Washington,
DC – The Executive Board of the International Monetary Fund (IMF) recently
approved a disbursement of SDR 15.55 million (about US$21.3 million or 25
percent of its SDR quota) for The Gambia under the Rapid Credit Facility (RCF).
The financing provided under the RCF will help the country meet its urgent
balance-of-payments (BOP) need as well as support the authorities’ efforts to
contain the spread of COVID-19 and limit its adverse economic and social
impacts.
The
Gambia is being severely affected by the COVID-19 pandemic. While the spread of
the virus in the country remains contained, The Gambia is extremely vulnerable
to the pandemic due to the density of its population and a weak health system.
The
economic impact is large. The global pandemic and related emergency measures
have halted tourism (the mainstay of The Gambian economy), disrupted trade, and
reduced remittances and private capital inflows. The real GDP growth projected
for 2020 has been revised from 6.3 percent to 2.5 percent and the BOP outlook has
weakened by about US$46 million (2.4 percent of GDP). The immediate gross
fiscal impact, including revenue shortfalls due to the disruption of economic
activity and the expected delay in public investment, is estimated at about 3.6
percent of GDP. Half of this amount corresponds directly to emergency spending
on healthcare and logistics, and increased spending on social support,
including food distribution, compensation to frontline workers and support to
small businesses.
The
emergency support to The Gambia will supplement financing from the IMF under a
US$47.1 million Extended Credit Facility arrangement for The Gambia approved on
March 23, 2020. To accommodate the worsened BOP outlook, the IMF Executive
Board also approved today the authorities’ request to modify the ECF
performance criteria on net usable international reserves and net domestic
assets of the central bank.
The
Gambia has also benefited from the IMF Executive Board decision of April 13,
2020 to provide debt service relief to all countries eligible for support from
the International Development Association (IDA) in the form of grant assistance
under the Catastrophe Containment (CC) window of the Catastrophe Containment
and Relief Trust (CCRT). As a result, The Gambia will receive relief from the
CCRT on debt service falling due to the IMF in the next 6 months (about US$2.9
million). This relief could be extended for up to 2 years, subject to the
availability of resources under the CCRT.
Following
the Executive Board discussion, Mr Tao Zhang, Deputy Managing Director and
Acting Chair, issued the following statement:
“The
global COVID-19 pandemic is straining The Gambian economy, notably as
international travel and tourism are halted. The Gambian authorities are acting
decisively to contain the domestic spread of the pandemic and mitigate its
impact on the economy. The IMF Executive Board’s approval of a disbursement
under the Rapid Credit Facility will help fill the urgent balance-of-payments
need and augment budget resources.
“The
authorities’ support for social programs is being severely tested. In this
context, a better targeting and timely delivery of social assistance to the
most affected households and sectors is needed during the pandemic.
“It
is important to establish appropriate criteria and reporting requirements for
the use of emergency spending and ensure that COVID-related operations and
outlays undergo a full independent audit to enhance transparency. In order to
safeguard debt sustainability, the authorities are encouraged to seek additional
grant financing for emergency spending.
“The
Central Bank of The Gambia should continue to monitor developments in the
financial sector, to ensure adequate liquidity and oversight, while avoiding a
blanket weakening of supervisory standards. A strengthening of market
surveillance under the existing regulations will help detect and address
appropriately any weakening of banks’ foreign exchange positions. Maintaining a
flexible exchange rate will help absorb balance-of-payments shocks.”
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