The North Bank Evening Standard [TNBES]: IMF highlights risks to Gambia’s economic outlook

Gambia: Economy at risk - Tourists shopping in Kololi Market, The Gambia (Photo credit: Anguskirk)

The outlook for the Gambian economy is generally favourable for 2013, but there are risks, as the economy is still recovering from the severe drought of 2011, the International Monetary Fund, IMF, said Wednesday.

Gambia’s real gross domestic product, GDP (the total value of goods and services that the country produces in a year) grew by an estimated 4 percent in 2012, led by a partial rebound in crop production and strength in the tourism sector, IMF’s mission chief David Dunn said on April 10, 2013.

“Inflation remained under control, ending the year at just under 5 percent, despite the depreciation of the Gambian dalasi during the second half of the year,” he said. “A substantial overrun in government spending late in the year resulted in higher-than-budgeted domestic borrowing, 3½ percent of GDP.”

However, Dunn said real GDP growth is expected to accelerate if the recovery in crop production is sustained. Also, by accessing new markets, the potential for growth in tourism looks good.

Gambia: Economy at risk - fish smoking oven (Photo credit: Anguskirk)

Inflation goes sky-high

Inflation has picked up partly due to side effects from the introduction of the value-added tax (VAT) at the beginning of the year.

“Although the VAT is applied to firms with a turnover of at least one million dalasis, we understand that many smaller businesses also raised their prices opportunistically,” Dunn said.

The IMF observed that during the first quarter of 2013, The Gambia Government spending once again exceeded planned allocations, contributing to an uptick in Treasury-bill yields. Correspondingly high bank lending rates are discouraging private sector borrowing.

Tightened fiscal policy

The mission welcomes the Government’s decision to tighten fiscal policy by reducing its domestic borrowing needs to 1½ percent of GDP in 2013 and then to ½ percent of GDP a year or less, beginning in 2014.

This, the mission said, will help lower the heavy domestic debt burden. They also welcome the intention of the Government to submit a fully-funded supplementary budget to the National Assembly later this month.

The money lending agency noted that targets for reserve and broad money growth have been tightened to stem potential inflationary pressures and stabilize the dalasi, which has continued to weaken against most major currencies.

IMF supported the target of the Large Taxpayers Unit of the Gambia Revenue Authority (GRA) to achieve 100 percent compliance with taxpayers’ income tax filings in the current year, to help broaden the tax base.

“This is necessary if business-friendly tax reforms such as a reduction in tax rates are to be considered in the future,” it said. “The mission also welcomed efforts by the GRA to strengthen its audit functions.”

Landing a fishing boat in The Gambia (Photo credit: Anguskirk)

The IMF mission that visited The Gambia from April 4-10, 2013, concluded discussions on the first review of the authorities’ macroeconomic and financial programme that is supported by the IMF under its Extended Credit Facility (ECF).

“The mission reached an agreement, and referendum, on programme targets for 2013. The IMF Executive Board would consider the completion of the review by end-May 2013,” the Briton Woods institution said in a statement.

Written by Modou S. Joof