Tuesday, April 8, 2014

IMF says Gambia’s policy implementation gone off-track

Projections of The Gambia’s economic growth are usually not representative of citizens’ socioeconomic status.

The International Monetary Fund (IMF) has on April 7 stated The Gambia’s implementation of [financial] policies during the first quarter of 2014 has “gone off-track”.

“[This is] mainly because spending significantly exceeded agreed targets following completion of the first review in May 2013,” it says after assessing the authorities’ progress in implementing [monetary] policies to bring their reform programme back on track.

Gambia’s reform programme is supported by an IMF Extended Credit Facility arrangement.

“Significant fiscal slippages caused by sharply higher than budgeted levels of spending pushed the fiscal deficit to about 8¾ per cent of GDP (gross domestic product) in 2013,” says Bhaswar Mukhopadhyay who led the IMF mission to Banjul.

Though real GDP is estimated to have grown by 6¼ per cent last year, it is expected to grow by nearly 7½ per cent this year based on recovery in agriculture and a strong tourism season.

Inflation, which stood at 6.1 per cent in October 2013, slightly decreased to 5.6 per cent in February 2014.

But the level of public debt has risen above 80 per cent of GDP by end-2013, while domestic interest bill grew to almost 25 per cent of domestic revenue the same year.

IMF notes that expansion of fiscal stance contributed to increasing pressures on the exchange rate and the balance of payments.

The level of gross external reserves fell to about 4 months from 4¾ months of imports by end-2013, and the dalasi depreciated by 10 per cent following the lifting of exchange controls in early October 2013.

“The initial policy actions of the government and observed improvements in the macroeconomic outlook this past quarter will require sustained efforts to consolidate,” says Mr Mukhopadhyay.

But warns that: “Interest rates on government debt remain high and pressures on the Dalasi [national currency] could return during the lean season for exports.”

He advises the government to lower its domestic borrowing through policy action and to allow interest rates and domestic interest payments to decline from their presently very high levels.

This, he said, will create room for spending on social and development priorities and private credit growth.
 “It will be important to ensure that public enterprises are operated on a sound financial basis and steadily implement reforms, particularly in the energy sector, to minimize emerging pressures on the budget.” says Mukhopadhyay after meeting with top government officials, the banking sector and development partners.

Strong policy implementation would serve as the basis for presenting the second review under the ECF for the IMF Executive Board’s consideration in the second half of 2014.

Growth not improved living standards

Observers say projections of The Gambia’s economic growth are usually not representative of citizens’ socioeconomic status.

“In other countries, economic growth means more jobs for their citizens, while in The Gambia unemployment remains high and poverty figures keeps rising,” says a local journalist who specializes on economic and financial reporting.

Last week, the EU Chargé d’affaires to The Gambia said recent economic growth rates of the country have not necessarily translated into the improvement of living standards for all.

“Poverty, as well as gender inequality, persists in The Gambia where despite the government’s strong commitment, women still continue to face discrimination in access to social and economic rights,” said Madam Agnes Guillaud.  

Written by Modou S. Joof

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