IMF allocates $2m to Gambia for poverty reduction

The International Monetary Fund (IMF) has approved the disbursement of US$2.3 million to The Gambia government to support programmes and structural reforms necessary to reduce the high rate of poverty and boost economic growth in the country.

 

The disbursement is following the IMF executive board’s completion of the first review of the government’s economic performance under a programme supported by the Extended Credit Facility (ECF) arrangement, according to a press release from the IMF-Gambia office on Thursday.

 

This last disbursement makes the total disbursements under the arrangement to about US$16.2 million.  

 

In May 2012, the executive board of the IMF approved a three-year ECF arrangement with an amount equivalent to about US$28.3 million for The Gambia to support the government's economic programme.

 

Economy still recovering

 

“The Gambian economy is still recovering from the severe drought of 2011,” Naoyuki Shinohara, deputy managing director and acting-chair of the IMF, said following the Board’s discussion of The Gambia.

 

The government’s policies and the support of the international donor community played an important role in enabling the recovery in agriculture to take hold, he noted.

 

However, he said there are downside risks related to The Gambia’s economic recovery such as the high domestic debt burden, weaknesses in the balance of payments, and inflationary pressures.

 

The domestic debt of the government increased to D11.3 billion, as at end-March 2013.

 

“High public indebtedness continues to pose risks to macroeconomic stability and significant costs to the budget,” Mr Shinohara affirmed.

 

$28M FOR GAMBIA TO LESSEN BALANCE OF PAYMENTS EFFECTS

The Executive Board of the International Monetary Fund (IMF) has approved a new arrangement for The Gambia under the Extended Credit Facility (ECF) to the tune of about US$28.3 million.
This decision will enable an immediate disbursement equivalent to about US$14.2 million.
According to a statement from the IMF Banjul office on Monday, this 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).

Over the medium term, the IMF seeks to ease The Gambia’s heavy debt burden through fiscal adjustment, while implementing a strong economic reform agenda in support of the PAGE.

In the statement, Naoyuki Shinohara, IMF’s Deputy Managing Director, said the Gambian economy has made good progress in achieving strong growth and making a substantial reduction in poverty.
However, he said, major crop failure due to the drought has created hardship that calls for effective and timely delivery of assistance for the most vulnerable households.

“The Gambia’s heavy debt burden poses high costs for the government and risks for the economy,” Mr Shinohara said.

“To address this problem,” he continued, “the IMF's new ECF-supported program 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.”

IMF recommends immediate fuel price increment for Gambia

Cost of transport and electricity-related services in The Gambia may skyrocket as pump price of fuel in the country is billed for further increase very soon, if the advice of the International Monetary Fund (IMF) is anything to go by. 

In its latest report on The Gambia, the IMF has advised the government for an “immediate adjustment in fuel prices” in order to remedy the steady decline of the country’s revenue performance coupled with unanticipated expenditure overruns, higher-than-budgeted spending, which could threaten the country’s macroeconomic stability. 

The Gambia government revenue performance has signaled a downward trend over the years while expenditure has continued to increase giving rise to budget deficit that continues to swell year on year.

With the fuel price increment, the IMF says, the government is expected to collect the full value of excise tax on fuel, although it noted that this adjustment might only provide a modest of the much needed revenue boost.

IMF urges Gambia to privatize Gamcel

The International Monetary Fund has urged the Gambia government to move forward with plans “for a fully transparent privatization of Gamcel”, national cellular company.

However, it is still unclear whether the government has initial plans to privatise the national cellular company again following a failed attempt at privatizing it together with Gamtel, its parent company, some five years.

In its latest report on The Gambia, released in February, the IMF said such structural reforms would also help eliminate major sources of contingent liabilities that have impaired government finances in recent years.

The report reveals that claims associated with the failed privatization of Gamcel, and spending on contingent liabilities and extra-budgetary items such as bills and debt service owed by the National Water and Electricity Company (NAWEC), which owes millions of dalasi to its major suppliers, were leading sources of government expenditure overruns.

GAMBIAN BANKS IN TROUBLE: PROFITABILITY DECREASES, NON-PERFORMING LOANS INCREASE

The 13 banks in The Gambia, competing for less than 25% of the country’s 1.8 million people, are undergoing some turbulent times as their profitability drops while non-performing loans increase, a report compiled by the International Monetary Fund has revealed.

“With 13 banks competing for a small customer base, competition is fierce resulting in narrow profit margins,” the IMF Country Report of the Gambia, given to local journalists in Banjul on Thursday, has stated.  “Non-performing loans have increased from 5 per cent of total loans and advance in 2005 to 14.5 per cent at end 2010.”

IMF Representative to The Gambia
Mr Meshack Tunee Tijorongo

Commercial banks in The Gambia are going though some touch time more than ever before as their loans and advances portfolio continue to swell while increasing sums of monies given out as loans to customers continue to remain as bad debts or non-performing loans, which are debts not likely to be paid, giving rise to banks losing millions of dalasis in profits.

Total earnings for the banking sector as a whole was negative in 2009, provision for loan losses increased and the level of non-performing loans also increased.

IMF urges Gambia to introduce Value Added Tax

The International Monetary Fund has urged The Gambia to pursue a comprehensive tax reform, centered on the introduction of Value Added Tax (VAT) by 2013. In a report prepared by the staff team of the IMF following a discussion that ended in June, this year, with the officials of The Gambia on economic developments and policies, the IMF stressed that a broad based VAT has proven to be a reliable revenue source in many countries throughout the world, including sub-Saharan Pic: Executive Director of IMF  Africa. A shift towards a more consumption based tax system with improved tax payer services could form the cornerstone to a more enabling environment for business and investment in The Gambia. However, it could be recalled that Hon. Abdou Colley, Minister of Finance and Economic Affairs, while delivering the 2010 budget speech said The Gambia has planned the introduction a Value Added Tax system on or before January 2013. IMF Country Report of The Gambia maintained that preparing for a successful launch of VAT, “requires that existing systems and policies are improved.” This includes an overhaul of the small business tax, further roll-out of self-assessment, the establishment of a tax refund system, and improvements in taxpayer services. Additional steps include widening the base of the current sales tax and enforcement of excise taxes on domestically produced goods. Capacity constraints in tax administration will guide policy choices to ensure that a new tax system can be run efficiently within the resource constraints faced by The Gambia Revenue Authority (GRA). “Complementary measures are needed to make the tax system efficient and friendlier to tax payers,” the report noted, while adding that several “nuisance” taxes—taxes with low revenue potential but high administrative and compliance costs—could be abolished. This would free resources at the GRA to pursue more revenue-relevant activities and improve the tax environment for the private sector. It further maintained that tax payer services could be improved by the establishment of a tax and customs tribunal. The Gambia’s tax system undermines the business climate, yet revenue is volatile and remains below the regional average. The country’s domestic revenues account for only about 15% of Gross Domestic Product (GDP).  The volatility of the revenue is partly because of fixed retail fuel prices and varying tax collection priorities. Poor scores on tax compliance and tax payer services are an important reason for the low ranking of Gambia’s business climate. The authorities’ response The report stated that The Gambian authorities agreed that the country’s tax system is in need of reform. It says the authorities clearly stated their commitment to the introduction of a VAT in the context of their membership in ECOWAS. However, the report indicated that the authorities have yet to decide on the timing of the preparatory intermediate steps to be taken. “They (Gambian authorities) did note that the GRA is in the process of implementing the collection of excise taxes on domestically produced goods, both as a revenue measure and to meet World Trade Organization (WTO) commitments. They also stressed their long-term goal of reducing corporate income tax to enhance the competitiveness of The Gambia within the ECOWAS region,” the report further explained.