IMF Reaches Staff Level Agreement on a Staff Monitored Program with The Gambia

IMF News, March 8, 2019

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Mission led by Jaroslaw Wieczorek visited Banjul from February 25–March 8, 2019.
Press release date: March 8, 2019.
The team reached understandings with Gambian authorities on a new Staff-Monitored Program (SMP).
Upon the completion of prior actions, the program is expected to be submitted to the IMF Management for approval by end-April.
Note: An SMP is an informal agreement between country authorities and Fund staff and does not entail financial assistance or endorsement by the IMF Executive Board.

Real GDP growth in 2018: 6.6 percent (up from 4.6 percent a year earlier).
Headline inflation: declined from 6.9 percent at end-2017 to 6.1 percent in January 2019.
Gross official reserves: US$195 million at end-January 2019 (or about 3 months of prospective imports).
Recovery drivers cited: resurgence in business confidence, strong recovery in private sector credit, robust growth in tourism and remittances, stabilization of the dalasi.

Budget execution in 2018 faced implementation challenges, leading to the postponement of budget support equivalent to 3 percent of GDP.
Fiscal deficit widened to 6.6 percent of GDP in 2018 (from 5.3 percent of GDP a year earlier).
Domestic borrowing in 2018 significantly exceeded the budgeted amount.
Domestic revenue performance improved, supported by strong domestic activity and import growth, but expenditure slippages and fiscal pressures from state-owned enterprises (SOEs) contributed to the wider deficit.
Important reform progress noted on central bank governance and operations, strengthening treasury management, and preparations for SOE reform, including launch of special audits of the largest six SOEs.

With budget support in the form of grants expected to exceed 5½ percent of GDP, authorities committed to a net domestic borrowing target of zero.
Revenue-side measures agreed:
- Revisions in excise rates, user charges and fees.
- Strengthened revenue administration.
Expenditure-side measures agreed:
- Tighter control of public spending.
- Improved financial management of state-owned enterprises to generate savings.
- Renewed commitment to reducing staffing of foreign embassies and creating contingencies within the existing budget envelope.
The team emphasized that strong policy efforts will be needed to maintain fiscal discipline and ensure that all expected budget support materializes.

Restoring debt sustainability will require prudent fiscal policy, limiting external borrowing, and restructuring of existing external debt.
The team supports ongoing efforts to restructure The Gambia’s debt; preliminary creditor responses have been broadly positive.
Authorities are encouraged to:
- Enhance control over external debt contracting, including by state-owned enterprises.
- Implement reforms to strengthen SOE governance, operational efficiency, and transparency.

Central Bank of The Gambia (CBG) measures:
- Introduction of central bank bills to improve liquidity management.
- Recent easing of the CBG policy rate from 13.5 to 12.5 percent.
Staff assessment:
- Current monetary policy stance considered appropriate.
- CBG should maintain a flexible exchange rate policy.
- CBG should remain vigilant about inflation pressures and potential risks to financial stability from the rapid expansion in private sector credit.

The mission met with Minister of Finance and Economic Affairs Njie, Minister of Trade, Industry, Regional Integration and Employment Sanneh, CBG Governor Jammeh, other senior government and public officials, representatives of the private sector, banks, civil society, development partners, and members of the diplomatic community.

International Monetary Fund – Press Release No. 19/66; statement issued at the end of the staff team visit (February 25–March 8, 2019).