FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUEST FOR A WAIVER OF NONOBSERVANCE AND MODIFICATION OF A PERFORMANCE CRITERION, AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE GAMBIA
In the context of The Gambia – Fourth Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance and Modification of a Performance Criterion, and Financing Assurances Review, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 10, 2022, following discussions that ended on April 8, 2022, with the officials of the Gambia on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on May 24, 2022.
A Debt Sustainability Analysis prepared by the staff(s) of the IMF and the World Bank.
A Statement by the Executive Director for the Gambia.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
IMF Executive Board Completes Fourth Review under the Extended Credit Facility Arrangement for The Gambia and Approves US$ 6.72 Million Disbursement
FOR IMMEDIATE RELEASE
The IMF Executive Board decision allows for an immediate disbursement of about US$ 6.72 million to The Gambia to help meet the country’s financing needs, address the repercussions of the war in Ukraine, and support the post-pandemic recovery.
Despite the various waves of the COVID-19 pandemic, the Gambian economy grew by 4.3 percent in 2021 and is expected to grow by 5.6 percent in 2022.
The authorities remain committed to strong policy measures and structural reforms, including on fiscal management, State-Owned Enterprises, and governance.
Washington, DC – [June 10, 2022]: The Executive Board of the International Monetary Fund (IMF) today completed the fourth review under the Extended Credit Facility (ECF) arrangement for The Gambia. The completion of the review enables an immediate disbursement of SDR 5 million, about US$ 6.72 million, to help meet the country’s balance-of-payments and fiscal financing needs, support the post-pandemic recovery, and address challenges from the war in Ukraine. This brings total disbursements under the ECF arrangement to SDR 45 million. The Board also completed a financing assurances review and granted a waiver of nonobservance of a performance criterion on the ceiling on the net domestic borrowing of the central government.
The Gambia’s economic growth is estimated at 4.3 percent in 2021 despite the various waves of the COVID-19 pandemic. Growth is projected to reach 5.6 percent in 2022, predicated on strong remittance inflows, a robust expansion of the construction sector, and large public investment projects. The repercussions of the war in Ukraine intensify inflationary pressures, exacerbate pandemic-related uncertainties, dampen tourism prospects, and disrupt the supply of food and agricultural inputs. The central bank took initial measures to contain inflationary pressures, as inflation reached 11.7 percent at end-April 2022. The authorities are advancing reforms on several fronts, including the transparency of COVID-19 spending, the institutional framework of State-Owned Enterprises, revenue administration, and public financial management.
Following the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director, made the following statement:
“The Gambia’s democratic progress is commendable, including the successful organization of peaceful and transparent presidential and parliamentary elections. Performance under the economic program supported by the Extended Credit Facility (ECF) has been broadly satisfactory despite challenges related to the COVID-19 pandemic and the electoral context. The economy is gradually recovering but the spillovers from the war in Ukraine are hampering a vigorous rebound and intensifying inflationary pressures.
“Fiscal and monetary policies aim at ensuring an appropriate balance between supporting the post-pandemic economic recovery, addressing the repercussions of the war in Ukraine, containing inflationary pressures, and safeguarding debt sustainability. In the context of a weakened tax base and elevated spending needs, it would be paramount to further streamline tax exemptions, rationalize subsidies to SOEs, strengthen cash management, and better prioritize public investment projects. The authorities are advancing reforms on governance, including the transparency of COVID-19-related spending and the management of state-owned enterprises (SOEs).
“In view of lingering vulnerabilities, including anticipated increases in debt service at the expiry of the debt service rescheduling period, it would be important to maintain adequate fiscal and external buffers. To this end, it would be advisable to adhere to the external borrowing plan under the ECF-supported program and seek grants and highly concessional loans.
The authorities would be encouraged to persevere in their ambitious structural ref orm agenda, including on transitional justice reforms and the improvement of the business environment to support private sector-led growth and poverty reduction, as well as to build resilience to climate change.”
FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUESTS FOR A WAIVER OF NONOBSERVANCE AND MODIFICATION OF A PERFORMANCE CRITERION, AND FINANCING ASSURANCES REVIEW
May 24, 2022
Context. The Gambia is consolidating its democratic change by successfully organizing peaceful and transparent elections. President Barrow was reelected for a second five-year term in December 2021; his party and its alliance hold half of the parliamentary seats following an election in April 2022. A fourth wave of the COVID-19 pandemic hit the country in late 2021-early 2022. New infection cases have dropped to almost nil recently. The vaccination rate currently stands at about 20 percent of the adult population. The Gambia is already facing significant repercussions of the war in Ukraine.
Macroeconomic developments and outlook. Economic growth is estimated at 4.3 percent in 2021, supported by record-high remittances and robust construction sector. Tourist arrivals started to recover but remained largely below pre-pandemic levels. Inflation accelerated to 8.2 percent in March 2022, exacerbated by pressures on global fuel and commodity prices originating from the war in Ukraine. Forex reserves reached 5.8 months of imports in March 2022. Budget execution has been adversely impacted by pressures from the organization of the elections and COVID-19 pandemic in 2021, and by fuel revenue losses resulting from the authorities ‘ decision to reduce fuel taxation to contain domestic fuel price increases in 2022. The outlook is clouded by significant downside risks. A potential resurgence of the COVID-19 pandemic and protraction of the war in Ukraine would endanger the fragile economic recovery, particularly of the tourism sector. Domestic food and fuel prices would soar further. Fiscal and debt sustainability would be challenged by additional pandemic spending and further fuel revenue loss.
Program performance. Performance under the E CF-supported program was broadly satisfactory, despite the difficult pandemic and electoral environments. All but one quantitative performance criteria (QPCs) as well as all but one indicative target (ITs) at end -December 2021 were met. Of the four structural benchmarks (SBs) for end-December 2021, two were met and the remaining two were satisfied with delays.
Program objectives in 2022. The fiscal framework in 2022 aims to ensure an appropriate balance between supporting the post-pandemic economic recovery, addressing the repercussions of the war in Ukraine, and safeguarding debt sustainability. This balance will be achieved through a policy mix consisting of domestic fuel price adjustment, revenue collection efforts, prioritization of spending, and some relaxation of the fiscal deficit and financing. Some tightening of the monetary policy stance will be initiated to address the mounting inflationary pressures while safeguarding the nascent economic recovery. The structural reform agenda will continue to be centered on revenue administration, public financial management, and governance, including digitalization, public procurement, prioritization of public investment, state-owned enterprises, and fight against corruption.
Staff’s views. Considering the satisfactory implementation of the program and the strong policy commitments going forward, staff recommends completion of the fourth ECF review and supports the authorities’ requests for a waiver of nonobservance and modification of a performance criterion.
Montfort Mlachila (AFR) and Geremia Palomba (SPR)
The mission took place in hybrid format during March 28–April 8, 2022, and comprised Messrs. Razafimahefa (head), Kemoe, Kumah, and Nachega, and Ms. Singh (all AFR), Ms. Han (FAD), and Messrs. Suryakumar (SPR), Barry (resident representative), and Mendy (local economist). The team met with President Adama Barrow and Vice President Isatou Touray, and held discussions with Finance Minister Mambury Njie, Central Bank Governor Buah Saidy, other public officials, and private sector operators. The mission briefed development partners and held a press conference. Mr. Cham (advisor, OEDAE) participated in the meetings. Staff from the African Development Bank, the European Union, and the World Bank attended several meetings. Following the Cabinet reshuffle in early May 2022, staff held discussions with new Finance Minister Seedy Keita. Ms. Barry (local office manager) helped on the organization of the mission. Ms. Jaghori and Pilouzoue assisted in the preparation of this report.
RECENT ECONOMIC DEVELOPMENTS
PERFORMANCE UNDER THE PROGRAM
ECONOMIC OUTLOOK AND RISKS
A. Fiscal Policy and Debt Sustainability
B. Monetary Policy and Financial Sector Issues
C. Public Financial Management, Governance, and Other Structural Reforms
1. Recent Economic Developments, 2014–21
2. Fiscal Sector Developments, 2014–21
3. Recent Monetary Developments, 2016–21
4. Recent Financial Sector Developments, 2017–21
5. Medium-Term Outlook, 2020–27
1. Selected Economic Indicators, 2020–27
2a. Statement of Central Government Operations, 2020–27 (Millions of local currency)
2b. Statement of Central Government Operations, 2020–27 (Percent of GDP)
3. Statement of Central Government Operations, 2021–22 (Cumulative, millions of local currency)
4a. Monetary Accounts, 2020–27 (Millions of local currency)
4b. Monetary Accounts, 2020–27 (Percent changes)
5. Monetary Accounts, 2020–22
6a. Balance of Payments, 2020–27 (Millions of U.S. dollars)
6b. Balance of Payments, 2020–27 (Percent of GDP)
7. External Financing Needs, 2020–23
8. Decomposition of Public Debt and Debt Service by Creditor, 2021–2023
9. Financial Soundness Indicators for the Banking Sector, 2015–21
10. Indicators of Capacity to Repay the Fund, 2021–32
11. Disbursements Under the ECF Arrangement, 2020–23
I. Review of Support from Development Partners
II. Medium-Term Fiscal Framework
III. SOEs Sector Reform
IV. Risk Assessment Matrix
V. Capacity Development Strategy 2021–22
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
African Continental Free Trade Agreement
African Development Bank
Balance of Payments
Banjul Rehabilitation Project
Central Bank of The Gambia
Consumer Price Index
Debt Sustainability Analysis
Extended Credit Facility
Financial Sector Stability Review
Gambia Tax Management System
The Gambia Bureau of Statistics
Gross Domestic Product
The Inter-Governmental Action Group against Money Laundering in West Africa
Gambia Investment and Export Promotion Agency
The Gambian dalasi
The Gambia National Petroleum Corporation
The Gambia Public Procurement Authority
The Gambia Revenue Authority
International Financial Institution
Integrated Financial Management Information System
Islamic Development Bank
Integrated Tax Management System
Islamic Trade Finance Corporation
Letter of Intent
Ministries, Departments, and Agencies
Memorandum of Economic and Financial Policies
Ministry of Finance and Economic Affairs
Memorandum of Understanding
Medium-Term Debt Strategy
Medium-Term Fiscal Framework
National Water and Electricity Corporation
Net Domestic Borrowing
National Development Plan
National Food Security, Processing, and Marketing Corporation (previously GGC: The Gambia Groundnut Corporation)
The Gambia: Fourth Review under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance and Modification of a Performance Criterion, and Financing Assurances Review - Press Release; Staff Report; and Statement by the Executive Director for The Gambia