IMF Staff Concludes Visit to The Gambia
IMF News, May 9, 2018
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Bibliographic details
- Published: May 9, 2018
Mission purpose and engagement
- IMF staff team led by Jaroslaw Wieczorek visited Banjul from May 3–9, 2018 to assess implementation of The Gambia’s Staff-Monitored Program (SMP) from end-September 2017 to end-March 2018 and to discuss forward-looking economic and financial policy commitments for the remainder of the SMP (extended through September 2018).
- The mission met with Finance Minister Sanneh, Central Bank Governor Jammeh, other senior government and public enterprise officials, representatives of the private sector, banks, civil society, and development partners (including visiting World Bank Executive Directors).
Assessment of recent economic developments
- “Gambia’s economic recovery is gaining traction.”
- Growth and inflation:
- Economic growth rebounded to 3.5 percent in 2017, from 2.2 percent in 2016.
- Headline inflation declined from a peak of 8.8 percent in January 2017 to 6.5 percent in March 2018.
- Drivers of improvement:
- Stronger agricultural season and a pickup in tourism, trade and transportation.
- Stabilization of the dalasi and a rebound in food supply contributed to lower inflation.
- Significant external financial support boosted international reserves and allowed the government to reduce reliance on domestic borrowing, causing a sharp fall in T-Bill yields.
Outlook and projections
- 2018 projections:
- GDP growth is expected to rise to 5–5½ percent in 2018.
- Inflation is projected to drop to about 5¼ percent, close to the Central Bank of the Gambia’s target of 5 percent.
- International reserves are expected to strengthen to 3.4 months of next year’s imports of goods and services.
Performance under the Staff-Monitored Program
- Performance to date under the SMP has been broadly satisfactory.
- All quantitative targets at end-December 2017 and end-March 2018 were met.
- Implementation of the structural reform agenda encountered some delays; the team reached understandings on a timetable for completion of the reform agenda and on fiscal measures needed to ensure budget implementation consistency with the SMP.
Debt vulnerabilities and fiscal stance
- The Gambia’s debt stock rose to about 130 percent of GDP at end-2017.
- More than half of this debt is owed to external creditors.
- Drivers include legacy issues: faster disbursements of previously contracted loans, recognition of external arrears incurred by the former administration, and the government’s assumption of State-Owned Enterprises (SOEs) liabilities.
- Policy imperatives to ensure debt sustainability:
- Refraining from contracting new government debt or contingent liabilities before additional fiscal and borrowing space has been achieved.
- Leveraging more private investment.
- Strengthened fiscal discipline and domestic revenue mobilization.
- Mobilization of sizable and sustained external grant support and strictly limiting reliance on external borrowing, even on concessional terms.
Structural reforms and SOE oversight
- Reform of SOEs is critical.
- Needed actions:
- Strengthen financial oversight of SOEs.
- Conduct special multiyear audits.
- Enforce SOE compliance with monthly, quarterly and annual reporting requirements.
Monetary policy recommendations
- The Central Bank of the Gambia (CBG) should:
- Maintain its flexible exchange rate policy.
- Take concrete steps to strengthen the monetary policy framework to help ensure price stability.
- Establish an interest rate corridor for the policy rate to help ensure monetary conditions are consistent with keeping inflation at or below 5 percent.
Cross-cutting governance and private sector role
- Strengthening the rule of law, governance and anti-corruption efforts are central to the success of The Gambia’s economic transformation.
- Requires enhanced transparency, including through improved data quality and timeliness.
- The private sector is key to achieving sustained growth and job creation.
- Efforts are needed to leverage the restoration of investor confidence and pave the way for enhanced private sector participation, including by improving the business regulatory environment.
Key statistics and findings (exact figures)
- Visit dates: May 3–9, 2018
- Growth: 3.5 percent in 2017; 2.2 percent in 2016
- Inflation: peak 8.8 percent in January 2017; 6.5 percent in March 2018
- 2018 projections:
- GDP growth: 5–5½ percent
- Inflation: about 5¼ percent
- International reserves: 3.4 months of next year’s imports of goods and services
- Poverty: 48.6 percent (as cited)
- Human Development Index ranking: 173 out of 187 countries (UNDP 2016)
- Debt stock: about 130 percent of GDP at end-2017
IMF Communications Department — End-of-Mission press release, May 9, 2018.