head of the IMF staff team that visited the Gambia since the 3rd May to assess
the implementation of its ongoing programs, has warned the government to
refrain from any sort of borrowing from external donors.
Rather, The Gambia should focus on a sustainable debt management policy, and use domestic loans to roll-over the existing bonds, Mr. Jaroslaw Wieczoreck told journalists at a press conference held at the Ministry of Finance in Banjul today.
“With Gambia’s debt at 130 percent of the GDP, ideally, the government should refrain from any borrowing externally, and domestically should have used it to roll-over the existing bonds,” Wieczoreck told journalists.
“What Gambia needs in the meantime is a very sound debt management policy,” he pointed out, further warning that the country’s debt may even go higher.
“There are many reasons this debt is going up. Let me be very clear and I hope the minister agrees with me, that it may even go higher because we have not opened the books of the state-owned enterprises… It could be a lot of liability,” the IMF official added.
“So, our position is that the government should insists on receiving grants until we could assess the entire situation after the audits are completed,” he added.
Gambia’s Minister of Finance indicated they have presented an “ambitious plan” to the Group, considering the scale of Gambia’s challenges. He said they inherited arrears, loans from commercial banks and NAWEC bonds that they had to deal with…. Over the past one year.
Gambia already paid off all the arrears and continues to service its debt obligations. “We are negotiating with our creditors to seek a relief, either in restructuring or absolute debt relief as China did; Saudi Fund also signed an agreement where they’ve frozen repayments for five years (from 2018),” Minister Amadaou Sanneh said, adding that they will continue to negotiate with hopes of better results.
Gambia’s Central Bank, considering the domestic debt of government comprises a significant component of the national debt stock, introduced a three, and a five-year treasury bond as a way of restructuring the domestic debt. This is opposed to the usual three, six and one-year bonds that Jammeh government used as a way of raising funds for servicing projects. “This is to extend the maturity and reduce the roll-over risk. We were able to raise D2billion to restructure the debt,” Bakary Jammeh, Central Bank Governor said.
Meanwhile, the IMF team maintains that Gambia government produces a plan to deal with these liabilities, and another for financing, mostly, through grants. “If grants cannot be found, you just retain an understanding that The Gambia would seek loans with concessionality of 50 percent or higher…,” Wieczoreck told journalists.
He added that given the high level of distress, such is the standard policy. At some point, you will even have to agree on an additional limit on an actual amount of borrowing…, he added, explaining that even at that, it should be reserved for critical needs such as lack of medicines at the hospitals.