IMF Country rep in The Gambia has said that the total budget support to the
country around the mid-year equals to 7.2% of GDP which is very sizeable.
The European Union provided 25 million euros, World Bank $56.1 million and an additional budget support is expected from the African Development Bank before the end of the calendar year, Ruby E.M. Randall told journalists yesterday.
Thanks to donor intervention, such a high challenge to the new government upon coming to power has helped to stabilise the economy in terms of debt-to-GDP ratio.
Ms Randall said Gambia was considered to be in debt distress at the time of change of government earlier this year.
“In fact, the debt was considered unsustainable particularly following the downgrading of this country’s rating. The debt-to-GDP ratio at the end of 2016 reached 120%,” she said.
In perspective, Senegal’s debt ratio to GDP was 57%, while the average GDP ratio for ECOWAS was 29%. Sub Saharan Africa, including South Africa and Nigeria, which have lower debt to GDP ratio, stands at an average of 53%.
Debt vulnerabilities, SMP
The Gambia is facing significant debt vulnerabilities and a big part of what the IMF is doing is working with the authorities to address those vulnerabilities.
The SMP is a micro framework of consistent policies that are designed to achieve macro-economic stability and put the country on a sustainable road path. As part of that agenda, authorities are engaging with IMF to address their debt vulnerabilities.
“The executive board meeting at end of June 26 this year approved the disbursement under the Rapid Credit facility of $16.1 million for balance of payment support to The Gambia. Also at that time, the Staff Monitored Program (SMP) also began its implementation,” Ms Randall said, noting that the core objectives of SMPs were to help catalyse budget support.
The disbursement of the funds by the IMF had helped to encourage other development partners to provide budget support to The Gambia, she said.
“This is particularly important when you consider the high debt-to-GDP ratio. The flip side of it is that a high amount of government resources are being spent on debt servicing, thereby crowding out other priority spending areas such as poverty alleviation expenditures and social spending,” she said.
SMP is also a vehicle for allowing the authorities to build a successful track record to demonstrate their readiness to transition to a formal fund arrangement called an Extended Credit Facility (SMP). An IMF team will come in November to do a formal SMP review, return back 6 months later to conduct a second SMP review and also issue a formal request to transition into the ECF.
“So addressing the high debt vulnerabilities creates fiscal space for priority spending,” she added.
Gambian authorities are undertaking measures both on fiscal and revenue side through cutting expenditures primarily at the Office of the President. According to the IMF staff, they are also undertaking a number of other reforms including vehicle fleet reform and travel policy, and a number of others to cut expenditures.
“They are also mobilising revenue, asset sales, and restructuring the debt at the central bank, issued a three year bond and create savings from that measure to the tune of about 1.5% of GDP,” Ms. Randall said, arguing that addressing the high debt vulnerabilities creates fiscal space for priority spending.