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© 2009 International Monetary Fund
March 2009
IMF Country Report No. 09/92
The Gambia—Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for a Waiver of Nonobservance of Performance Criterion, Augmentation of Access, and Modification of Performance Criteria—Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for The Gambia
In the context of the fourth review of the three-year arrangement under the Poverty Reduction and Growth Facility, request for a waiver of nonobservance of performance criterion, augmentation of access, and modification of performance criteria the following documents have been released and are included in this package:
The staff report for the Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for a Waiver of Nonobservance of Performance Criterion, Augmentation of Access and Modification of Performance Criteria, prepared by a staff team of the IMF, following discussions that ended on November, 6, 2008, with the Gambian officials on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 3, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement on the joint IMF/World Bank debt sustainability analysis.
A Press Release summarizing the views of the Executive Board as expressed during its February 18, 2009, discussion of the staff report that completed the review and request.
A statement by the Executive Director for The Gambia.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by The Gambian authorities.*
Memorandum of Economic and Financial Policies by the Gambian authorities*
Technical Memorandum of Understanding*
*Also included in the Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
THE GAMBIA
Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for a Waiver of Nonobservance of Performance Criterion, Augmentation of Access, and Modification of Performance Criteria
Prepared by the African Department
(In consultation with other departments)
Approved by Emilio Sacerdoti and Dominique Desruelle
February 3, 2009
Discussions: The discussions were held in Banjul during October 23–November 6, 2008. The staff team comprised Messrs. Tsikata (head), Dwight, Pamu, Reinke, and Ms. Kaendera (all AFR). The team met President Yahya Jammeh, Secretary of State for Finance and Economic Affairs Mousa Gibril Bala-Gaye, Governor of the Central Bank of The Gambia (CBG) Momodou Mamba Saho, other senior officials of the government and CBG, and representatives of commercial banks, the business community, non-governmental organizations and The Gambia’s development partners.
PRGF arrangement: The current three-year PRGF arrangement was approved in February 2007 in the amount of SDR 14 million (45 percent of quota). The third review was completed on September 8, 2008 in conjunction with the conclusion of the 2008 Article IV consultation. The authorities are requesting the fifth disbursement under the arrangement (SDR 2 million). They are also requesting an augmentation of SDR 6.22 million (20 percent of quota) to be disbursed in two equal installments at the completion of this (fourth) and the next (fifth) review, to help mitigate the impact of the global slowdown on their balance of payments and international reserves.
Safeguards assessment: In the context of the proposed augmentation, the CBG is subject to an update safeguards assessment which has been initiated.
Contents
Executive Summary
I. Introduction
II. Recent Developments
III. Policy Discussions
A. Medium-Term Macroeconomic Framework
B. The Impact of the Global Financial Crisis on the Balance of Payments in 2009
C. Fiscal Policy
D. Debt Sustainability
E. Monetary and Exchange Rate Policies
F. Promoting Growth and Reducing Poverty
IV. Program Issues
V. Staff Appraisal
Appendix I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Tables
1. Selected Economic and Financial Indicators, 2006–13
2A. Central Government Operations, 2006–13 (Millions of dalasis)
2B. Central Government Operations, 2006–13 (Percent of GDP)
3. Monetary Survey, 2006–13
4. Analytical Account of the Central Bank of The Gambia, 2006–13
5A. Balance of Payments, 2006–13 (Millions of U.S. dollars)
5B. Balance of Payments, 2006–13 (Percent of GDP)
6. Proposed Schedule of Disbursements
7. Indicators of Capacity to Repay the Fund, 2007–15
Executive Summary
Recessions in the advanced economies triggered by the global financial crisis are adversely affecting The Gambia’s tourism receipts and remittances inflows. In 2008, the current account deficit widened substantially, international reserves fell by nearly 2 months of imports, and the exchange rate depreciated significantly. Revisions to the macroeconomic framework for 2009 indicate a wider current account deficit, lower international reserves, and slower growth compared to the projections in the PRGF third review.
The government scaled back its expenditure plans for 2009 in response to uncertain revenue prospects. Due to a shortfall in revenues, the authorities missed the program’s fiscal basic balance target for end-September 2008. They took action to shore up revenues but in view of deteriorating growth prospects in the near term, they accepted staff advice to bring 2009 proposed budget expenditures in line with a downward revision of the prospective resource envelope.
The Gambia remains at high risk of debt distress after HIPC and MDRI debt relief due to the high level of debt and the country’s vulnerability to shocks. An updated joint Fund-Bank DSA re-affirmed that reached by the staffs a year earlier when The Gambia reached completion point under the enhanced HIPC initiative. To mitigate the risk, staff urged the authorities to expedite the formulation of a national debt strategy and to rely mainly on grants to finance their development plans.
Overall performance under the PRGF-supported program has been satisfactory, but downside risks to achieving program objectives have increased. The main risks to maintaining macroeconomic stability and reducing poverty are slower growth associated with a worsening global environment, underperformance of revenues, and shortfalls in external assistance. The global downturn is leading to a significant deterioration of the external current account and reserve position, justifying the authorities’ request for an augmentation of access under the PRGF by SDR6.22 million (20 percent of quota) to be phased over this and the next review.
Staff supports the authorities’ requests for a waiver for nonobservance of the fiscal basic balance performance criterion, augmentation of access, and modification of quantitative performance criteria for end-March 2009.
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INTERNATIONAL MONETARY FUND AND INTERNATIONAL DEVELOPMENT ASSOCIATION
THE GAMBIA
Joint IMF/World Bank Debt Sustainability Analysis1
Prepared by the Staffs of the International Monetary Fund and the International Development Association
Approved by Emilio Sacerdoti and Dominique Desruelle (IMF) and Sudhir Shetty and Carlos Alberto Braga (IDA)
February 3, 2009
The Debt Sustainability Analysis (DSA) assesses the sustainability of The Gambia’s external and public debt. The DSA, prepared by the staffs of the Fund and the World Bank, shows that The Gambia remains at high risk of debt distress even after Enhanced HIPC initiative and MDRI debt relief. In particular, the present value (PV) of external debt-to-exports ratio remains above The Gambia’s policy-dependent threshold throughout the projection period. The DSA indicates that public debt is declining due to recent fiscal consolidation.
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INTERNATIONAL MONETARY FUND
THE GAMBIA
Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, and Request for a Waiver of Performance Criterion—Informational Annex
Prepared by the African Department
(In consultation with other departments)
Approved by Emilio Sacerdoti and Dominique Desruelle
February 3, 2008
Relations with the Fund. Describes financial and technical assistance from the Fund and provides information on the safeguards assessment and exchange rate system. Outstanding purchases and loans amounted to SDR 6.00 million (19.29 percent of quota) at end-July 2008.
Joint Bank-Fund Work Program. Lists the work program of the Bank and the Fund on The Gambia during August 2008–July 2009.
Relations with the African Development Bank. Describes the African Development Bank Group program and portfolio.
Statistical Issues. Assesses the quality of statistical data. The authorities have made progress in improving the compilation of economic and financial statistics. However, weaknesses in a broad range of economic statistics are hampering the analyses of economic developments in the country.
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Press Release No. 09/42
FOR IMMEDIATE RELEASE
February 18, 2009
International Monetary Fund
Washington, D.C. 20431 USA
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February 18, 2009