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The Gambia: Statement at the End of an IMF Staff Visit

Press Release No. 14/156 April 4, 2014

A mission from the International Monetary Fund (IMF), led by Bhaswar Mukhopadhyay, visited Banjul during March 25 – April 4, 2014. The mission assessed the authorities’ progress in implementing policies during the first quarter of 2014 to bring their reform program back on track. The program is supported by an Extended Credit Facility arrangement with the IMF, and had gone off-track mainly because spending significantly exceeded agreed targets following completion of the first review in May 2013.

The mission met with Vice-President Njie Saidy, Secretary General Sabally, Finance Minister Touray, Central Bank Governor Colley, other senior officials, members of parliament, senior officials in public enterprises, the banking sector, and development partners.

At the end of the mission, Mr. Mukhopadhyay issued the following statement:

“Real GDP is estimated to have grown by 6¼ percent in 2013 and is expected to grow by nearly 7½ percent in 2014 on the basis of continued recovery in agriculture and a strong 2013/14 tourism season. The external current account is projected to continue to improve. Inflation, which stood at 6.1 percent in October 2013, has gradually eased to 5.6 percent in February 2014.

“Significant fiscal slippages caused by sharply higher than budgeted levels of spending pushed the fiscal deficit to about 8¾ percent of GDP in 2013. In response, as the monetary policy stance tightened, interest rates rose significantly and the domestic interest bill grew to almost 25 percent of domestic revenue in 2013. The level of public debt rose above 80 percent of GDP at end-2013. The expansionary 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 percent following the lifting of exchange controls in early October 2013.

“To restore macroeconomic stability the authorities embarked on a program of corrective measures over the first quarter of 2014. The government has implemented concrete measures to boost revenue and contain expenditure, and has instituted a cash budgeting scheme to strengthen budget execution. Improved policy implementation has begun to restore confidence, as reflected in the stabilization of the dalasi exchange rate in recent months. The level of gross international reserves is recovering slowly, but remains at the comfortable level of 4 months of import cover.

“The initial policy actions of the government and observed improvements in the macroeconomic outlook this past quarter will require sustained efforts to consolidate. Interest rates on government debt remain high and pressures on the Dalasi could return during the lean season for exports. Continued policy action will provide a sound basis to lower the government’s domestic borrowing, allow interest rates and domestic interest payments to decline from their presently very high levels, and create room for spending on social and development priorities and private credit growth. As economic gains are consolidated we will see a return in international reserves, a vital shock absorber for a small open economy such as The Gambia.

“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.

“The mission welcomes the determination expressed by the Gambian authorities to contain spending, improve revenues, and macroeconomic stability. The IMF stands ready to support the authorities in their endeavor. 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.

“The mission thanks the authorities for candid and constructive discussions and expresses its appreciation for the excellent cooperation during its visit.”