IMF remain concerned over Gambia’s heavy debt burden

David Dunn Meeting with Government officials (Pix - Daily Observer)

As usual, the International Monetary Fund said The Gambian economy continues to perform well, coming off another strong year for agriculture, particularly in rice and groundnut production.

However, tourism has remained suppressed, owing to lingering effects of the economic slowdown in key European markets, but is expected to pickup later in the year.

With an overall gross domestic product, GDP (the total value of goods and services that the country produces in a year) projected to grow by about 5½ percent in real terms in 2011; the annual inflation would remain moderately elevated at about six percent, reflecting food and fuel price pressures.

An IMF mission to the country from May 18–31, 2011 headed by Mr. David Dunn also projected that the longer-term economic outlook is generally positive, although The Gambia’s “heavy debt burden” remains a concern.

The visit to Banjul by the IMF Mission Chief Mr. Dunn and his team was meant to initiate negotiations on a policy framework that could be supported by a new three-year arrangement under the IMF’s Extended Credit Facility (ECF).

Policy discussions

The IMF team appreciates the candid policy discussions with the authorities and welcomes the President’s leadership on addressing the debt problem.

IMF mission chief David Dunn

“We support the intention of the Government to curb its borrowing needs beginning in 2011, with the goal of achieving near-zero net domestic borrowing by 2014,” Mr. Dunn said in a statement at the end of the mission.

“This will require a gradual, but steady fiscal adjustment, including a reversal of the decline in government revenues in recent years and firm restraint on spending.”

The international financial lending institution, IMF added it welcome the recently-introduced cash-budgeting approach to contain monthly expenditures, which should assist in reducing the Government’s net domestic borrowing to about two percent of GDP in the current year. “This should help to ease pressure on interest rates, generate fiscal savings, and avoid the crowding out of credit to the private sector.”

Support to page

The new ECF arrangement, which the authorities have requested, will support the forthcoming Programme for Accelerated Growth and Employment (PAGE). Financing of the PAGE will pose a significant challenge in light of the country’s already heavy debt burden.

Thus, in addition to seeking development partner support for the PAGE, IMF welcomes the authorities’ aim to embark on a programme of private sector participation in critical areas of infrastructure investment, including telecommunications and electricity generation.

In order to build broad support for the PAGE, the IMF team encourages the authorities to further engage civil society, the donor community, and other stakeholders in the final formulation of the strategy.

Return

The IMF team will return to The Gambia later in the year to conduct discussions on surveillance issues and medium-term policy options, such as tax reform aimed at reducing rates and broadening the base. Programme discussions are expected to conclude by early 2012.