The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of The Gambia's economic performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement, and approved an increase in financial assistance under the arrangement in an amount equivalent to SDR 6.215 million (about US$9.2m) to help mitigate the impact of the global slowdown, a statement from the IMF said.
The completion of the review, according to the statement, allows for the immediate disbursement of an amount equivalent to SDR 5.11 million (about US$7.5 million) including SDR 3.11 (about US$ 4.6 million) from the augmented amount, bringing total disbursement under the arrangement to SDR 13.11 million (about US$19.3 million).
"The Executive Board also approved the authorities' request to waive the non observance of the fiscal basic balance performance criterion, and to modify quantitative performance criteria for end-March 2009", the statement added.
Following the Executive Board's discussion, Mr Murilo Portugal, deputy managing director and acting chair, said: "The Gambian authorities are to be commended for the satisfactory implementation of their PRGF-supported program and their commitment to prudent economic policies, which have contributed to robust growth and moderate inflation.
Nevertheless, The Gambia has not been spared from the effects of the global economic crisis, with international reserves declining and the current account deficit widening as a result primarily of reduced income from tourism and remittances".
Mr Portugal added: "The authorities remain committed to achieving sustained growth and poverty reduction by maintaining fiscal discipline, reducing the still high debt levels and promoting private sector development. The authorities will increase the share of budgetary resources allocated to poverty reduction, in line with the priorities of their poverty reduction strategy, and in order to make faster progress towards achieving the Millennium Development Goals. The authorities intend to review the system of investment incentives while maintaining fiscal prudence".
The boards deputy director further revealed that the fiscal policy is being strengthened to ensure long-term fiscal sustainability. "The authorities have appropriately scaled back their expenditure plans to partially compensate for the contraction of revenues. They have also maintained the retail prices of petroleum products at current levels to allow for some recovery in government revenues. Going forward, it will be important to improve the revenue base, rationalize taxation, better align the budget with PRSP priorities, and further strengthen public financial management".
The commitment of the Central bank of The Gambia to maintain a monetary policy designed to keep inflation at single-digit levels, Mr Portugal added, is commendable.
"The authorities are appropriately planning to rebuild international reserves in order to provide a stronger buffer against adverse external developments, and the augmentation of access under the PRGF arrangement will provide helpful support in this regard".
However, Mr Portugal further added that The Gambia remains at high risk of debt distress, even after receiving HIPC and MDRI debt relief, due to high levels of debt in relation to exports and vulnerability to external shocks. "It is important to expedite the formulation of a national debt strategy to guide government borrowing decisions and ensure long-term sustainability. As much as possible, there should be reliance on grants to finance the country's development programs," Mr Portugal said.
