation of GDP by expenditure approach, with results from the 2004 Economic Census.
- Apr./May 2008: Follow-up of the 2006 TA mission to assist the CBG in improving the compilation of monetary and financial statistics and in preparing the standardized report forms for reporting monetary data to the IMF.
- Mar. 2008: Third visit of the DfID-funded TA mission helped the authorities improve the compilation of national accounts statistics, particularly in rebasing the GDP series and calculation of GDP by expenditure approach, with results from the 2004 Economic Census.
- Oct./Nov. 2007: Second visit of the DfID-funded TA mission helped the authorities improve the compilation of national accounts statistics, particularly in rebasing the GDP series with results from the 2004 Economic Census.
- Sep. 2007: The DfID-funded TA mission helped to improve the compilation of balance of payments statistics.
- Aug. 2007: The DfID-funded TA mission advised in improving the compilation of national accounts statistics, particularly in rebasing the GDP series with results from the 2004 Economic Census.
- Apr./May 2006: TA mission helped to improve the compilation and analytical soundness of monetary and financial statistics.
- Feb. 2006: TA mission advised on compilation of balance of payments statistics.
- Feb. 2005: Report on the Observance of Standards and Codes (ROSC)—Data Module—mission assessed data quality in four main areas of macroeconomic statistics (national accounts, government finance, monetary, and balance of payments) based on the Fund’s Data Quality Assessment Framework (DQAF, July 2003) and The Gambia’s dissemination practices against the recommendations of the General Data Dissemination System (GDDS).
- Mar./Apr. 2007: A Poverty and Social Impact Analysis (PSIA) mission analyzed the planned reform of the groundnut sector and discussed with the authorities the implications of these reforms.

### Summary observations from the program material
- Structural benchmarks show frequent "Met" outcomes, with several instances of "Met with delay" and at least one "Partially met".
- Key data improvements prioritized included rebasing the GDP series and improving compilation of national accounts, monetary and financial statistics, and balance of payments statistics.
- Multiple DfID-funded TA missions focused on national accounts rebasing with inputs from the 2004 Economic Census.
- Several R-stage entries note follow-up consideration "At R7 (to be considered by the IMF's Executive Board in January 2011)".

*Appendix Table 5.3. The Gambia: Structural Conditionality under the 2007-2010 ECF Program (Structural Benchmarks).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr1115.pdf_