Fixing the Imbalances

The International Monetary Fund has come in like a knight in shining armour to amend the Gambia’s economic dent caused by both external and internal shocks.

The Fund, in trying to observe one of its traditional roles of helping member countries sustain their balance of payments (BOP) status, and mend some of the wounds that have been sustained by the country’s economy due to the shocks, has approved emergency financial assistance of about US$10.8 million under the Rapid Credit Facility (RCF) in the amount equivalent to SDR7.775 million for The Gambia to enable the government to meet their urgent balance of payments and fiscal needs.

It is no secret that the Ebola crisis in some parts of West Africa has caused serious loss and setback in human lives and economic growth not only at the epicentres of the Ebola viral disease, but also in other countries in the sub-region such as The Gambia.

Though The Gambia remains completely free of Ebola the crisis has caused a deep decline in tourism-related activities - the economy’s principal foreign currency earner - of about 60 per cent.

In tandem with this setback, there is also a significant drop in agricultural production with serious implications for growth in the times ahead, as well as on food security.

Moreover, this situation has fallen on a bed of policy slippages and persistent financial difficulties in public enterprises that have challenged the government to take desperate measures to turn around the country’s economic wellbeing for the better, including seeking the helping hand of the IMF.

All these have led to a serious situation of balance of payments snag that is diminishing the country’s ability and power to meet the payment for its needs derived from abroad, making the IMF a knight in shining armour as it has approved about US$10.8 million to stave off the imminent difficult situation of the economy.

“The Gambia is facing urgent balance of payments needs triggered mostly by the impact of the regional Ebola outbreak on tourism. Although the country remains free of Ebola, the regional outbreak is expected to cut by more than half tourism receipts for the 2014/15 season, giving rise to an urgent balance of payments need.

“At the same time, the delayed summer rain has led to a significant drop in agricultural production with serious implications for growth in 2014 and food security.

“Policy slippages and persistent financial difficulties in public enterprises have exacerbated the problems and pushed The Gambia’s Extended Credit Facility (ECF) arrangement off track,” said Min Zhu, Deputy Managing Director of the IMF.

The IMF financial assistance, as stated, is intended to address the urgent balance of payments needs that have arisen on account of the shock.

It is, therefore, expected to help fill budgetary gaps, while the authorities implement economic and structural policies aimed at restoring macroeconomic stability and reducing poverty.

“Balance of payments snag diminishes the country’s ability and power to meet the payment for its needs derived from abroad.”

The Point