IMF expresses concern over Gambia’s heavy debt burden

The International Monetary Fund has expressed concerned over The Gambia’s “heavy debt burden” most of which use to take large stock of the country’s outstanding treasury bills.  In 2010, interest on debt consumed about 20 percent of government revenues. However, the IMF mission failed to disclose the amount owed by government. The total fiscal deficit of The Gambia for 2011 is estimated at D466.36 million representing about 2 per cent of GDP.  This is expected to be financed by foreign and domestic borrowing amounting to D833.82 million and D120 million respectively. A statement issued by David Dunn, IMF mission chief for The Gambia indicates that the IMF “welcomes the President’s leadership on addressing the debt problem.” Mr Dunn issued this statement at the end of the IMF mission visit to The Gambia, from May 18–31, 2011.  The IMF mission was in the country 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). “We support the intention of the Government to curb its borrowing needs beginning in 2011, with the goal of achieving near-zero domestic borrowing by 2014,” the mission said.  “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 IMF mission chief to the Gambia said:  “We welcome the recently introduced cash-budgeting approach to contain monthly expenditures, which should assist in reducing the government’s net domestic borrowing to about 2 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.” The IMF said the new ECF arrangement will support the government’s 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. In addition to seeking development partner support for the PAGE, the IMF said, we welcome the authorities’ aim to embark on a program of private sector participation in critical areas of infrastructure investment, including telecommunications and electricity generation. 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. The Gambian economy continues to perform well, coming off another strong year for agriculture, particularly in rice and groundnut production.  Tourism, however, has remained suppressed, owing to lingering effects of the economic slowdown in key European markets, but is expected to pick up later in the year. Overall, gross domestic product (GDP) is projected to grow by about 5½ percent in real terms in 2011, while annual inflation would remain moderately elevated at about 6 percent, reflecting food and fuel price pressures. IMF said the longer-term economic outlook is generally positive. 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. Program discussions could be concluded by early 2012.”