$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 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.

Gambia needs $23mn to remedy crop failure, looming food shortage

New Minister of Agriculture, Solomon Owens

The Gambia government, through the Ministry of Agriculture, has disclosed that it “urgently needed” twenty three million U.S dollars to provide food, seeds, and fertilizer to the entire farming population as the country declared 2011-2012 farming season a failure resulting from severe crop failures and a corresponding soaring of food prices.

A statement from the Ministry of Agriculture, formally announcing the national crop failure, stated that the post-harvest assessment of the 2011 farming season, which was characterised by below-normal and poorly distributed rainfall, indicated a reduction in total crop production of more than 70%.

GAMBIA IN A STATE OF ‘HIGH RISK OF DEBT DISTRESS’ IMF SAYS

Mr Dunn

The International Monetary Fund (IMF) and the World Bank (WB) diligently carried out a ‘Debt Sustainability Analyses (DSA)’ that has cautioned the trend in which the economy and financial system of the country is faring.

The DSA is a formal framework developed by the IMF for conducting public and external debt sustainability analysis as a tool to better detect, prevent, and resolve potential crises. It looks at the evolutions of government debt over the next twenty years and it is based on long-ranged projections of government borrowing needs.

According to David Dunn, Chief of IMF mission to The Gambia, “The Gambia is classified as being high risk of debt distress at the moment based on a debt sustainability analyses by the IMF and WB.”

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.”