The Gambia: Staff Report for the 2021 Article IV Consultation, Third Review under the Extended Credit Facility Arrangement, Request for Modification of a Performance Criterion, and Financing Assurances Review—Debt Sustainability Analysis

THE GAMBIA

Abstract

THE GAMBIA

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THE GAMBIA

STAFF REPORT FOR THE 2021 ARTICLE IV CONSULTATION, THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUEST FOR MODIFICATION OF A PERFORMANCE CRITERION, AND FINANCING ASSURANCES REVIEW—DEBT SUSTAINABILITY ANALYSIS

November 8, 2021

Approved By

Annalisa Fedelino, Geremia Palomba (IMF), and Marcello Estevão, Abebe Adugna (IDA)

Prepared by the staffs of the International Monetary Fund and the International Development Association

The Gambia Joint Bank-Fund Debt Sustainability Analysis

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The Gambia’s overall and external debt distress risk ratings remain “High” and public debt continues to be deemed sustainable, similar to the previous DSA. Under the updated macro framework to reflect the staff’s revised assessment of the impact of COVID-19, compared with the previous DSA1 prepared in the context of the first ECF review in December 2020, there remain temporary breaches of the indicative thresholds for the PV of external debt-to-exports ratio in 2021–22, and external debt service-to-exports ratio in 2021 and between 2025–29. These breaches reflect weak export projections for those years as well as upward revisions for the external debt service resulting from data reconciliation with creditors. Meanwhile, the PV of external debt service-to-revenue ratio breaches the threshold for 2021 and between 2026–2029. The PV of overall debt-to-GDP ratio remains on a downward sloping path and drops below its threshold by 2025 (one year later than estimated in the previous DSA), indicating that the public debt outlook remains sustainable. Downside risks are linked to a potential resurgence of the pandemic that could trigger a prolonged economic recession, with added fiscal pressures adversely affecting the debt profile.

Background

1. During the few years following the remarkable political turn-around in 2016–17 and prior to the onset of the pandemic, The Gambia had shown strong macroeconomic performance. Economic growth accelerated from 2 percent in 2016 to 6 percent in 2019, driven by strong tourism arrivals and private capital inflows. This economic performance helped improve some key social indicators; The Gambia’s Human development index improved from 0.475 in 2016 to 0.496 in 2019; infant mortality rate declined by 0.8 percentage point and primary school net enrollment rate increased from 77.7 percent to 81.8 percent. Foreign exchange coverage soared from about one month of imports to 4 months of imports during this period, buoyed by large private remittances and disbursements from development partners. Debt sustainability improved as the fiscal deficit narrowed by about 7 percentage points of GDP during this period and most creditors agreed on some debt deferrals in 2019. Inflation remained broadly stable. However, the COVID-19 pandemic has disrupted some of the hard-won progress.

Text Table 1.

The Gambia: External and Public DSAs: Coverage of Public Debt and Design of

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The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1,). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligiblej a country team may reduce this to 0%.

2. Compared to the previous DSA in December 2020 (1st ECF review), the current DSA uses updated end-2020 data as a starting point. Like the previous DSA, the current DSA uses the broader coverage of the public sector, which includes the central government, central bank and government-guaranteed debt pertaining to State-owned enterprises (Text Table 1). As in the previous DSA, SOE debt linked to trade credit from the Islamic Trade Finance Corporation (ITFC) is accounted for in the government debt. This includes short-term external financing to the large SOEs, namely, the National Water and Electric Company (NAWEC), the Gambia Groundnut Corporation (GGC) and the Gambia National Petroleum Company (GNPC). Additionally, the coverage for the contingent liabilities test uses default settings for financial markets (at the minimum of 5 percent of GDP), representing the average cost to the government from a potential financial crisis in a low-income country, and SOE debt of 3.7 percent of GDP (for debt not explicitly guaranteed by the government) as in the previous DSA. Exposures to PPPs are set at zero, as PPPs in the Gambia are estimated to be marginal as a proportion of GDP. External debt is based on currency and not residency.

3. The Gambia’s total public debt to GDP stood at 85.0 percent and external debt to GDP at 49.7 percent as of end-2020. External debt figures were revised upward for end-2019 and end-2020 compared to the previous DSA following a visit to The Gambia of some bilateral creditors to reconcile debt data. The upward revisions of external debt figures for 2019 and 2020 were to the tune of 2.6 percent and 6.1 percent of GDP respectively in the current DSA, to 47.3 percent and 49.7 percent of GDP respectively. Total public debt ratios were also revised upward as a result, by 2.9 percent and 7.7 percent respectively compared to the previous DSA 2. However, the total public debt profile remains on a downward trajectory and broadly in line with the previous DSA. The authorities are aware of the extent of the debt data revisions and the potential ramifications, and have therefore committed to improving efforts to bolster data collection and reconciliation. They have proposed increasing the frequency of the data reconciliation exercise with creditors and managers of foreign-financed projects.

Text Figure 1.
Text Figure 1.

The Gambia: Total Public Debt and PPG External Debt

(Percent of GDP)

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

4. Debt-service deferrals secured by the authorities in 2019 have provided significant relief since the onset of the pandemic, creating much-needed fiscal space, though debt-service pressures persist. Total debt service relief due to confirmed deferrals from the 2019 negotiations with bilateral creditors amounted to around US$129 million (7 percent of GDP). The Gambia is receiving debt service relief under the Catastrophe Containment and Relief Trust (CCRT) expected to total SDR7.9 million (SDR 6.1 million of which has already been approved). The debt service payment projections were revised upward during the data reconciliation process with creditors, leading to a cumulative increase in debt service of around US$72 million between 2021–30, equivalent to about 4 percent of GDP. This resulted in a worsening of key DSA ratios, notably leading to the extended breach of PV of public debt and external debt ratios over their respective thresholds in the near-term. The debt-service profile remains challenging particularly given the recent slump in exports. The sharp fall in exports due the pandemic is estimated to push the debt-service-to-exports ratio to 21.4 and the PV of debt-to-exports ratios over 300 in 2021. As exports gradually recover in 2022, the debt-service pressures are expected to abate, though they will likely resurface as the debt deferrals begin to expire in 2024/25.

5. The Gambia’s external debt primarily comprises of concessional and semi-concessional loans from multilateral and plurilateral creditors, with creditors from the Middle East forming the single largest creditor sub-group. Around 66 percent of the Gambia’s PPG external debt is owed to multilateral creditors, with bilateral creditors (30 percent) and commercial creditors (4 percent) comprising relatively smaller shares among the creditor categories. While approximately 30 percent of the PPG external debt is owed to the IMF and MDBs, a combined 45 percent of debt is owed to various creditors from the Middle East (see Table below). The Gambia has arrears on external debt owed to Libya and Venezuela, with the combined debt owed to these creditors at approximately US$23 million, equivalent to around 1.2 percent of GDP. However, these arrears have materialized due to technical problems and are not an indication of debt distress. The discussions on arrears to Libya have been obstructed by the change in regime in Libya, while discussions on the arrears to Venezuela have been impeded by international sanctions on Venezuela.

Text Table 2.

The Gambia: Decomposition of Public Debt and Debt Service by Creditor, 2020–221

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As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements). Plans to fill the data gaps will be discussed at subsequent program reviews.

Some of the public debt is not shown in the table due to capacity constraints. Plans to fill the data gaps will be discussed at subsequent program reviews.

6. The Gambia will continue to benefit extensively from grants and loan disbursements from multilateral and bilateral creditors in the years ahead. The annual net financing flows from the World Bank (IDA resources) are projected at US$105.3 million during 2021–24 and US$38.8 million during 2025–30. The net financing flows from the IMF during the ECF program (2020–23) amount to US$91 million. Based on staff’s estimates, the projected gross grant disbursements from donors during 2021–30 amount to US$1.81 billion. The recent debt data reconciliation with creditors has resulted in a downward revision of US$110 million in expected loan disbursements over the next few years. Following this revision, an estimated US$233 million in project loan disbursements are expected from creditors between 2021–24. On the moratorium from bilateral creditors, The Gambia benefited from debt service suspension of US$4 million under the Debt Service Suspension Initiative (DSSI) in 20203. While the authorities requested for further relief for January-June 2021, they have not requested any further relief under the DSSI for the rest of 2021, given that they have already received substantial debt relief through 2024–25 from the bilateral creditors in the 2019 agreement.

Underlying Assumptions

7. The DSA is consistent with the macroeconomic framework outlined in the staff report. In line with the previous DSA, the baseline scenario assumes the implementation of sound macroeconomic policies, structural reforms, and an ambitious infrastructure investment plan. The key macroeconomic assumptions are as follows:

  • Real GDP growth: The impact of the COVID-19 shock on the outlook for 2020 and 2021 has been worse than estimated in the previous DSA. GDP growth in 2020 dropped slightly from 0.0 percent projected in the previous DSA to -0.2 percent and the rebound projected for 2021 has also been revised downward (4.9 percent, compared to 6.0 percent projected earlier). Credit to the private sector started to rebound, showing growth of about 5.8 percent (y/y) in August 2021 (compared to zero growth in December 2020).

  • Inflation: Inflation subsided from 7.7 percent (y/y) at end-2019 to 5.7 percent at end-2020, reflecting weak domestic demand. Inflation edged up in recent months, to 8.1 percent at end-June 2021 but eased to 6.9 percent at end-August 2021. Average inflation is projected to decline towards the central bank’s target of 5 percent in the medium term.

  • Fiscal deficit: The fiscal outlook is calibrated to reduce debt vulnerabilities. The fiscal framework foresees a switch from primary deficit to surpluses starting in 2023, which should reduce the debt levels and vulnerabilities. The fiscal consolidation path is underpinned by: (i) a projected gradual increase in domestic revenue supported by measures to broaden the tax base, rationalization of tax expenditures and exemptions, and strengthening of revenue administration; (ii) the phasing-out or streamlining of most one-off COVID-related spending and the rationalization of subsidies to SOEs and transfers to subvented agencies; and (iii) strict cash management. The thorough enforcement of the infrastructure project selection criteria, supported through the IDA Sustainable Development Financing Policy in FY21, and the development of priority sector Public Investment Programs (PIPs), supported in FY22, will also anchor medium-term debt sustainability.

Text Table 3.

The Gambia: Evolution of Select Macroeconomic Indicators, 2020–251

(in percent of GDP, unless otherwise indicated)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

Defined as the simple average of the last 15 years of the projection (2026–40).

In current dollar terms, including re-exports.

Includes worker’s remittances and grants.

Includes grants.

Previous DSA numbers are taken from First Review ECF

Sources: The Gambian authorities; and Fund staff estimates and projections.
  • Infrastructure projects: The current framework assumes that loan agreements and related disbursements for financing infrastructure projects will align with the external borrowing plan schedule. However, contract agreements and loan disbursements on some large infrastructure projects, such as the Banjul Port project and the Bertil-Harding highway road project, are materializing at a slower pace than anticipated.

  • Gross financing needs: In line with the fall in the deficit, average gross financing needs over the medium term in the current DSA fall to around 17 percent of GDP, lower than that in the previous DSA.

  • External financing mix and terms: The DSA assumes that the financing mix will be consistent with a prudent borrowing strategy, aimed at gradually increasing the share of domestic debt and only seeking new external financing on concessional terms. Financing needs originate mainly from the persistent health and economic implications of the COVID-19 pandemic, the delayed resumption of tourism activities, the support to the economic recovery, and the large infrastructure projects in preparation for the Organization of Islamic Cooperation (OIC) conference. Consistent with the external borrowing plan, the authorities have contracted US$12 million in new concessional debt in 2020, well within the program target of US$60 million for the year. Under the program agreement, this leaves an aggregate US$195 million in concessional external debt that the Gambia can potentially contract or guarantee between 2021–23, distributed across the years 2021 (US$55 million), 2022 (US$100 million) and 2023 (US$40 million). Given the assumption that a higher proportion of concessional financing comes from some multilateral creditors in later years, the grant element in 2031 is marginally above the medium-term average.

  • Domestic borrowing: Domestic borrowing from banks was contained in 2020, thanks to on-lending to the government of the IMF’s RCF disbursement. Net domestic borrowing was within the program ceiling targets throughout 2020 and during H1 2021. Public borrowing requirements are expected to steadily decrease, and combined with the use of a portion of the SDR allocation and budget-support disbursements from donors, are estimated to keep domestic borrowing contained within the program ceilings in 2021. Domestic borrowing for the remainder of the program period is expected to remain consistent with reducing debt vulnerabilities and providing sufficient space for private sector financing on the domestic financial market.

  • Exports: Exports of goods and services fell to around 8 percent of GDP in 2020, on the back of a pandemic-induced slump in tourism, worse than projected in the previous DSA. Exports are projected to partially rebound in 2021 (11 percent of GDP) and return to pre-pandemic averages around 2022–23.

  • Current account deficit: The C/A deficit narrowed to 3.6 percent of GDP in 2020, compared to 6.2 percent projected in the previous DSA, on the back of stronger-than-expected remittances in 2020. The deficit is projected to widen to 14.5 percent of GDP in 2021 and average around 12 percent of GDP in the medium term, compared to an average of 10.7 projected in the previous DSA. This is partly due to delayed resumption of the tourism sector and an uptick in imports related to ongoing large infrastructure projects. Meanwhile, remittances climbed sharply in 2020, to 22 percent of GDP, compared to 8 percent projected in the previous DSA. Moving forward, remittances are projected to average around 17 percent of GDP in the medium term, compared to around 11 percent projected in the previous DSA, as flows that shifted from the informal channels into the formal channels during the pandemic are now expected to largely persist.

  • FX Reserves: Gross foreign exchange reserves rose to US$352 million in 2020, equivalent to 4.7 months of imports, compared to US$330 million projected in the previous DSA. Reserves are projected to rise sharply in 2021 to US$497 million (or above 5 months of imports), following the new SDR general allocation; they are estimated to average around US$495 million in the medium term.

8. The realism of the macroeconomic framework is confirmed based on several metrics (Figure 4). The drivers of projected medium-term debt-creating flows for public debt are comparable to those underlying the historical outturns. While the forecast errors have been large even in the past, the relatively large residuals can be partly attributed the debt data reconciliation mentioned earlier in this report. The projected fiscal adjustment for the next three years is well below the top quartile of the distribution of approved Fund-supported programs for LICs since 1990. The contribution of government capital to real GDP growth is conservative and remains in the order of the historical magnitudes. Regarding the relation between fiscal adjustment and growth paths, the baseline projection in 2021 and 2022 deviates from the growth paths under the different fiscal multipliers. However, given the development partners’ support of the Gambia’s vaccination campaign, the resilience of some sectors (e.g. agriculture, remittances-financed construction), and the strong macroeconomic policies (including under the IMF-supported program, the projected rebound in growth seems reasonable albeit with the caveat that the outlook is subject to high uncertainty and downside risks and dependent on the course of the pandemic. The economic growth rebound is broadly consistent with projections in peer countries. Moreover, the projected per capita GDP growth path does not show any noticeable breaks.

Text Table 4.

The Gambia: Key Macroeconomic Indicators, 2020–26

(in percent of GDP, unless otherwise indicated)

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Sources: The Gambian authorities; and Fund staff estimates and projections.
Text Figure 2.
Text Figure 2.

The Gambia: Economic Growth, 2010–26

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

Sources: World Economic Outlook; and IMF staff estimates

Country Classification and Determination of Stress Test Scenarios

9. The Gambia’s debt carrying capacity remains medium. The classification of the Gambia’s debt carrying capacity is based on a CI score of 2.90, which is marginally higher from the previous DSA (2.70) and the previous two vintages, but the classification remains the same as the previous round. The import coverage of reserves is the most significant contributor to the CI score, followed by the CPIA value, which reflects the quality of institutions and policies. The CI score has been updated with the April 2021 WEO.

10. Stress tests follow the standardized settings, with none of the individual tailored stress tests applicable for the Gambia. The standardized stress tests use the default settings, with the combined contingent liabilities test assuming a shock of 8.7 percent of GDP (5 percent of GDP for financing sector shock and 3.7 percent of GDP for non-guaranteed SOEs debt).

Text Table 5.

The Gambia: Debt Carrying Capacity and Thresholds

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External DSA

11. Under the baseline scenario, three of the four external debt indicators temporarily breach the threshold for varying periods within the forecast horizon (Figure 1). The PV of external debt-to-exports breaches the threshold level of 180 in 2021–22, before falling below the threshold and continuing to decline for the remainder of the projection period. The debt-service-to-exports ratio breaches the threshold level of 15 in 2021, and between 2025–29. The external debt service-to-revenue ratio breaches the threshold level of 18 in 2021 and between 2025–28, before falling below the threshold for the remainder of the forecast horizon. The reason for the breach in later years can be attributed to lower growth and revenue projections for those respective years. However, given that these breaches materialize in the medium-term, it gives the authorities an opportunity to enact suitable policies to correct the trend. The PV of external debt-to-GDP remains within the threshold level of 40 for the entire forecast horizon.

12. Under the stress test scenarios, all the indicators breach their thresholds for varying periods under the forecast horizon. The PV of debt-to-GDP breaches the threshold level of 40 in 2022 and falls below the threshold in 2030. The PV of debt-to-exports breaches the threshold level of 180 in 2021 and remains above the threshold for the remainder of the forecast horizon. The debt-service-to-exports ratio breaches the threshold level of 15 in 2021, remains marginally above the threshold until 2030, and declines below the threshold thereafter. The debt-service-to-revenue ratio breaches the threshold level of 18 in 2024 and remains above the threshold for most of the forecast horizon. For the PV of debt-to-exports and debt service-to-exports ratios, the exports shock is the most severe, while for the PV of debt-to-GDP and debt service-to revenue ratios, the combination shock is the most severe.

13. The Gambia’s risk of external debt distress remains high, but sustainable. The weak export-related external debt service indicators in the near term can be attributed to the sharp slowdown in tourism and the associated decline in exports of goods and services. However, these breaches are temporary and will likely be overcome if exports recover as per forecasts in 2022 and beyond. Additionally, the breaches of the debt-service thresholds in later years reflect the period when debt-service deferrals negotiated with creditors are expected to expire, potentially leading to higher debt-service payments coming due in those years. These breaches highlight The Gambia’s limited space for additional borrowing in the near term, as well as emphasize the need to continue to build ample buffers to face the increased debt-service burden that lies ahead.

Public DSA

14. Under the baseline scenario, the PV of total public debt-to-GDP ratio is temporarily in breach of the benchmark in the near term. The PV of total public debt-to-GDP breaches the benchmark level of 55 between 2020–24, but falls within the benchmark level in 2025 and continues to decline thereafter throughout the forecast horizon. Two other indicators of public debt, namely the PV of debt-to-revenue and PV of debt service-to-revenue are on a declining trend for the entire duration of the forecast horizon in the baseline scenario. Under the stress scenario, the PV of total public debt-to-GDP remains above the benchmark for the length of the forecast horizon. The growth shock is the most extreme for the PV of total public debt-to-GDP ratio under the stress scenario. The most extreme shock for the PV of debt-to-revenue ratio is the non-debt creating flows stress test, highlighting the importance of grant disbursements in the baseline financing projections.

15. The Gambia’s overall public debt position is also assessed at high risk of debt distress but remains sustainable. Despite the impact of the COVID-19 shock, the PV of total public debt-to-GDP continues to follow a firmly downward sloping path, remains within the benchmark from 2025 onwards (similar to the previous DSA), continuing to decline thereafter. Since the indicator falls below the benchmark within 4 years of the projection horizon and remains under benchmark thereafter, the overall debt position is deemed sustainable. This assessment, however, is subject to downside risks stemming from a resurgence of the pandemic that potentially causes a prolonged economic recession, with added fiscal pressures adversely affecting the debt profile.

Risk Rating and Vulnerabilities

16. Risks to the assessment are titled to the downside. The economic outlook is subject to high uncertainty and downside risks, notably linked to the evolution of the pandemic, the global economic recovery and the resumption of tourism. Additionally, the recent strong capital inflows from remittances and donor support might not necessarily persist and could add additional pressures on debt servicing. As highlighted in the second review, in a downside scenario, with a resurgence of the pandemic and continued global travel restrictions, tourism could be subdued until end-2021. Under such a scenario, growth could fall to 3.0 percent (2.0 percent below the baseline). The fiscal deficit would widen due to higher health-related spending and lower revenues, increasing financing needs and pushing PV of total public debt to fall below the benchmark level of 55 later than under the baseline. Beyond the pandemic, the main risk is potential political instability from the upcoming presidential and parliamentary elections. Other sources of risks include oil price volatility and natural disasters.

17. Relevant factors that could affect future assessments include data revisions and the speed of infrastructure project execution. As highlighted in the previous staff reports, further efforts are needed to bolster data collection and reconciliation, both for debt as well as external sector statistics. Uncertainty over data quality and delivery could hamper future assessments in a timely and comprehensive fashion. The ongoing WB TA will support debt recording (better understanding and use of the Meridien system), formulation and implementation of the annual borrowing plan and the implementation of the government guarantees framework in the near term. Meanwhile, the execution of public investment projects related to the preparation of the 2022 OIC conference is accelerating. Other large public investment projects are also underway, including the extension of the Port of Banjul. Financing plans with respect to these projects remain in flux and have significant implications for the ceilings on the external borrowing plan. Any deviation from the borrowing plan could pose risks to the debt outlook.

Authorities’ Views

18. The authorities acknowledged the challenging trade-off between addressing near-term financing needs and ensuring medium-term debt sustainability. The COVID-19 pandemic heightened the urgent need for investment to close the country’s infrastructure gap, including in the health sector, and meet the SDGs. In this regard, the authorities committed to continued efforts to reduce debt vulnerabilities given that the public debt profile is still at high risk of distress, aiming at reducing the present value of total public debt below the benchmark of 55 percent of GDP by 2025. They aim to meet this objective through a combination of a strong medium-term fiscal framework and a prudent borrowing policy. They also committed to improving efforts to bolster data collection and reconciliation, including on debt service deferrals agreed with creditors in 2019. In this regard, they will initiate a bi-annual data reconciliation exercise with creditors and coordinate with managers of foreign-financed projects to ensure that their disbursement requests are processed through the debt management office (DLDM) and processed disbursements are systematically communicated to DLDM. On external arrears, they have made some progress in re-engaging with the Libyan authorities to resolve outstanding arrears, and plan to re-engage with the Venezuelan authorities once the sanctions are lifted. Please see Annex VII in the staff report for more details on the external arrears.

Figure 1.
Figure 1.

The Gambia: Indicators of Public and Publicly Guaranteed External Debt Under Baseline and Alternative Scenarios, 2021–31

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department.
Figure 2.
Figure 2.

The Gambia: Indicators of Public Debt Under Alternative Scenarios, 2021–31

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.
Figure 3.
Figure 3.

The Gambia: Drivers of Debt Dynamics – Baseline Scenario External Debt

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

1/ Difference between anticipated and actual contributions an debt ratios.2/ Distribution across LICs for which LICDSAswere produced.3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation
Figure 4.
Figure 4.

The Gambia: Realism Tools

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A003

Table 1.

The Gambia: External Debt Sustainability Framework, Baseline Scenario, 2018–41

(in percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections.1/ Included both public and private sector external debt.2/ Derived as[r- g – p(l + g)l/(1+ g + p + gp) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and p = growth rate of GDP deflator in US-dollar terms.3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign interest rate; g – real GDP growth rate, and p = growth rate of GDP deflator in U.S. dollar terms.4/ Includes relief under CCRT.5/ Current-year interest payments divided by previous period debt stock.6/ Defined as grants, concessional loans, and debt relief.7/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between tha face value and PV of new debt).8/ Assumes that PV of private sectoe debt is equivalent to its face value.9/ Historical averages are generallly derived over tha past 10 years, subject to data availability, whereas projections are over the first year of projection and the next 10 years.
Table 2.

The Gambia: Public Sector Debt Sustainability Framework Baseline Scenario, 2018–41

(in percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections.1/ Coverage of debt: The central government, central bank, government-guaranteed debt. Definition of ecternal debt is Currency-based.2/ Includes relief under CCRT.3/ The underlying PV of ecternal debt-to-GDP ratio under the DSA differs from the external DSA with the size of differences depending on exchange rates projections.4/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.5/ Gross financing need is defined as the primary deficit plus the stock of short-term debt at the last period and other debt creating/reducing flows.6/ Defined as a primary deficit minus a change in the public debt-lo-GDP ratio [(-): a primary surplus), which would stabilizes the debt ratio only in the year in question.7/ Historical averages are generally derived over the past 10 year, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 3.

The Gambia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2021–31

(in percent)

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Sources: Country authorities; and staff estimates and projections.1/ A bold value indicates a breach oF the threshold2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest curnent account in percent of GDP, and non-debt creating flows.3/ Includes official and private transfers and FDI.4/ Shock set at S.7 per ten! o1 GDP (5 percent ol GDP represents a financial sector shock and 3.7 percent of GDP accounts fen no n-guaranteed SOEs debt).
Table 4.

The Gambia: Sensitivity Analysis for Key Indicators of Public Debt, 2021–31

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Sources: Country authorities and staff estimates and projections.1/ A bold value indicates a breach of the threshold.2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.3/ Includes official and private transfers and FDI.4/ Shock set at 8.7 percent of GDP.
1

The Gambia’s Composite Index is estimated at 2.90 and is based on April 2021 WEO and 2019 WB CPIA; the debt carrying capacity remains medium.

2

The sharp upward revisions in debt and debt service projections were mainly attributed to corrections in loan disbursements made in 2019 and 2020 by a Middle East creditor, and due to incorrect recording of the debt service deferrals agreed with bilateral creditors in 2019.

3

This amount includes relief by the ECOWAS Bank for International Development (EBID) worth US$1.4 million.

The Gambia: Article IV Consultation, Third Review under the Extended Credit Facility Arrangement, Request for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Gambia
Author: International Monetary Fund. African Dept.
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    The Gambia: Total Public Debt and PPG External Debt

    (Percent of GDP)

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    The Gambia: Economic Growth, 2010–26

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    The Gambia: Indicators of Public and Publicly Guaranteed External Debt Under Baseline and Alternative Scenarios, 2021–31

  • View in gallery

    The Gambia: Indicators of Public Debt Under Alternative Scenarios, 2021–31

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    The Gambia: Drivers of Debt Dynamics – Baseline Scenario External Debt

  • View in gallery

    The Gambia: Realism Tools