The International Monetary Fund demands that the Gambia unlocks the pending constitutional reform to advance critical macroeconomic policies, including state-owned enterprises and public financial management. The recommendation is part of preliminary findings that an IMF mission has compiled in a report for the Fund’s Executive Board for discussion and decision.
Because of the Coronavirus, the International Monetary Fund (IMF), led by Mr Ivohasina Fizara Razafimahefa, Mission Chief for The Gambia, and the Gambian authorities, opted for a week-long virtual mission (March 22nd—April 1st). They discussed the second review of The Gambia’s economic program supported by the IMF’s Extended Credit Facility (ECF). The Extended Credit Facility provides financial assistance to countries with protracted balance of payments problems. It supports countries’ economic programs to move towards a stable and sustainable macroeconomic position consistent with solid and durable poverty reduction and growth.
From March 22nd to April 1st, the IMF mission held discussions with Gambia’s Minister of Finance and Economic Affairs Mambury Njie, the Governor of the Central Bank of The Gambia Buah Saidy, senior staff of the Ministry of Finance and Economic Affairs, the Central Bank of The Gambia, the Ministry of Agriculture, the Ministry of Works and Transport, the Ministry of Tourism, the Ministry of Justice, and some state-owned enterprises’ executives.
During the discussions, the IMF Staff suggested to the Gambian authorities that “It would be important to unlock the constitutional reform process, still being debated, to allow advancing some key macroeconomic policies, including on state-owned enterprises and public finance management.”
It appeared that the Gambian economy has significantly been affected by the COVID-19 pandemic. Economic growth is estimated to have decelerated from 6.1 per cent in 2019 to zero per cent in 2020, due primarily to a sharp decline of the tourism sector, partly attenuated by good agricultural production and solid private construction financed by significant inflows of remittances. Inflation subsided from 7.7 per cent (year-on-year) at end-2019 to 5.7 per cent at end-2020, partly reflecting weak domestic demand. The Gambia government contained the budget deficit at 2 per cent of GDP despite the authorities’ swift and effective responses to address the spread of the COVID-19 pandemic and support the population and the economy.
While the public debt-to-GDP ratio remains a bottleneck, IMF staff have observed that liquidity expanded significantly, fueled by private remittances. But credit to the private sector grew only by 0.8 per cent as banks have adopted a prudent approach in providing loans given the highly uncertain economic environment. Foreign exchange reserves strengthened further, exceeding 5 months of prospective imports in February 2021.
According to a statement released by the IMF Communications team, the negative growth prompted Gambian authorities to take “swift and effective measures to address the spread of the pandemic and support the population and the economy,” according to the IMF statement.
Mamburry Njie and team’s evidence of goodwill to meet IMF expectations
The IMF’s team in the discussions seems satisfied with Mamburry Njie’s performance in strictly observing the IMF Extended Credit Facility terms. The Gambian authorities informed IMF that they are adhering to their commitments on the transparency of COVID-19 spending. Mamburry Njie and co told IMF staff that they had published the details of all COVID-19-related procurement contracts on the website of the Gambia Public Procurement Authority (GPPA). The Gambian authorities also said an audit of the COVID-19 spending is underway for publication in September 2021. Good progress exists on revenue administration and public financial management, including on the cleaning of taxpayers’ registry, a digital transformation of the revenue administration, an audit of the ministries/departments/agencies, civil service reforms, the selection of public investment projects, cash management, and the roll-out of the integrated financial management information system.
Moreover, Mamburry Njie and his team told the IMF that the Gambia Government is making the necessary efforts to address fiscal pressures on revenue and expenditure in 2021. They are committed to pursuing their prudent borrowing policy to reduce debt vulnerabilities in the medium term.
Ivohasina Fizara Razafimahefa, Mission Chief for The Gambia, said, “The mission team reached staff-level agreement with the Gambian authorities on economic and financial policies that could support the approval of the second review of the ECF-supported program. Performance under the program has been strong despite the challenges caused by the COVID-19 pandemic”. Mrs Razafimahefa added that The Gambia met all quantitative targets at end-December 2020 and completed the structural benchmarks.
In May 2021, the IMF Board will tentatively meet to consider the outcomes of these discussions. IMF is set to disburse an additional aid to The Gambia up to about US$14 million, should the board approve this second review.