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“The Gambia’s heavy debt burden poses high
costs for the government and risks for the economy,” Mr. Naoyuki Shinohara, IMF
Board Deputy Managing Director and Acting Chair said on Monday.
Mr.
Shinohara remarks followed the International Monetary Fund (IMF) Executive
Board’s May 28 approval of a new arrangement for Gambia under the Extended
Credit Facility (ECF) an amount equivalent to SDR 18.66 million (about US$28.3
million).
The IMF
said the decision will enable an immediate disbursement equivalent to SDR
9.33million (about US$14.2 million).
“To
address this problem, the authorities’ new ECF-supported programme rightly
focuses on fiscal adjustment to curb government’s domestic borrowing. Limiting
external borrowing to concessional loans is also necessary to reduce the risk
of debt distress,” he said.
The
authorities’ planned fiscal adjustment will require consistent strong
implementation to build confidence and achieve fiscal savings. Rebuilding the
government’s revenue base is key to fiscal adjustment, especially the upcoming
introduction of a value added tax (VAT) and reductions in fuel subsidies.
The
money is aimed at meeting an acute balance of payments need arising from the
recent crop failure due to drought, and helping to catalyze support from
development partners for The Gambia’s new poverty reduction strategy, the
Programme for Accelerated Growth and Employment (PAGE).
IMF
explains that over the medium term, the authorities seek to ease the
government’s heavy debt burden through fiscal adjustment, while implementing a
strong economic reform agenda in support of the PAGE.
Mr.
Shinohara said the Gambian economy has made good progress in achieving strong
growth and making a substantial reduction in poverty. However, major crop
failure due to the drought has created hardship and calls for effective and
timely delivery of assistance for the most vulnerable households.
“Progress
toward eliminating fiscal dominance has enhanced the independence of the
Central Bank of The Gambia and its capacity to conduct sound monetary policy.
The central bank will continue to build capacity for effective financial sector
supervision, particularly for stress testing,” he added.
He
said financing the government’s new poverty reduction strategy, the PAGE, under
tight budget constraints will be a challenge. In this regard, fiscal savings
from lower interest on domestic debt and private sector participation in
infrastructure investment could be helpful.
“To
ensure that such investments are productive and to guard against potentially
large contingent liabilities for the government, robust institutions and
regulatory frameworks are critical. To support growth, reforms are needed in
key sectors such as energy and telecommunications,” he warned.
IMF
said Gambian economy performed well during the previous ECF arrangement, which
expired at the end of March 2011.
During
that period (2007–10), real gross domestic product (GDP) growth was robust and
inflation was low-to-moderate, despite the global financial crisis and sharp
food and fuel price shocks, it said. Source: The Voice
Written by Modou S. Joof
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