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The Gambia: Request for Disbursement Under the Rapid Credit Facility, Cancellation of the Extended Credit Facility Arrangement, and Proposal for a Staff-Monitored Program—Debt Sustainability Analysis

Author(s):
International Monetary Fund. African Dept.
Published Date:
April 2015
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Underlying Assumptions

1. The macroeconomic framework underlying the DSA incorporates estimated shocks to tourism exports and agricultural output as well as the authorities’ consolidation program. The regional Ebola outbreak has deterred tourists from traveling to The Gambia, likely resulting in a 60 percent decline in the country’s principal export in 2014/15 tourism season. Erratic rainfall patterns and border closures due to the Ebola crisis have also weighed on traditional exports and related imports causing a short term decline in the growth of trade flows. Both are expected to recover after 2016 and long-run growth forecasts remain roughly unchanged compared with the previous DSA. Downside risks to growth remain, particularly in the recovery in tourism, and are captured in the negative growth shock scenario.

2. Debt accumulation has been significantly larger anticipated in the 2013 DSA due to fiscal slippages. Fiscal execution fell short of program targets in the second half of 2013, while further slippages, support for SOEs, and losses associated with Ebola caused further significant accumulation of debt in 2014. In total, the net present value of public debt rose by six percent of GDP from end-2012 to end-2014, against a forecast of a 7 percent fall. This number difference would be even starker but for the change in discount rate used to assess public debt between the last DSA and this one (see below). Continuing trends identified in the previous DSA, new debt accumulation was primarily domestic. Domestically denominated debt accounted for two thirds of net borrowing and raising the domestic share of public debt to 45 percent, up from 33 percent in 2008. Domestic debt is shorter in duration and comes at a higher interest rate increasing both the costs and the risks of the debt stock.

3. The medium-term fiscal outlook includes the fiscal consolidation the authorities committed to in the MEFP, recovery of growth, and therefore improved revenue performance. Revenues are expected to perform well over the medium term owing to recent improvements in revenue collection efficiency with the help of Fund technical assistance, as well as the various revenue measures listed in the MEFP, including the elimination of fuel subsidies that took place in late 2014. The government has also committed to finding solutions to SOE’s financial problems which will also boost revenue collection going forward. The fiscal consolidation anticipated in the previous DSA did not take place during 2013–14, but the authorities have committed to a strong fiscal adjustment starting in 2015 in order to return to fiscal sustainability and have begun implementing necessary actions to realize their ambitious fiscal consolidation target.

Public Debt Accumulation

(2013-2014, percent of GDP)

4. A recent revision to historical BOP estimates has reduced historical and forecast debt dynamics residuals. The IMF’s BOP estimates have recently been harmonized with the authorities’ estimates. At the time of the last DSA, staff maintained separate estimates for BOP data from those of the authorities. Staff estimated, for example, a current account deficit of 16.2 percent for 2013, while the authorities estimated a current account surplus (see Text Table 1). Staff estimates had difficulty explaining actual rates of accumulated external debt (see Text Table 2). Recent TA from the IMF and DFID, along with a sustained revision effort at the CBG, have brought the authorities estimates into better alignment with external debt data and the rest of the macroframework. Staff has adopted these estimates in the current macroeconomic framework and this DSA. While these revisions have not significantly affected the forecast path of external debt, the current account deficits are now in the high single digits and historical debt dynamics residuals are smaller and unbiased compared with the previous DSA.

Text Table 1.The Gambia: Selected Macroeconomic Indicators
20132014201520162017201820192020-2034
Real GDP Growth (percent)
Current DSA4.8-0.25.18.76.25.95.95.9
Previous DSA19.08.56.55.95.95.5
CA deficit (percent of GDP)2
Current DSA10.712.613.510.29.59.19.08.6
Previous DSA16.214.413.613.31313.6
Exports of goods and services growth (percent)3
Current DSA-6.0-11.3-26.142.715.512.49.17.7
Previous DSA6.67.47.67.67.87.0
Imports of goods and services growth (percent)3
Current DSA-7.2-0.9-9.910.310.910.18.57.5
Previous DSA0.64.45.76.66.77.5
Overall fiscal deficit4
Current DSA58.613.33.21.61.90.91.01.1
Previous DSA1.71.71.71.31.30.9

May 2013 (IMF Country report No. 13/139)

Includes worker’s remittances

In currnt dollar terms, including reexports.

Includes reexports and grants.

Deficit forecast through 2028

May 2013 (IMF Country report No. 13/139)

Includes worker’s remittances

In currnt dollar terms, including reexports.

Includes reexports and grants.

Deficit forecast through 2028

Text Table 2.The Gambia: BOP Data Revision and Debt Dynamics, 2011
Authorities’ Previous

Estimates
Staff’s Pevious

Estimates
Harmonized

Estimates
External debt (percent GDP)46.046.046.0
Change in external debt2.82.82.8
Identified net debt-creating flows-7.411.88.4
of which: Non-interest current account deficit-11.114.711.3
Residual (3-4) 3/10.2-9.0-5.6

5. The adoption of a uniform 5 percent discount rate on NPV calculations has improved the debt outlook. Consistent with the policy adopted by the IMF Board of Directors, the net present value of debt is now assessed at a uniform 5 percent discount rate. The discount rate used in the previous DSA was 3 percent. This change reduced the NPV of the stock of external debt by about 4 percent of GDP and that of total public debt by about 5 percent. These reductions were offset by unanticipated borrowing during 2013–14.

External DSA

6. External debt indicators are not projected to breach established debt thresholds for a sustained period.3 Due to the dramatic decline in tourism and erratic rains, most debt indicators are projected to spike in 2015, temporarily breaching the threshold for the present value of external debt to exports ratio. This is a denominator-driven effect which is anticipated to fall back below the threshold after 2016, failing to meet the standard of a sustained breach. All other indicators peak below established thresholds and moderate further over the forecast horizon.

7. Alternative scenarios indicate different long-run paths for debt distress indicators but remain below established thresholds. Forecast indicator paths under a historical scenario are slightly more optimistic than those under the baseline, principally due to a slightly lower current account deficit in the initial years of the forecast (9.2 percent of GDP). An alternative scenario with less favorable financing yields results similar to the baseline scenario with mildly more pessimistic long run implications. In that scenario the present value of debt never falls below 27 percent of GDP and rises to 30 by the end of the forecast period. Both alternative scenarios remain below established thresholds for all indicators in all periods except, as with the baseline, in the case of the exports ratio in 2015 driven by the external shock.

8. The thresholds are breached for sustained periods under the shock scenarios, most notably under a 30 percent depreciation scenario. Shock scenario indicators based on exports roughly track the extremely poor baseline path anticipated for 2015, for example in the debt to exports ratio, indicating that the current Ebola shock is of the order of magnitude intended to be captured by the shock scenarios. The only indicator to feature a sustained breach in established thresholds is the debt to GDP ratio, where a 30 percent depreciation would cause external debt to spike at nearly 50 percent of GDP in 2015 and remain above the threshold until 2020. These results highlight the small, open character of the Gambian economy and its exposure to exchange rate variation. Prudent fiscal and monetary policies of the kind designed in the rapid credit facility (RCF) arrangement with the staff-monitored program will be critical to minimizing the risk of such a scenario materializing.

Public DSA

9. Total public debt is currently significantly in excess of its indicative threshold and is not expected to fall below it until 2019. The Gambia’s total public debt currently stands at 100 percent of GDP in nominal terms and just above 80 percent of GDP in net present value terms, more than 25 percent above the indicative threshold for public debt distress. Even under the significant fiscal consolidation foreseen under the baseline of our framework, public debt would not fall below the threshold until 2019.

10. Public debt dynamics are vulnerable to a shock to domestic interest rates. All domestic public debt is in T-bills with maturity less than one year. A spike in T-bill rates since mid-2013, as well as the significantly larger-than-expected domestic borrowing during 2013–14, largely explains the noticeable increase in public debt to GDP ratio over the past two years.4 The baseline scenario assumes that T-bill rates gradually will decline to the levels observed in early 2013 by 2017 as the strong fiscal consolidation brings down the net domestic borrowing to GDP ratio from over 12 percent in 2014 to 1 percent in 2015 and ½ percent in 2016 and thereafter. If T-bill rates stay at the levels observed in late 2014 for the next several years, public debt would remain above 80 percent of GDP at end-2019, even assuming the same primary deficit path as in the baseline. This highlights the importance for the authorities of implementing strictly their ambitious fiscal consolidation plan to bring down the T-bill rates.

11. Given the short maturity and elevated stock of domestic debt, The Gambia is subject to a high rollover risk of domestic debt. The government’s medium-term debt strategy envisages issuing longer-term bonds which would eventually help reduce the high rollover risk. However, as domestic interest rates are prohibitively high at this time, issuing longer-term bonds will need to wait until the authorities’ fiscal adjustment is firmly in place and has helped to reduce T-bill yields.

12. Alternative scenarios indicate a more tenuous path to return to a lower overall risk of debt distress. Under the historical scenario, which features a relatively mild primary deficit of 0.2 percent of GDP, the public debt ratio would fall more slowly, declining only to 65 percent of GDP in the next 10 years and remaining above the indicative threshold for the entire forecast period. Fixing the primary balance at its estimated level in 2014, a deficit of 7.4 percent of GDP yields an explosive path for public debt which rises continuously over the forecast period. 2014 featured an exceptionally high fiscal deficit, so this scenario should not be considered a likely outcome, but it serves to illustrate the unsustainable nature of recent fiscal slippages.

13. Shock scenarios remain closer to the baseline forecast than the historical scenarios. For all three indicators, the 30 percent depreciation scenario was the most extreme shock, as in the external DSA. These results highlight again the country’s exposure to external conditions and the centrality of prudent policy-making. The authorities’ commitment not to intervene in foreign exchange markets paired with determined fiscal consolidation will help prevent such a sharp depreciation scenario from materializing. Unlike the alternative scenarios, the shock scenarios have the same long-run features as the baseline, with public debt indicators falling substantially with consolidation once the shock has run its course.

Conclusion

14. This debt sustainability analysis confirms the finding of the previous DSA of a moderate risk of external debt distress in The Gambia. While the export ratio breaches the threshold in the baseline this is a temporary breach driven by the shock to tourism services exports, the motivation for the authorities; request for the Fund support under the RCF. In all other years and for all other indicators forecast remain below established thresholds in the baseline and historical scenarios. The shocks scenarios, the 30 percent depreciation in particular, drive indicators to sustained breaches as in the previous DSA.

15. The indicators of total public debt distress risk are much more elevated, justifying a heightened overall risk of debt distress. Public debt levels are well above indicative thresholds. The authorities will need to take concerted and sustained efforts to bring the public debt below established thresholds of acceptable risk. The fiscal outcomes of the past two years and the exogenous shocks exerting pressure on the Gambian economy make the authorities’ current consolidation plan all the more critical.

Table 1.The Gambia: External Debt Sustainability Framework, Baseline Scenario, 2011–2034 1/(in percent of GDP, unless otherwise indicated)
ActualHistorical Average6/Standard Deviation6/Projections
2011201220132014201520162017201820192014-2019

Average
202420342020-2034

Average
External debt (nominal) 1/46.048.050.357.760.355.953.249.746.634.821.8
of which: public and publicly guaranteed (PPG)44.143.746.254.657.653.250.547.043.932.119.1
Change in external debt2.72.02.37.42.7-4.4-2.7-3.5-3.1-1.9-0.9
Identified net debt-creating flows8.1-3.81.83.60.7-4.7-3.3-2.9-2.7-1.6-0.9
Non-interest current account deficit11.47.19.99.23.612.613.510.19.49.08.88.68.08.4
Deficit in balance of goods and services14.613.412.216.520.614.913.913.513.312.511.1
Exports26.530.929.428.422.130.232.233.433.733.031.5
Imports41.144.341.644.942.745.146.246.947.045.542.6
Net current transfers (negative = inflow)-5.9-8.7-4.0-8.02.8-6.9-10.5-8.6-8.3-8.1-7.9-6.7-5.0-6.2
of which: official0.0-1.00.00.0-4.4-0.8-0.7-0.8-0.8-0.5-0.4
Other current account flows (negative = net inflow)2.72.41.73.03.43.93.73.63.42.81.9
Net FDI (negative = inflow)-6.7-11.2-9.5-9.31.5-9.2-9.7-10.0-9.6-9.0-8.9-8.4-7.9-8.3
Endogenous debt dynamics 2/3.40.31.40.1-3.1-4.9-3.1-2.8-2.6-1.8-1.0
Contribution from nominal interest rate0.90.90.80.00.10.10.10.10.20.20.3
Contribution from real GDP growth2.0-2.5-2.30.1-3.1-5.0-3.2-2.9-2.7-2.0-1.2
Contribution from price and exchange rate changes0.61.92.9
Residual (3-4) 3/-5.45.80.53.82.00.30.6-0.6-0.5-0.30.0
of which: exceptional financing0.00.00.00.00.00.00.00.00.00.00.0
PV of external debt 4/31.936.338.436.034.632.831.124.115.4
In percent of exports108.8128.0173.7119.2107.598.192.373.149.0
PV of PPG external debt27.933.235.733.331.930.128.421.412.7
In percent of exports95.0117.2161.2110.399.190.184.364.940.3
In percent of government revenues171.1179.5170.9154.1144.8135.1127.497.760.1
Debt service-to-exports ratio (in percent)9.08.68.98.311.78.27.06.66.35.63.9
PPG debt service-to-exports ratio (in percent)9.08.68.98.311.78.27.06.66.35.63.9
PPG debt service-to-revenue ratio (in percent)14.816.216.012.712.411.410.39.99.58.45.8
Total gross financing need (Millions of U.S. dollars)92.53.766.384.074.943.239.944.246.969.4131.0
Non-interest current account deficit that stabilizes debt ratio8.75.17.65.210.814.612.112.412.010.58.9
Key macroeconomic assumptions
Real GDP growth (in percent)-4.35.64.83.63.8-0.25.18.76.25.95.95.35.95.95.9
GDP deflator in US dollar terms (change in percent)-1.4-4.1-5.72.79.4-8.0-9.9-3.82.02.32.2-2.52.22.22.2
Effective interest rate (percent) 5/1.91.91.71.60.40.00.10.20.20.30.30.20.71.20.8
Growth of exports of G&S (US dollar terms, in percent)5.018.1-6.03.47.0-11.3-26.142.715.512.49.17.17.77.87.7
Growth of imports of G&S (US dollar terms, in percent)-9.39.2-7.23.58.3-0.9-9.910.310.910.18.54.87.57.67.5
Grant element of new public sector borrowing (in percent)45.038.844.844.744.644.543.741.835.239.8
Government revenues (excluding grants, in percent of GDP)16.116.416.318.520.921.622.122.322.321.921.121.7
Aid flows (in Millions of US dollars) 7/71.3109.154.967.362.457.861.655.458.774.1111.9
of which: Grants46.081.420.228.847.629.629.731.733.740.765.4
of which: Concessional loans25.327.734.738.514.728.231.823.724.933.446.6
Grant-equivalent financing (in percent of GDP) 8/5.67.45.25.04.44.33.62.53.3
Grant-equivalent financing (in percent of external financing) 8/68.578.473.071.476.376.473.170.572.3
Memorandum items:
Nominal GDP (Millions of US dollars)898.3910.0898.8825.4781.4816.6884.4958.11037.21540.73399.6
Nominal dollar GDP growth-5.61.3-1.2-8.2-5.34.58.38.38.32.68.28.28.2
PV of PPG external debt (in Millions of US dollars)237.8251.7259.9268.2279.2285.1291.2325.8426.3
(PVt-PVt-1)/GDPt-1 (in percent)1.51.01.11.30.70.61.00.50.50.5
Gross workers’ remittances (Millions of US dollars)27.261.848.750.053.156.059.162.365.785.5144.6
PV of PPG external debt (in percent of GDP + remittances)26.531.333.431.229.928.326.720.312.2
PV of PPG external debt (in percent of exports + remittances)80.296.6123.389.982.175.471.055.535.5
Debt service of PPG external debt (in percent of exports + remittance7.56.89.06.75.85.55.34.83.4
Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt. Debt values may vary marginally from those in the accompanying staff report due to exchange rate conventions.

Derived as [r - g - ρ(1+g)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt. Debt values may vary marginally from those in the accompanying staff report due to exchange rate conventions.

Derived as [r - g - ρ(1+g)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Figure 1.The Gambia: Indicators of Public and Publicly Guaranteed External Debt under Alternates Scenarios, 2014–2034 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio on or before 2024. In figure b. it corresponds to a One-time depreciation shock; in c. to a Non-debt flows shock; in d. to a One-time depreciation shock; in e. to a Growth shock and in figure f. to a One-time depreciation shock

Table 2a.The Gambia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2014–2034(In percent)
Projections
20142015201620172018201920242034
PV of debt-to GDP ratio
Baseline3336333230282113
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014-2034 1/3329262625241913
A2. New public sector loans on less favorable terms in 2014-2034 23334343432312621
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015-20163335383634322414
B2. Export value growth at historical average minus one standard deviation in 2015-2016 3/3329313028262012
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015-20163332333130282112
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015-2016 4/3338413937352714
B5. Combination of B1-B4 using one-half standard deviation shocks3329343230292213
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/3350494745423219
PV of debt-to-exports ratio
Baseline1171611109990846540
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014-2034 1/117132888175715841
A2. New public sector loans on less favorable terms in 2014-2034 211715311310597938065
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015-20161171501099889836440
B2. Export value growth at historical average minus one standard deviation in 2015-2016 3/11710011610494886844
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015-20161171501099889836440
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015-2016 4/1171711351221111048144
B5. Combination of B1-B4 using one-half standard deviation shocks11710411810696907043
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/1171501099889836440
PV of debt-to-revenue ratio
Baseline1801711541451351279860
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014-2034 1/1801401221181121088861
A2. New public sector loans on less favorable terms in 2014-2034 218016215915314614012197
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015-201618016817416415314411168
B2. Export value growth at historical average minus one standard deviation in 2015-2016 3/1801391431341251189158
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015-20161801541511421331259659
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015-2016 4/18018118917816615712265
B5. Combination of B1-B4 using one-half standard deviation shocks1801411551461361299960
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/18023922821520018914589
Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Table 2b.The Gambia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2014–2034(In percent)
Projections
20142015201620172018201920242034
Debt service-to-exports ratio
Baseline812877664
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014-2034 1/810766654
A2. New public sector loans on less favorable terms in 2014-2034 2812877765
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015-2016812877664
B2. Export value growth at historical average minus one standard deviation in 2015-2016 3/89987754
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015-2016812877664
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015-2016 4/812987775
B5. Combination of B1-B4 using one-half standard deviation shocks89877764
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/812877664
Debt service-to-revenue ratio
Baseline1312111010986
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014-2034 1/13111099986
A2. New public sector loans on less favorable terms in 2014-2034 2131211111110107
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015-2016131313121111107
B2. Export value growth at historical average minus one standard deviation in 2015-2016 3/1312111010976
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015-20161312111010986
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015-2016 4/131212111110107
B5. Combination of B1-B4 using one-half standard deviation shocks13121110101086
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/131917151514139
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/3838383838383838
Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Table 3.The Gambia: Public Sector Debt Sustainability Framework, Baseline Scenario, 2011–20341/
ActualAverage5/Standard Deviation5/EstimateProjections
2011201220132014201520162017201820192014-19

Average
202420342020-34

Average
Public sector debt 1/77.377.083.3101.7101.592.386.179.673.951.227.3
of which: foreign-currency denominated44.143.746.254.657.653.250.547.043.932.119.1
Change in public sector debt7.6-0.36.418.4-0.2-9.2-6.2-6.5-5.7-3.7-1.6
Identified debt-creating flows7.72.25.916.90.0-9.2-6.2-6.5-5.9-3.6-1.7
Primary deficit0.70.64.60.22.38.4-3.3-3.2-2.2-2.4-1.8-0.8-0.5-0.1-0.4
Revenue and grants21.225.318.522.027.025.325.425.625.624.623.0
of which: grants5.18.92.23.56.13.63.43.33.32.61.9
Primary (noninterest) expenditure21.926.023.130.423.722.123.223.223.724.023.0
Automatic debt dynamics7.01.51.38.53.9-6.0-4.0-4.0-4.0-3.0-1.6
Contribution from interest rate/growth differential4.5-2.5-1.81.9-1.6-6.1-4.1-4.1-4.1-3.0-1.6
of which: contribution from average real interest rate1.41.61.71.83.42.01.30.70.40.10.0
of which: contribution from real GDP growth3.1-4.1-3.50.2-5.0-8.1-5.4-4.8-4.5-3.1-1.6
Contribution from real exchange rate depreciation2.54.03.16.55.50.10.10.10.0
Other identified debt-creating flows0.00.00.00.0-0.60.00.00.00.00.00.0
Privatization receipts (negative)0.00.00.00.0-0.60.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (HIPC and other)0.00.00.00.00.00.00.00.00.00.00.0
Other (specify, e.g. bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes0.0-2.50.51.5-0.20.00.00.00.1-0.10.1
Other Sustainability Indicators
PV of public sector debt65.080.379.672.467.662.758.540.620.9
of which: foreign-currency denominated27.933.235.733.331.930.128.421.412.7
of which: external27.933.235.733.331.930.128.421.412.7
PV of contingent liabilities (not included in public sector debt)
Gross financing need 2/35.736.340.550.548.142.639.335.132.321.59.8
PV of public sector debt-to-revenue and grants ratio (in percent)350.5365.1295.2286.9265.9245.0228.5165.190.9
PV of public sector debt-to-revenue ratio (in percent)398.8433.9381.5335.0306.5281.3261.8185.099.1
of which: external 3/171.1179.5170.9154.1144.8135.1127.497.760.1
Debt service-to-revenue and grants ratio (in percent) 4/25.222.331.732.733.628.324.921.218.613.37.8
Debt service-to-revenue ratio (in percent) 4/33.234.536.038.943.433.128.724.421314.98.5
Primary deficit that stabilizes the debt-to-GDP ratio-6.90.9-1.8-9.9-3.16.04.04.13.93.11.5
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)-4.35.64.83.63.8-0.25.18.76.25.95.95.35.95.95.9
Average nominal interest rate on forex debt (in percent)2.02.01.91.70.40.00.10.20.20.30.40.20.71.40.9
Average real interest rate on domestic debt (in percent)6.15.34.931.672.46.88.97.16.55.04.06.42.62.12.5
Real exchange rate depreciation (in percent, + indicates depreciation)5.99.67.30.411614.3
Inflation rate (GDP deflator, in percent)3.74.55.74.72.96.65.84.74.84.84.85.24.84.84.8
Growth of real primary spending (deflated by GDP deflator, in percent)-2.624.9-6.71.78.431.4-18.31.511.45.98.66.75.85.35.7
Grant element of new external borrowing (in percent)45.038.844.844.744.644.543.741.835.2
Sources: Country authorities; and staff estimates and projections.

Comprises domestically denominated central government debt, and general government external debt, gross.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Sources: Country authorities; and staff estimates and projections.

Comprises domestically denominated central government debt, and general government external debt, gross.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Figure 2.The Gambia: Indicators of Public Debt Under Alternative Scenarios, 2014–2034 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio on or before 2024.

2/ Revenues are defined inclusive of grants.

Table 4.The Gambia: Sensitivity Analysis for Key Indicators of Public Debt 2014–2034
Projections
20142015201620172018201920242034
PV of Debt-to-GDP Ratio
Baseline8080726863584121
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages8084838280786647
A2. Primary balance is unchanged from 2014809092959799104111
A3. Permanently lower GDP growth 1/8080747066635147
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015-20168085878481786655
B2. Primary balance is at historical average minus one standard deviations in 2015-20168085827671664624
B3. Combination of B1-B2 using one half standard deviation shocks8087888480776247
B4. One-time 30 percent real depreciation in 20158098898377725027
B5. 10 percent of GDP increase in other debt-creating flows in 20158089807569644524
PV of Debt-to-Revenue Ratio 2/
Baseline36529528726624522916591
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages365311327318309301263196
A2. Primary balance is unchanged from 2014365334364373379387422482
A3. Permanently lower GDP growth 1/365298292275257244205202
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015-2016365311337323309299264235
B2. Primary balance is at historical average minus one standard deviations in 2015-2016365315325300276257187105
B3. Combination of B1-B2 using one half standard deviation shocks365319345327309296249203
B4. One-time 30 percent real depreciation in 2015365364353325300280203117
B5. 10 percent of GDP increase in other debt-creating flows in 2015365328318294270252184103
Debt Service-to-Revenue Ratio 2/
Baseline333428252119138
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages3334312825231916
A2. Primary balance is unchanged from 20143334313028272530
A3. Permanently lower GDP growth 1/3334292622201614
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015-2016 3335322925231916
B2. Primary balance is at historical average minus one standard deviations in 2015-2016333430272320149
B3. Combination of B1-B2 using one half standard deviation shocks3334322925231815
B4. One-time 30 percent real depreciation in 20153336343026241913
B5. 10 percent of GDP increase in other debt-creating flows in 2015333430272320149
Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

1The DSA was prepared jointly by Bank and Fund staff, in consultation with the Debt Management Unit of the Gambian Ministry of Finance and Economic Affairs. The fiscal year for The Gambia is January 1- December 31.
2The previous DSA was prepared in May 2013 (IMF Country Report No. 13/139).
3This DSA was prepared with a base year of 2013 and a first year of projection of 2014. Many of the underlying data for 2014 remain staff estimates in absence of finalized data from the authorities. In addition, 2015 forecasts present a poor basis for shock scenarios as the extreme shock which forms the basis of the RCF is already part of the baseline.
4The 12-month T-bill rate increased from 10¾ percent in April 2014 to 18½ percent in October 2013 and has hovered around that level since then, reflecting the fiscal slippages since mid-2013 and impact of the regional Ebola outbreak starting in mid-2014.

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