The
executive board of the International Monetary Fund (IMF) has recently endorsed
the disbursement of US$16.1 million emergency financial assistance to The
Gambia government.
The disbursement was under the Rapid Credit
Facility (RCF), a lending arrangement through which IMF provides rapid
financial support in a single, up-front payout for low-income countries facing
urgent financing needs.
According
to a statement from the IMF, the $16.1 million was approved for The Gambia “to
enable the authorities to meet their urgent balance of payment needs and “a
precariously low level” of usable international reserves.
The
Executive Board’s approval of the RCF disbursement will also enable the
authorities to engage in further discussions with the donor community regarding
assistance to meet their remaining financing needs. The Board’s approval
enables the immediate disbursement of the full amount of the RCF loan, which is
equivalent to 18.75 percent of The Gambia’s quota in the IMF.
Following
the approval, Mr Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair,
said: “The Gambia faces an urgent
balance of payments need triggered by a weak agricultural season, lower tourism
receipts due to the political turmoil early this year, and higher commodity
prices. These shocks along with past economic mismanagement have exacerbated an
already weak economic situation.
“The
Gambian authorities are strongly committed to a break with past policies and to
restoring macroeconomic stability and debt sustainability. To that end, they
intend to implement strong fiscal measures in 2017 and beyond. They have
committed to drastically reducing domestic borrowing, including by ending
central bank deficit financing, and are taking substantive measures to increase
non-tax revenue and reduce expenditures in 2017.
The
authorities also plan to undertake comprehensive reforms of key state-owned
enterprises to secure the planned fiscal adjustment. These efforts are
complemented by substantial external support from development partners.
However, sustained further efforts beyond 2017 will be needed to secure fiscal
sustainability.
“The
Gambia’s high public debt exposes it to significant vulnerabilities. To reduce
these vulnerabilities, multilateral development banks have committed to provide
additional support and assurances of highly concessional support have been
received from some of The Gambia’s major official bilateral creditors. The
authorities are also committed to developing a strategy to reduce
vulnerabilities stemming from domestic debt. These actions will help make debt
sustainable over the medium term, although risks are expected to remain
elevated.
Over
the coming months, it will be important for the authorities to continue to
pursue a coordinated approach to secure assurances of support from other
official creditors to reduce debt vulnerabilities.
“The
IMF is supporting the efforts of The Gambia with resources from the Rapid Credit
Facility. In addition, determined and strong policy implementation under the
staff monitored program will be critical to restoring macroeconomic stability,
help catalyze further donor financing and establish a track record as the basis
for future program engagement with the IMF.”
Background.
The Gambia is at a historical turning point, with the transition to a
democratically elected government committed to the rule of law, freedom of
speech and socio-economic development ending the 22-year reign of the
autocratic regime of former President Jammeh.
However, the new government has inherited a
dire economicsituation and the country is faced with an urgent balance of
payments need and a precariously low level of usable international reserves.
The
Gambia has been hit by a bad agricultural season, the political turmoil
following the elections in December 2016 is expected to reduce tourism receipts
in the first quarter of 2017 by about one third, and higher fuel and commodity
prices put further strain on the balance of payments (BOP). The total
BOP-impact of these shocks in 2017 is estimated at $31 million (3 percent of
GDP).
Finally,
the new government is uncovering massive theft and embezzlement of funds by the
previous regime mainly from state-owned enterprises (SOEs). International
development partners have been quick to reengage and have indicated that
substantive support is forthcoming.
