The Gambia: Article IV Consultation, Third Review under the Extended Credit Facility Arrangement, Request for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Gambia
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International Monetary Fund. African Dept.
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Publication Date:
10 Dec 2021
eISBN:
9781616356767
ISBN:
9781616356767
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English
Keywords:
excess reserves; authorities endeavor; relief program; government support; IMF staff estimate; Budget planning and preparation
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CONTEXT: COVID-19 DISRUPTS PROGRESS AND HEIGHTENS FRAGILITY

Abstract

CONTEXT: COVID-19 DISRUPTS PROGRESS AND HEIGHTENS FRAGILITY

Context: Covid-19 Disrupts Progress and Heightens Fragility

1. During the few years following the remarkable political transition in 2016–17 and prior to the onset of the pandemic, The Gambia had shown strong macroeconomic performance (Annex I, Table 1, and Text Figure 1).1 Economic growth accelerated from 2 percent in 2016 to 6 percent in 2019, which helped improve some key socio-economic indicators.2 Foreign exchange coverage soared from about one month of imports to 4 months of imports during this period, buoyed by large private remittances and disbursements from development partners. Debt sustainability improved as the fiscal deficit narrowed by about 7 percentage points of GDP during this period and most creditors agreed to some debt deferrals. Inflation remained broadly stable.

2. However, the COVID-19 pandemic has disrupted some of the hard-won progress (Annex II, Text Figure 1). While the authorities have strived to maintain strong policies and macroeconomic stability, the pandemic has interrupted the growth momentum and progress in some key socio-economic areas. Tourist arrivals plummeted by 62 percent (from 235,788 in 2019 to 89,232 in 2020) and, despite some offsetting expansion in agriculture and industry, economic activity contracted by 0.2 percent in 2020. The pandemic caused budgetary spending of about 3.6 percent of GDP to address its socio-economic impact. Credit to the private sector nearly stagnated.

3. The pandemic has heightened socio-economic fragility.3 The pandemic led to partial loss of income for 48 percent of businesses, scaling down of operations for 43 percent, and shutdown of operations for 19 percent.4 Despite the government and development partners’ relief programs, at least 9 out 10 people reported a decrease in income during the peak of the first wave of the pandemic (March-August 2020).5 Rural populations, who mainly depend on agriculture, mostly lost market access due to border closures and the initial ban on local weekly markets (Lumos). Consequently, an additional 25,000 people (about 1 percent of the population) were pushed into extreme poverty.6 Furthermore, the pandemic may cause long-term scars. For instance, the schools closure disrupted the education of most children across the country, especially the poor with very limited learning opportunities due to the shift to distance learning that was impossible to implement for most schools. Maternal mortality also worsened.

4. Preparations for a new electoral cycle are underway. Presidential elections are planned for December 2021, and parliamentary elections for April 2022. The number of voters who have registered for those elections exceeded, by about 10 percent, the registered voters in the 2016 elections. Eighteen political parties are registered for the elections. Representatives of political parties in the Inter-Party Committee expressed support for the continuation of reforms under the ECF-supported program after the elections. Development partners and the civil society are promoting inter-party dialogue.

Text Figure 1.
Text Figure 1.

The Gambia: Fragility Indicators

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: Johns Hopkins; United Nations; The Gambian authorities; and IMF staff estimates and projections.1 Average calculated using the most recent year available during the period specified.

Recent Developments: A Fragile Recovery

5. The third wave of the COVID-19 pandemic is softening a budding economic recovery that started in late 2020 (Figures 1 and 3, Table 1, and Text Figures 2–3). The dip in tourist arrivals since March 2020 is narrowing; remittance inflows have continued at a record-high pace (reaching about US$300 million in the H1 2021, compared to about US$400 million during the full-year 2020); and private credit rebounded by 5.8 percent (y-o-y) at end-August 2021. These developments have translated into an improvement in the CBG’s composite index of economic activity. Nonetheless, the third wave of the pandemic has obstructed a vigorous recovery. Inflation accelerated to 8.1 percent (y-o-y) at end-June 2021, driven by increasing global food and fuel prices, pandemic-driven high freight costs, and a slight weakening of the dalasi relative to some major currencies. However, it abated to 6.9 percent (y-o-y) at end-August 2021. Core inflation followed a broadly similar pattern.

Text Figure 2.
Text Figure 2.

The Gambia: Economic Activity Indicators, 2019–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Text Figure 3.
Text Figure 3.

The Gambia: Inflation and Exchange Rates, 2019–21

(12-month percent changes, unless otherwise indicated)

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities; and Fund staff estimates.

6. Budget execution in the first half of 2021 faced challenges but remained prudent (Tables 2–4 and Text Table 1). The delayed full recovery of economic activity, the fall in trade volumes, and the increase in freight costs hindered tax collections. The disbursement of a World Bank budget support grant expected in H1 2021 was delayed. Those adverse revenue developments were partly attenuated by tax arrears collection at the expiry of the tax moratorium extended to some SOEs and businesses in 2020; strong collection of custom duty and taxes on fuel products; and a significant decline in duty waivers (i.e. exemptions). The overall revenue shortfall relative to program projections was addressed by the authorities through a strict enforcement of cash management to align spending with available resources, which led to an execution of spending below program projections. As a result, the fiscal balance was broadly on target and net domestic borrowing remained below the program ceiling (after adjusting for the shortfall in budget support).

Text Table 1.

The Gambia: Fiscal Performance in H1 2021

(January-June Cumulative, percent GDP)

article image
Sources: The Gambian authorities; and IMF staff estimates.

7. The Parliament approved in July 2021 a supplementary appropriation (SAP) to account for a revenue windfall without altering program parameters. The government received settlement payments of about GMD1.5 billion (1.4 percent of GDP) from British Petroleum’s withdrawal of its exploration licenses. These resources have been allocated to the preparation of the presidential and parliamentary elections, purchases of ambulances, road construction, and anti-drug enforcement amid increasing illegal drug seizures. The 2021 program fiscal framework remains unchanged, including the floor on overall fiscal balance and the ceiling on net domestic financing.

8. Monetary policy was appropriately expansive to support economic activity (Tables 1 and 5–7, and Text Figure 4). At its September monetary policy committee meeting, the CBG appropriately left the policy rate at 10 percent and the statutory reserve requirements at 13 percent. The policy has helped inject liquidity and narrow the interest rate corridor as the special deposit facility rate was kept unchanged from its pre-pandemic level. Reserve money expanded by 31 percent (y-o-y) at end-June 2021 and banks’ excess reserves over the statutory requirement reached 15.7 percent of reserve money. Supported by the expansive policy stance, private credit expanded by 5.8 percent (y-o-y) at end-August 2021, compared to 0.8 percent at end-2020.

Text Figure 4.
Text Figure 4.

The Gambia: Monetary Policy and Interest Rates, 2017–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities, and Fund staff estimates.

9. Foreign exchange reserves remain adequate; the dalasi has slightly depreciated against some major currencies but remain broadly stable against the US dollar (Tables 8–9, Text Figure 5). Preliminary data point to a rebound in exports of goods in H1 2021 compared to the same period in 2020, particularly for re-exports of oil, while tourism continued to be subdued. Apart from health-related imports, all other import categories dropped over this period. However, remittance inflows remained strong, boosting banking system net foreign assets and excess reserves. The CBG’s presence in the FX market was limited and solely on the purchasing side to mobilize funds in anticipation of government’s FX needs. Donor support and the IMF’s US$85 million SDR allocation to the CBG at end-August 2021, helped strengthen gross official reserves by US$173 million to US$526 million (equivalent to 5.7 months of prospective imports) at end-September 2021. The dalasi has remained broadly stable relative to the U.S dollar (appreciating slightly by 0.9 percent y-o-y at end-August 2021) but weakened against other major currencies (an average 6.9 percent y-o-y depreciation over the same period).

Text Figure 5.
Text Figure 5.

The Gambia: FX Inflows and Excess Reserves, 2017–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities, and Fund staff estimates.

10. The financial sector is weathering the COVID-19 shock well, despite localized transitory balance sheet weakening (Figure 4 and Table 12). After some deterioration in December 2020 and March 2021, non-performing loans (NPLs) narrowed to 5.6 percent of gross loans in June 2021, with still high ratios in a few small banks. Some non-bank financial institutions also witnessed balance sheet weakening; NPLs in microfinance companies (MFCs) increased from 4.4 percent of gross loans at end-2019 to 9.5 percent at end-2020 and averaged 10.4 percent H1 2021, in the context of asset expansions that also helped financial inclusion. The banks and the MFCs remain liquid, profitable, and well capitalized, with the banking system’s capital adequacy ratio at 28 percent at end-June 2021, compared to a statutory 12 percent; for MFCs, capital adequacy ratio reached 34 percent at end-June, compared to a statutory 20 percent.

Program Performance

11. Program performance at end-June 2021 was satisfactory (MEFP1F1F11–12 and MEFP Tables 1 and 3).

  • All quantitative performance criteria were met. The adjusted ceiling on net domestic borrowing and floor on net international reserves were observed with margins. The other four QPCs were also observed.

  • Three out of four indicative targets were met. The ceiling on the CBG’s credit to the central government on non-market terms and the ceiling on the CBG’s net domestic assets were observed. The floor on poverty-reducing expenditure was just on target. The floor on domestic tax revenue was missed by 0.3 percent of GDP due to sluggish economic activity, including imports.

  • One out of the three end-June 2021 structural benchmark (SB) was met. The authorities completed a roadmap for extending the coverage of the Integrated Financial Management Information System (IFMIS) to project and subvented agency accounts. Good progress was made on the two non-observed SBs, but they still need some technical work. The CBG prepared a draft bank stress testing framework, but it still requires further technical refinement. The authorities approved a tax expenditure policy memorandum and produced a draft GIEPA act, but the latter still needs to be agreed with all key stakeholders.7 Those two SBs are proposed to be rescheduled to end-December 2021.

Macroeconomic Outlook and Risks

12. The overall macroeconomic outlook is turning somewhat positive (Table 1 and Text Table 2). Barring an acceleration of the COVID-19 pandemic, economic activity is projected to expand by 4.9 percent in 2021 and strengthen further to an average of 6 percent per year in the medium term. In the baseline scenario, growth is predicated upon recovery in tourism. The increased availability of vaccines, despite vaccine hesitancy, and continued strong retail activity and remittance-financed private construction point to some optimism. The recent easing of travel restrictions in The Gambia and UK could also help on the upside. Inflation is projected at 6.5 percent for 2021, reflecting global commodity price increases and a strengthening of domestic demand as the economy rebounds, and to converge to the CBG’s medium-term objective (5 percent) by 2024. The external current account is expected to deteriorate in the near term, owing to a sharp rise in imports linked to major infrastructure projects, and to improve in the medium term on the back of an eventual rebound in tourism and sustained inflow of remittances.

Text Table 2.

The Gambia: Key Macroeconomic Indicators, 2020–26

(in percent of GDP, unless otherwise indicated)

article image
Sources: The Gambian authorities; and Fund staff estimates and projections.

13. Risks to the outlook are tilted to the downside (Annex III and Text Table 2). Global resurgence of the pandemic could dampen tourism further (for 2021, a 9-percent decline relative to baseline) and reduce growth by two percentage points per year in 2022 and one percentage point per year for 2023–24. The resultant reductions in services export and income receipts would widen the current account deficit and reduce gross official reserves. On the fiscal side, softened economic activity under the downside scenario would lower tax intake while Covid-19-related spending increases, weakening the primary balance and increasing the public debt. In addition, potential continuation of global oil price increases, global supply chain disruptions, and high shipping costs could lead to higher import prices. Moreover, the upcoming presidential and parliamentary elections could fuel socio-political tensions, with adverse impacts on the economy. The authorities should stand ready to re-prioritize expenditures to reduce resort to debt financing, recalibrate monetary policy, and bolster forex reserves should downside risks materialize.

Policy Discussions

Policy discussions were structured around three main areas, covering near-term program-related issues and medium-term Article IV-related policies, as follows: (i) measures to support near-term post-pandemic recovery and lay the foundations for medium-term inclusive growth; (ii) policies to address immediate COVID 19-related spending and development needs while reducing debt vulnerabilities in the medium term; and (iii) policies to sustain external and financial stability.

A. Post-Pandemic Recovery and Inclusive Growth8

In the Near Term

14. Containment of domestic spread of the COVID-19 pandemic remains paramount on the authorities’ policy agenda to allow recovery of economic activity (MEFP1, Annex II, Tables 2–3). The authorities are accelerating vaccine roll-out and targeted relief to allow a full return of economic activity, despite vaccine supply constraints, hesitancy, and disrespect for covid containment protocols especially among some sections of the urban population. Around 12 percent of the population above 18 years of age have received Covid-19 vaccines as of end-September 2021. The authorities are endeavoring to tackle vaccine hesitancy, through remarkable vaccination communication efforts across the country. While the authorities phased out most of the measures introduced at the early stage of the pandemic, the tax rebate on essential goods and the food distribution program are being pursued to support the population.

15. The authorities adopted a business reform program and are improving the targeting of social safety net programs (MEFP¶¶30–31). Some key measures are envisaged or underway, to address key bottlenecks for private sector activities: facilitating the setting-up of new businesses; preparing a service-level agreement with the utility company NAWEC to reduce companies’ waiting time for new electricity connection; putting in place a single window (web-based platform) to accelerate customs clearance—a project supported by the European Commission. The business registration fee will be reduced to minimize the cost of business creation. To better target the poor and most vulnerable population, the social registry will be expanded to additional six districts (proposed SB for end-June 2022).

From a Medium-Term Perspective

16. Strong policies on access to finance, digitalization, governance, support for women and youth, and climate-related issues will be necessary to ensure inclusive and sustainable medium-term growth (MEFP¶¶28, and 32–33). These will require:

  • Expanding access to finance to help create jobs. The Gambia compares well with peers in terms of bank branch, ATM coverage, and microfinance. However, access to formal financial services is very limited at an estimated 30 percent, with only 5 percent of the population using bank service and 14 percent non-bank financial services. In this context, prompt finalization and implementation of the financial inclusion strategy would be needed.

  • Unlocking the full potential of information and communication technology to enhance productivity. Considering that about 90 percent of Gambians live within 10 km off the fiber optic node and 98 percent of the population are covered by mobile cellular network, the country could greatly benefit from this existing digitalization infrastructure to drive socio-economic development. To this end, regulatory barriers could be progressively removed to foster competition and improve access, affordability, and reliability of services.

  • Strengthening governance to improve the business environment. 9 Although The Gambia’s scores are relatively low on various governance indicators, its performance has improved since the political transition in 2016–17. Progress is underway on the Anti-Corruption bill; it is expected to be adopted by the National Assembly by end-2021.10

  • Addressing biases and barriers against women and youth to support growth and inclusiveness and address social inequality. Efforts on the ambitious legislative agenda, including on human rights, access to information, women enterprise, and gender discrimination should continue. Some preparations are underway to develop a gender-budgeting roadmap.

  • Adopting climate-related policies to ensure sustainable development. The Gambia is highly vulnerable to the impact of climate change. Windstorms, floods, sea level rise, coastal erosion, and droughts have become more frequent and severe. According to Climate Action Tracker, an independent scientific analysis of government climate action and measures relative to the globally agreed Paris Agreement, The Gambia is the only country globally that has submitted plans deemed compatible with the goals of the Paris Agreement. In addition, The Gambia has adopted mitigation actions (including in the context of a Renewable Energy Act, 2013), and adaptation actions (including restoration of forests and mangroves) to address climate vulnerabilities.

Text Figure 6.
Text Figure 6.

The Gambia: Governance Indicators, 2016–19 1

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Source: Worldwide Governance Indicators database.1 The estimates range from -2.5 (weak) to 2.5 (strong) for each performance indicator.
Text Table 3.

The Gambia: Gender Gap Indicators

article image
Sources: World Bank, UNDP; and IMF staff estimates and projections.

Authorities’ Views

17. The authorities recognize the need to support an inclusive post-pandemic recovery and broadly agree with staff’s recommendations. They recalled the measures they immediately undertook at the onset of the pandemic to contain its spread and support livelihoods. They agreed on the need to address the obstacles to private sector development, unlock the potential of digitalization, empower women, and build resilience to climate change. They reiterated their commitment to ensure targeting of government support and resist an across-the-board blank-check allowances. They cited some progress already underway on financial inclusion and digitalization, such as digital money transfer, including of public sector salary payments. They also mentioned some measures implemented by the government to alleviate the impact of the pandemic on women.

B. Immediate Spending Needs and Debt Sustainability

In the Near Term

18. The authorities have committed to remain within the 2021 program fiscal parameters despite pressing challenges (MEFP17). The end-December 2021 fiscal targets are within reach.

  • Challenges: Revenue collection in H1 2021 underperformed. Due to delays in reforms necessary to unlock support from development partners, the disbursement of US$20 million World Bank budget support grant is postponed to 2022, and two out of five tranches of the European Union’s EUR13.5 million budget support grant will also likely be postponed to 2022. Expanding vaccine coverage, including mass communication and logistics, has proven costly. Continuing some pandemic-related measures (including the tax rebate on essential goods and the social safety net programs) will weigh on budget execution.

  • Mitigating factors and measures: Revenue collection nonetheless improved in early H2 2021. The Gambia is receiving vaccine support from the COVAX initiative, the World Bank COVID-19 grant, and bilateral partners (Senegal, France, and the USA). The authorities intend to accelerate the sale of public assets stolen by the previous regime, following a recent favorable court ruling on the issue. They will make efforts to fast-track reforms required to unlock disbursements from donors, including the public procurement act. The authorities are strengthening their tax exemptions policy: (i) the Cabinet approved a memorandum on Tax Expenditure Policy (TEP) to improve governance and define clear responsibilities and criteria for the approval and enforcement of tax expenditures; (ii) a consultant has been hired with World Bank support, to help implement the recommendations of the IMF TEP mission; and (iii) collaboration between the Gambia Revenue Authority (GRA), GIEPA, the Ministry of Trade, and the Ministry of Finance and Economic Affairs (MoFEA) has been reinforced to ensure a holistic approach to the control of tax exemptions. Reflecting these measures, duty remissions and exemptions declined to 0.9 percent of GDP during January-August 2021, compared with 2.5 percent of GDP and 2.8 percent of GDP during the same period in 2020 and 2019, respectively. Finally, strict cash management has underpinned the observed spending restraint; spending execution stood at about 41 percent of the full-year budgeted envelop at end-June 2021, compared to an average of about 47 percent in previous years.

19. The 2022 budget, approved by the National Assembly, features some consolidation while providing adequate space to support the post-pandemic recovery (MEFP19 and Text Table 4). The timid and fragile economic recovery calls for a careful balancing of fiscal support to the economy and fiscal consolidation to reduce debt vulnerabilities. Current projections, underpinned by the budget, show an overall fiscal balance of about 3 percent of GDP, with an improvement of about 1 percentage point of GDP on both the overall and the primary fiscal balances, relative to 2021. The projections show a relaxation of 1 percentage point of GDP relative to the projections at the time of the second ECF review to address primarily COVID-19 pandemic-related spending. Under current projections, public debt would decline by about 4 percentage points of GDP in 2022; the PV of public debt would fall below the 55-percent of GDP indicative threshold in 2025, a year later than projected at the time of the second review.11 The draft budget includes some one-off revenue and financing sources that are allocated for one-off spending items and projects. This draft 2022 budget was submitted to the National Assembly (prior action) and approved by the latter. Its main components are as follows:

  • Revenue: Uncertainties related to the upcoming presidential and parliamentary elections in the context of a still sluggish economic recovery, are expected to adversely impact the domestic revenue base in 2022. Tax revenue is projected at 11.0 percent of GDP, supported by strong revenue administration measures, including use of the electronic payment platform and an upgraded tax registry, more frequent tax audits and data matching to ensure compliance (particularly in the commercial real estate sector where a Rental Property Survey has been conducted) and the continued rationalization of tax exemptions initiated in 2021 (as elaborated above). Nontax revenues are projected at 4.2 percent of GDP, boosted by a one-off US$30 million (1.4 percent of GDP) receipt from the petroleum sector and further sale of stolen assets. The World Bank’s US$20 million and the European Union’s EUR5.4 million budget supports have been shifted from 2021 to 2022, while the World Bank indicated that they are no longer planning an additional budget support of US$15 million originally envisaged for 2022.

  • Spending: the budget comprises a provision of one billion dalasi for pandemic-related spending, including for vaccination logistics, the running of the COVID-19 hospitalization centers, medical supplies, and other potential pandemic-driven needs. At 2.6 percent of GDP, domestically financed investment is expected to be only marginally below its 2021 level, with over half reserved for completion of the Banjul Rehabilitation Project and the Bertil-Harding Highway. These one-off infrastructure projects are undertaken in preparation for the conference of the Organization of Islamic Cooperation (OIC).

  • Financing: The net domestic borrowing of GMD 659 million (0.6 percent of GDP) should allow sufficient space on the domestic financial market for private sector credit. The budget financing also includes anticipated proceeds from a one-off privatization (for which preparations are advanced). Finally, the budget uses US$20 million from the US$85 million SDR general allocation to The Gambia; this use of the SDR allocation allows to create space in the 2022 budget to address pandemic-related spending for a similar amount (Text Table 5).

Text Table 4.

The Gambia: Key Fiscal Indicators, 2021–22

(in percent of GDP)

article image
Sources: The Gambian authorities; and IMF staff estimates.
Text Table 5.

The Gambia: COVID-19 Spending, 2020–22

(in percent of GDP)

article image
Sources: The Gambian authorities; and IMF staff estimates.

20. Structural measures are envisaged to support the 2021 and 2022 fiscal frameworks, despite hurdles in a few areas (MEFP ¶¶18, 26–27 and MEFP Tables 3–4). Revenue administration reforms are anchored on the GRA’s 2020–24 Corporate Strategic Plan, which builds on the recommendations from the IMF’s 2018 Tax Administration Diagnostic Assessment Tool (TADAT). PFM reforms are based on the 2019 public investment management assessment (PIMA). Various measures are being implemented or planned.

  • Revenue administration: the legal framework governing business incentives under the GIEPA act will be revised in line with the tax expenditure policy to help streamline further tax expenditures (unobserved end-June 2021 SB, proposed reset to end-December 2021). A taxpayer charter will be adopted to improve the GRA’s relationship with taxpayers and boost tax compliance (proposed SB for end-June 2022). An accurate tax ledger for the large taxpayers will be approved to support collection (proposed SB for end-September 2022). At least five companies holding special investment certificates (SIC) will be audited to verify tax exemptions (proposed SB for end-December 2022).

  • Public financial management (MEFP 21): to press ahead with reforms, and considering the stalled constitutional review, the authorities intend to align the draft SOE bill to the existing constitution to allow its submission to Parliament as envisaged under the program (SB end-December 2021). In addition, the authorities intend to further strengthen transparency and accountability in SOEs and are committed to publish financial statements of SOEs for the financial years that have been audited and approved by Parliament (proposed SB end-December 2021). Some key financial indicators will be identified to monitor the performance of some main SOEs. The signing of performance contracts with MoFEA will be extended to three additional key SOEs, including targets on key operational and financial indicators (proposed SB for end-September 2022). Moreover, the new Directorate of SOE oversight within the Ministry of Finance should be operationalized to improve the monitoring of the SOE sector, and cross debts among key SOEs will be clarified to accurately assess each SOEs’ financial performance. While the process is underway on the preparation of the Public Finance bill, its finalization will likely be delayed due to procedural and capacity constraints (SB proposed to be reset from end-December 2021 to end-June 2022). Despite the recent delay at the National Assembly, the authorities intend to request another fast-tracking procedure to approve the public procurement (GPPA) act.

  • COVID-19 spending (MEFP 2): The authorities are delivering on their commitments to full transparency of COVID-19-related spending. They published a list of all COVID 19-related procurement contracts and their beneficial owners up to end-June 2021. The National Audit Office (NAO) has completed the first phase of an ex-post audit of COVID-19 spending and it is now well advanced on the second phase of the audit. The reports from those two audits are expected to be published (proposed SB for end-March 2022). The amount of COVID-19-related spending is published in the monthly budget execution reports for 2020; the authorities plan to resume this publication from October 2021, after clarifying some accounting issues. These transparency measures will be extended to pandemic-related spending in 2022.

  • Reforms to unlock donors’ support (MEFP 18): some important disbursements are postponed due to delays in completing the related triggers. The authorities are committed to fast-track the related reforms. To unlock the delayed World Bank budget support, the government submitted the GPPA act to the National Assembly and will request another fast-tracking of its approval. For the EU budget support, the government completed the trigger related to the revision of the voters list; they are making progress on triggers related to the finalization of the audit of the government’s 2019 financial statements and the submission to National Audit Office of the 2020 financial statements. However, the completion of triggers on seats for female candidates at the National Assembly and on the Vetting bill may be delayed. The government committed to make all necessary efforts to complete these reforms.

From a Medium-Term Perspective12

21. Advancing strong and inclusive growth will require narrowing the large socio-economic infrastructure gap (MEFP ¶¶26–27 and SIPs 2–3). While The Gambia fares slightly better than the average SSA country on some infrastructure indicators, particularly when assessed against each country’s level of development, ensuring universal access to some basic services remains a challenge. For instance, close to 40 percent of the population lacks access to electricity and more than 30 percent lacks access to safe drinking water. Staff estimates that, under current and planned policies, the infrastructure gap relative to the level needed to achieve the Sustainable Development Goals (SDGs) in 2030 in three areas (electricity, roads, and water and sanitation) would amount to about 15 percent of GDP. Considering the country’s investment spending efficiency, the initial capital stock and the capital depreciation rate, this estimate translates into an average additional annual investment need of about 5.3 percent of GDP in 2021–30. The authorities are making efforts to narrow the infrastructure gap, including through large infrastructure projects for the hosting of the OIC summit and the expansion of the Banjul port.

22. The authorities face a difficult trade-off between immediate financing needs and medium-term debt vulnerabilities (MEFP 20). Results from the Debt Sustainability Analysis (DSA) indicate that The Gambia’s overall and external debt distress risk ratings remain high. The public debt continues to be deemed sustainable, as in the previous DSA. Temporary breaches of the indicative thresholds for the external debt service indicators remain, reflecting weak export projections in the early years and the expiration of the debt deferrals in later years.13 Data reconciliation efforts with bilateral creditors resulted in an upward revision to debt service payments (a cumulative increase of about 4 percent of GDP in 2021 -30) and the stock of external debt (by 6.1 percentage points of GDP in 2020) (Table 11). To minimize such revisions going forward and address shortcomings on debt data, the authorities will increase the frequency of data reconciliation exercises with creditors from annual to bi-annual.14 They will also improve coordination between the debt directorate and managers of foreign-financed projects to ensure that their disbursement requests are processed through the debt directorate and disbursements are systematically communicated to the latter.

Text Figure 7.
Text Figure 7.

The Gambia DSA: Indicators of Total Public and External Debt

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

1/ The most extreme stress test is the test that yields the highest ratio in or before 2031.Sources: The Gambian authorities; and IMF staff estimates

23. Addressing the trade-off between spending needs and debt sustainability calls for strong policies, including on domestic revenue mobilization and spending efficiency (MEFP 20). Policy options would consist of a combination of domestic revenue mobilization, higher public spending efficiency, collaboration with development partners, enhancement of private sector financing, and prudent borrowing. Staff estimates that tax collection efforts in The Gambia are about 6–16 percent below the best performing peer countries; improving domestic revenue mobilization could cover 1–1.5 percent of GDP, out of the additional annual financing need of 5.3 percent of GDP. Strengthening spending efficiency could also help cover a similar magnitude in the financing need. Through a benchmarking of spending efficiency against best performing peer countries, staff’s analysis shows that educational outcomes in The Gambia could be improved by about 10 percent with unchanged amount of spending and public investment outcomes could be improved by 10–13 percent. To this end, the authorities plan to strictly enforce the selection and prioritization of public investment projects by the strategic review board, expand its mandate to cover both domestically and foreign-financed projects, and ensure a positive opinion before their inclusion into the budget.15 It would be paramount to follow through on this commitment. Moreover, good progress is made on the digitalization of procurement processes, the standardization of the legal and regulatory framework in procurement process, and the unification of procurement contracts system over all the MDAs and public sector entities. The share of public contracts awarded on single sourcing and request for proposal has been reduced significantly; most contracts are currently awarded based on “restricted tender”. The list of all awarded public procurement contracts in 2021 is published, including the beneficial ownership. Measures to minimize fiscal risks and maximize long-term growth benefits from the large infrastructure projects should be implemented, particularly for those developed for the OIC conference. The pension and pay reforms are also expected to support medium-term fiscal sustainability. The agreed borrowing plan should be followed, including by seeking concessional financing (preferably grants) for projects foreseen to help narrow the infrastructure gap.

Text Table 6.

The Gambia: Revised External Borrowing Plan, 2020–23

(in million U.S. dollars)

article image

The nonconcessional debt is part of a concessional financing package for the port expansion.

Sources: The Gambian authorities; and IMF staff estimates

Authorities’ Views

24. The authorities concur with staff’s recommendations on fiscal policy and acknowledge the need to appropriately balance financing needs and debt vulnerabilities. They noted that The Gambia has pursued strong fiscal discipline before and during the pandemic period. They highlighted the use of strict cash management, aligning spending with available resources, as a main policy tool to enforce fiscal discipline. They reiterated their commitment to enhance domestic revenue mobilization and spending efficiency. They will draw on their experience from the hosting of the African Union summit in 2006 to minimize fiscal risks and maximize economic benefits from the large infrastructure projects for the OIC conference. They are inviting the private sector to be involved in infrastructure projects. They reaffirmed their commitment to adhere to the agreed borrowing plan and rely primarily on grants and highly concessional borrowing to finance the infrastructure gap.

C. Maintaining Financial and External Stability

In the Near Term

25. Monetary policy will have to carefully balance the trade-off between supporting the post-pandemic recovery and taming inflation (MEFP ¶¶22–24). Given the slight easing of inflation pressures in August (after some inflation acceleration in H1 2021) and the still fragile economic recovery, the accommodative monetary policy stance should remain unchanged in the near term. However, if inflation pressures re-emerge, liquidity remains ample, and private credit grows robustly, the monetary policy stance should be tightened, starting by tempering the central bank’s forex purchases to moderate liquidity injection and increasing the deposit facility rate to narrow the spread from the overnight lending rate. The CBG should continue to strengthen oversight and capacity in accordance with the recommendations from the IMF’s 2020 safeguards assessment.

26. Financial sector policies should continue to focus on ensuring efficient financial intermediation (MEFP ¶23, Table 12, and Figure 4). Balance sheet weakening at the wake of the COVID-19 pandemic has moderated, paving the way for resumption of a healthier financial intermediation. In this context, the CBG could review the financial situation of banks and non-bank financial institutions (NBFIs), for greater understanding of the impact of the pandemic, withdraw progressively the remaining (albeit limited) case-by-case supervisory forbearance, and strengthen its crisis preparedness. The CBG plans to complete by end-December 2021, the development of an internal framework as a guide to banking sector stress testing in line with the 2019 Financial Sector Stability Review (FSSR) recommendations (unobserved end-June SB, proposed to be reset to end-December 2021). The CBG intends to continue strengthening risk-based supervision of banks, with the assistance of AFRITAC West2 and the resident advisor; and conduct balance sheet stress tests of two banks to inform risk preparedness (proposed SB for end-September 2022). Finally, the CBG is shoring up its macroprudential policy preparedness.

27. Efforts should be pursued on Anti-Money Laundering and the Combating of Financing of Terrorism (AML/CFT) framework (MEFP 29). While awaiting the GIABA’s (the InterGovernmental Action Group against Money Laundering in West Africa’s) assessment of the second mutual evaluation report on the CBG’s AML/CFT framework and practices, the CBG is (i) strengthening AML/CFT risk-based prudential supervision of banks, and (ii) enhancing and digitizing the suspicious transactions AML/CFT reporting regime.16 In this context, it has set up a specialized unit at its financial services department to focus on AML/CFT issues, and it is strengthening the capacity of the financial intelligence unit (including for an eventual membership of the Egmont Group). These moves will support commercial banks’ already established arrangements, including with a few African and European banks. In parallel, affected banks have largely resolved the foreign exchange cash transport problems that originated from Travelex Inc. problems in late 2019 and got complicated by global travel bans at the onset of the COVID-19 pandemic.

From a Medium-Term Perspective

28. The external position of The Gambia is broadly in line with economic fundamentals and desirable policies (Annex IV). Staff’s analysis points to an insignificant undervaluation of the Dalasi. Nonetheless, the current account balance is expected to deteriorate sharply in 2021 and 2022, on the back of subdued recovery in tourism and increased imports related to large infrastructure projects. The persistent current account deficits, including lower-than-expected current transfers (especially budget support grants), the upcoming expiry of debt service deferrals, and the protracted COVID-19 shock, is expected to exacerbate pressure on foreign exchange reserves and debt sustainability. Furthermore, continuation of the recent record-high remittance inflows and the evolution of FDI are subject to uncertainty. Thus, while the level of external reserves is considered adequate, considering these external balance risks, the authorities should maintain a flexible exchange rate regime and maintain or strengthen external buffers. Saving a part of the SDR allocation of US$85 million can help in this respect. The Gambia has neither placed any restrictions on the making of payments or transfers for current international transactions nor put in place any multiple currency practices.

Authorities’ Views

29. The authorities broadly agreed with staff’s assessment of the external position and reiterated their commitment to a flexible exchange rate regime and maintenance of adequate foreign exchange reserves (MEFP 25). They agreed to ensure a strong reserve position in anticipation of the government’s prospective demand for foreign exchange to meet debt service obligations, particularly at the expiry of the 2019 debt deferrals. The CBG will save a large portion of the SDR allocation (after on-lending US$20 million to the Treasury for the latter to meet one-time financing needs in the current COVID context), allowing gross official reserves to reach about 5 months of prospective imports in 2021–22. They reiterated that the CBG’s minimal intervention in the forex market would be limited to preventing disorderly volatility and, if warranted, to anticipate government’s prospective forex transactions. They underscored the absence of exchange restrictions and multiple currency practice.

Data Issues and Capacity Building

30. Data provision is broadly adequate for surveillance and program review (TMU Table 2). The authorities’ endeavor to provide weekly data on some key indicators under the ECF-supported program is remarkable. However, further efforts are needed to bolster data collection and reconciliation, both for debt as well as external sector statistics. With IMF support, the compilation of national accounts and price statistics and the provision of monetary and interest rate data have improved. Lingering problems, including data quality, submission delays, and economic survey financing shortfalls, could hamper the comprehensiveness and timeliness of future assessments and program reviews.

31. Capacity development will continue to help bolster institutional capacity, including for policy design and timeliness of data provision (Annex V). Ongoing support from STA and AFRITAC West2 will be key to improving data quality. The EU-funded resident advisors at MoFEA and the GRA are playing pivotal roles in helping sharpen institutional capacity at these institutions, while also helping the authorities meet data reporting requirements for program monitoring. The upcoming resident advisor for the CBG will support the central bank’s efforts to strengthen banking supervision and crisis preparedness.

Authorities’ Views

32. The authorities intend to further strengthen data collection and appreciate the role of technical assistance in helping economic policy design and implementation (MEFP 34). The authorities plan to allocate adequate funds to macroeconomic statistics production, including the financing of economic surveys. They have committed to improving debt data by initiating a biannual data reconciliation exercise with creditors and coordinating with managers of foreign-financed projects to ensure that processed disbursements are systematically communicated to the debt management office. They are thankful for the placement of resident advisors at the MoFEA and the GRA, and plan to continue to avail themselves of their expertise to strengthen revenue mobilization, budget execution, and public investment management. The CBG appreciates technical assistance on monetary forecasting as well as the hiring of a resident advisor on banking supervision.

Program Modalities and Other Issues

33. Program reviews: performance will continue to be assessed through semi-annual reviews (Table 14 and MEFP Tables 2 and 4). In exception of the floor on the Net International Reserves, which is proposed to be increased on account of the general SDR allocation, the program maintains all the other quantitative performance criteria (QPCs) and indicative targets (ITs) for end-December 2021 as set in the second ECF review. Staff proposes new QPCs and ITs for 2022. Assessments of the authorities’ performance relative to the QPCs at end-December 2021 and end-June 2022 will form the basis for the fourth and fifth ECF reviews, respectively. Staff also proposes postponing or setting new SBs for end-December 2021 and for 2022.

34. SDR allocation: The Gambia received an SDR allocation equivalent to US$85 million (or about 4.5 percent of GDP) at end-August 2021. The authorities will use US$20 million (or about 1 percent of GDP) to address financing needs in the 2022 budget in the context of COVID-19 pandemic.17 The use of the SDR allocation will help limit the resort to borrowing from the banking system and will help contain crowding out of financing to the private sector, which should support the burgeoning post-pandemic economic recovery. This SDR amount will be on-lent by the Central Bank of The Gambia to the Government based on Article 84 of the Central Bank act. A legally binding memorandum of agreement will be signed by the two parties, which stipulates the terms and conditions of the loan and also ensures the financial autonomy of the Central Bank. The remainder of the general SDR allocation will be saved to strengthen external reserves.

35. Balance of Payment needs: The Gambia received strong donor and private inflows in 2020, helping boost reserves to an adequate level. However, given the prospective financing needs, and related downside risks, it is important for The Gambia to maintain strong FX reserves. Prospective needs arise from a widening of the current account deficit amid economic recovery and large infrastructure projects while annual debt servicing needs will double from about US$55 million during 2022–25 to about US$105 million (3–4 percent of GDP) in 2026–30. A protracted COVID-19 pandemic and shortfalls in official transfers could lead to additional financing needs. Under the baseline scenario, the financing gap is estimated to be approximately US$151 million in 2021 and average around $62 million in the remaining two years of the program. Nearly 30 percent of this gap is estimated to be covered by Fund financing in 2021, while the proportion of IMF’s share declines to 17 percent in 2022 and to 2 percent in 2023.18 The Fund program also has a catalytic role in attracting financing from other donors during this period, with their financing amounting to 10, 80 and 85 percent of the total financing gap in years 2021, 2022 and 2023 respectively.19

36. Capacity to repay: The Gambia has a substantial exposure to the Fund in terms of GDP, revenues, and exports relative to past UCT-quality arrangements for LICs. Nonetheless, The Gambia’s capacity to repay the Fund is adequate, broadly unchanged from the time of program approval (Table 13). Total obligations to the Fund are projected to rise over the medium term, peaking around an average of SDR 14 million in 2027–28, which corresponds to about 3 percent of exports of goods and services. The Gambia has demonstrated a satisfactory track record of servicing their debt obligations to the Fund. The program design is anchored on strong policies and the authorities are making efforts to implement those policies despite the difficult pandemic context. The authorities are committed to introduce contingency measures as needed to achieve program objectives.

37. Program risks and mitigation measures: A protracted COVID-19 pandemic could delay tourism recovery and weaken economic activity further, increase fiscal and balance-of-payments financing gaps, and strain the financial sector. The government’s ambitious infrastructure plans pose risks to the fiscal strategy and debt sustainability. These risks underscore the need to build further external buffers, including saving the bulk of the SDR allocation, strengthen fiscal prudence, and better prioritize investment projects.

38. Political assurances: The presidential and parliamentary elections in December 2021 and April 2022, respectively, could disrupt reform momentum and weaken the implementation of the ECF-supported program. To address this risk, staff discussed with the Inter-Party Committee (IPC) of all 18 political parties in The Gambia, including those presenting candidates for the presidential and parliamentary elections. IPC members officially represent their parties and their candidates’ views. Staff also discussed with the two National Assembly committees in charge of Public Enterprises and Finance. All those political stakeholders expressed support for the continuation of reforms under the ECF-supported program after the elections, including the overall goals and key policies under the program.

39. Financing assurances (Table 10 and Annex VI): The program is fully financed with firm commitment of financing for the next twelve months and with good prospects of being fully financed for the remainder of the arrangement, based on information received from development partners. The authorities reaffirmed their commitment to continue efforts to re-engage with Venezuelan authorities to resolve any outstanding arrears; the re-engagement is contingent on the status of international sanctions. With regards to arrears to Libya, the Gambian authorities are disputing debt service liabilities due to a disagreement over the amount owed and are in the middle of ongoing discussions with the Libyan authorities to resolve the outstanding arrears in an amicable manner. The most recent exchange between the Gambian and Libyan authorities was in May-June 2021. While the terms on the outstanding balance with Libya have yet to be agreed upon, a reasonable projection of these amortization payments has been factored into the Fund-supported program baseline.

40. Safeguards assessment: The IMF completed a safeguards assessment of the CBG’s operations in July 2020 (MEFP 24). Despite some delays due to capacity, the CBG has implemented most of the key recommendations, including appointment of additional members of the audit committee and a director for the Internal Audit Department (IAD). The IAD continues to review program monetary data submitted to the Fund at test dates. The CBG has also updated the audit committee charter to strengthen oversight of the central bank. Further, the CBG has transferred all foreign exchange cash handlings to the purview of a newly established Currency Department and has committed to expeditiously complete all outstanding recommendations, including re-aligning their investment policy and guidelines with leading practices to safeguard the central banks’ growing international reserves.

Staff Appraisal

41. Although the economy is showing some signs of recovery, the third wave of the pandemic in mid-2021 has obstructed a vigorous rebound. The dip in tourist arrivals is narrowing; remittance inflows have continued at a record-high pace; and credit to the private sector has resumed. However, the third wave of the pandemic in mid-2021 has softened the recovery. Economic growth is projected at 4.9 percent in 2021, compared with -0.2 percent in 2020. Following COVID-19 vaccination supply supported by COVAX, World Bank, and Senegal-US-French governments, combined with remarkable communication by the authorities to address vaccine hesitancy, the vaccination rate currently stands at 12 percent of the adult population. The number of new COVID cases has dropped to almost nil in recent weeks.

42. Performance under the ECF-supported program is broadly satisfactory despite the challenging COVID-19 context. All quantitative performance criteria at end-June 2021 were met. Budget execution was in line with the program as the government is strictly enforcing cash management to align spending with available resources. Significant forex inflows, coupled with the recent SDR general allocation, helped boost reserves to more than 5 months of imports at end-September 2021. One out of three structural benchmarks was completed, namely on the use of the financial management information system. The authorities are making efforts to complete the other reforms on frameworks for streamlining tax expenditure and conducting bank stress testing.

43. Fiscal policy will need to contain the spread of the pandemic and support economic recovery while reducing debt vulnerabilities. The COVID-19 vaccination campaign will require sufficient resources. The weak revenue collection should be attenuated by continued streamlining of tax exemptions and strong revenue administration measures. Spending should be well prioritized by containing SOE subsidies and expanding the scope of the investment project selection criteria as the authorities endeavor to narrow the infrastructure gap and complete large infrastructure projects for the OIC conference. The authorities committed to adhere to the agreed borrowing plan and seek grants and concessional financing for infrastructure projects to help reduce debt vulnerabilities. The authorities plan to use US$20 million from the IMF’s US$85 million general SDR allocation to The Gambia to help create fiscal space in the 2022 budget for pandemic-related spending. The authorities commit to pursue transparency and accountability measures in such spending in 2022.

44. Monetary policy will remain accommodative but should be recalibrated if inflation pressures re-emerge. Given the slight easing of inflation pressures in August (after some inflation acceleration in H1 2021) and the still fragile economic recovery, the accommodative monetary policy stance should be maintained in the near term. However, if inflation pressures resume, liquidity remains ample, and private credit grows robustly, the monetary policy stance should be tightened, starting by tempering the central bank’s forex purchases to moderate liquidity injection and increasing the deposit facility rate to narrow the spread from the overnight lending rate. Continued financial stability is essential, requiring the CBG to continually strengthen financial supervision, sharpen macroprudential tools, and step-up crisis preparedness and management.

45. Maintaining external buffers is essential, in view of lingering vulnerabilities. The external position in 2020 was broadly in line with the level implied by medium-term economic fundamentals and desirable policies. The IMF’s general SDR allocation has boosted reserves to cover over 5 months of imports. While this level of reserves is assessed to be adequate for now, it should be viewed in terms of the prospective financing needs and downside risks and uncertainties associated with such needs. It is important in this context to maintain exchange rate flexibility to protect external reserves. With average annual debt service almost doubling after the expiration of the debt service deferral period to hover around 3–4 percent of GDP in 2025–30, and with high uncertainty around the strong remittance inflows and donor support in the context of limited space for new external borrowing (even on concessional terms), it is important to maintain a comfortable level of external reserves and continue adhering to the borrowing plan under the ECF-supported program.

46. Pursuing the remarkable structural reform agenda, notwithstanding the upcoming elections, will allow fully benefitting from the country’s turn-around and promoting inclusive growth. Significant progress is underway on governance. The authorities are delivering on their commitment related to the transparency of the COVID-19 spending, including by publishing the list of awarded contracts and auditing the spending. It would be important to continue progress and complete other reforms, such as the SOE bill, the anti-corruption bill, the public finance bill, and the public procurement act. Implementing the business reform program will help improve the business environment, create jobs, and support post-pandemic recovery and inclusive growth. From a medium-term perspective, to promote robust and sustainable development, it would be advisable to advance digitalization, support women and youth, and adopt climate change mitigation policies.

47. In view of The Gambian authorities’ satisfactory performance under the ECF-supported program in a challenging environment, and based on the authorities’ policy commitments for the remainder of the arrangement, staff recommends the Executive Board’s conclusion of the 2021 Article IV Consultation, modification of the end-December PC on NIR, and completion of the third review under the ECF arrangement and the associated financing assurances review.

48. Staff recommends that the next Article IV consultation take place within 24 months in accordance with the Decision on Article IV Consultation Cycles.

Figure 1.
Figure 1.

The Gambia: Recent Economic Developments, 2014–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities; and IMF staff projections.
Figure 2.
Figure 2.

The Gambia: Fiscal Sector Developments, 2014–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities; and IMF staff projections.
Figure 3.
Figure 3.

The Gambia: Recent Monetary Developments, 2016–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities and IMF staff estimates.
Figure 4.
Figure 4.

The Gambia: Recent Financial Sector Developments, 2017–21

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Source: The Gambian authorities; and Fund staff estimates.
Figure 5.
Figure 5.

The Gambia: Medium-Term Outlook, 2019–26

Citation: IMF Staff Country Reports 2021, 265; 10.5089/9781616356767.002.A001

Sources: The Gambian authorities; and IMF staff projections.
Table 1.

The Gambia: Selected Economic Indicators, 2019–26

(Percent of GDP)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

The grant for debt service falling due through January 10, 2022 is available under the CCRT. Subject to availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Table 2a.

The Gambia: Statement of Central Government Operations, 2019–26

(Millions of local currency)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

The grant for debt service falling due through January 10, 2022 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Calculated as the sum of project grant (net of social assistance projects), external project loans, and changes in project accounts.

Includes the agreed annual contribution of 180 million dalasi per year during 2019–23 to increase the CBG’s capital to the statutory level.

Commercial bank borrowing in 2021 budget is net of domestic debt amortization.

In staff projections change in arrears also includes a reduction in the treasury float.

Excluding the float in Financing.

Table 2b.

The Gambia: Statement of Central Government Operations, 2019–26

(Percent of GDP)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

The grant for debt service falling due through January 10, 2022 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Calculated as the sum of project grant (net of social assistance projects), external project loans, and changes in project accounts.

Includes the agreed annual contribution of 180 million dalasi per year during 2019–23 to increase the CBG’s capital to the statutory level.

Commercial bank borrowing in 2021 budget is net of domestic debt amortization.

In staff projections change in arrears also includes a reduction in the treasury float.

Excluding the float in Financing.

Table 3.

The Gambia: Statement of Central Government Operations, 2021–22

(Cumulative, millions of local currency)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

The grant for debt service falling due through January 10, 2022 is available under the CCRT Subject to the availability of sufficient resources under the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Excluding the Float in Financing

Table 4a.

The Gambia: Monetary Accounts, 2019–261

(Millions of local currency, unless otherwise indicated)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

End of period.

Includes public enterprises and the local government.

Including valuation effects.

Table 4b.

The Gambia: Monetary Accounts, 2019–261

(Percent changes, unless otherwise indicated)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

End of period.

The CBG onlent the 2020 RCF loan to central government and is expected to onlend the second and third ECF disbursements (SDR 5 million each) plus augmentations of SDR 15 million (at the first review) and SDR 5 million (for the second review). On-lending of IMF loans to the budget and the Treasury’s part use of the SDR allocation are excluded from Net Domestic Borrowing (NDB), see TMU ¶1.

Table 5.

The Gambia: Monetary Accounts, 2020–221

(Quarterly stocks, millions of local currency)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

End of period.

Includes public enterprises and local governments.

Including valuation effects.

Table 6a.

The Gambia: Balance of Payments, 2019–26

(Millions of U.S. dollars, unless otherwise indicated)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

Overall balance does not include prospective budget support and project grants.

The grant for debt service falling due through January 10, 2022 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Table 6b.

The Gambia: Balance of Payments, 2019–26

(Percent of GDP)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

Overall balance does not include prospective budget support and project grants.

Table 7.

The Gambia: External Financing Needs, 2020–23

(Millions of U.S. dollars)

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Sources: The Gambian authorities; and IMF staff estimates and projections.

Includes changes in commercial bank NFA, private trade financing and SDR allocation.

The grant for debt service falling due through January 10, 2022 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

In 2020 the African Development Bank frontloaded its SDR5 million initially scheduled for 2021, and European Union augmented its budget support to The Gambia by EUR 5.95 million.

Table 8.

The Gambia: Decomposition of Public Debt and Debt Service by Creditor, 2020–20221

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As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements). Plans to fill the data gaps will be discussed at subsequent program reviews.

Some of the public debt is not shown in the table due to capacity constraints. Plans to fill the data gaps will be discussed at subsequent program reviews.

Table 9.

The Gambia: Financial Soundness Indicators for the Banking Sector, 2015–21

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Source: Central Bank of The Gambia.
Table 10.

The Gambia: Indicators of Capacity to Repay the Fund, 2021–28

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Sources: IMF staff estimates and projections.

On May 24, 2019 the IMF Executive Board approved a modified interest rate setting mechanism which effectively sets interest rates to zero on ECF and SCF through June 2021 and possibly longer. The Board also decided to extend zero interest rate on ESF till end June 2021 while interest rate on RCF was set to zero in July 2015. Based on these decisions and current projections of SDR rate, the following interest rates are assumed beyond June 2021: 0/0/0/0 percent per annum for the ECF, SCF, RCF and ESF, respectively. The Executive Board will review the interest rates on concessional lending by end-June 2021 and every two years thereafter.

Total obligations include principal and charges and interest.

The grant for debt service falling due between January 11, 2022 and April 13, 2022 is subject to the availability of resources under the CCRT.

Excluding re-exports.

Table 11.

The Gambia: Disbursements Under the ECF Arrangement, 2020–23

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Source: IMF staff estimates.

In addition to generally applicable conditions under the ECF Arrangement.

Disbursements include proposed ECF augmentation; both disbursements are to be onlent to the government.

Annex I. Key Recommendations of the 2017 Article IV Consultation

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Annex II. Impact of COVID-19 Pandemic and Responses, 2020–21

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Source: The Gambian authorities.

Annex III. Risk Assessment Matrix1

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Annex IV. External Sector Assessment

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Annex V. Capacity Development Strategy 2021–22

Context

1. The Gambia continues to benefit from the IMF Technical Assistance (TA) program that is well aligned with surveillance and program objectives and the National Development Plan. The successful implementation of key structural reforms in public financial management (PFM), revenue mobilization, debt management, financial sector supervision, and SOEs governance—all built on TA support—helped The Gambia to transition from an SMP to an ECF in March 2020; and looking ahead, TA will continue to play a critical role in supporting the achievement of program quantitative targets and advancing the structural reform agenda. TA delivery priorities have been refocused during COVID-19 to strengthen revenue mobilization, rationalize public spending and enhance cash management and fiscal reporting. Capacity building is constrained by absorption and implementation gaps, now exacerbated by COVID-19, and could be further affected by the potential shift of priorities in the run-up to the December 2021 presidential elections.

Strategy and Priorities

2. The authorities have reiterated their ECF program commitments and remain resolute in building on the hard-worn gains in terms of debt sustainability and fiscal prudence. However, COVID-19 has weakened capacity and increased the need to deepen CD engagement—to deliver on ECF program structural benchmarks—around strengthening PFM, improving revenue mobilization and avoiding a worsening of debt vulnerabilities as pandemic-related spending and BoP pressures have increased. Moreover, slowing economic activity has given rise to potential financial stability concerns weakening the private sector’s ability to weather the COVID-19 impact and recover in its aftermath. In that respect CD support to help implementation of the FSSR is vital to help banks to increase loss absorption and avoid the pressure on the Central Bank of The Gambia (CBG) to soften supervisory and prudential regulatory requirements. On the positive side, the COVID-19 pandemic has triggered a marked expansion of mobile banking, an area in which The Gambia will need technical assistance to develop the appropriate regulatory, legal, and physical infrastructure. Another important CD focus for FY 2021 will be a governance diagnostic mission to help articulate potential future ECF program conditionality to tackle macro-critical areas of weak governance and vulnerability to corruption.

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Annex VI. Lending into Arrears to Official Bilateral Creditors

Staff assesses that the conditions are met for the Fund to provide financing to The Gambia in line with the policy on arrears to official bilateral creditors, notwithstanding its outstanding arrears to Venezuela. In particular:

1. Prompt financial support from the Fund is considered essential and the member is pursuing appropriate policies. The Gambia is a long-standing fragile state, currently at high risk of debt distress caused by the heavy debt service payments on its external debt. The ECF arrangement will support the authorities’ efforts to achieve debt sustainability, while catalyzing much needed international financial support. The Fund-supported program is expected to anchor macroeconomic stability and play a pivotal role in addressing this long-standing issue, building on the improvements in the medium-term debt profile as a result of debt service deferrals. The Gambia’s policies in the context of the ECF-supported program covering 2020–23 will contribute markedly to growth and poverty reduction, notably by facilitating the creation of the much-needed fiscal space.

2. The authorities have been making good faith efforts to reach agreement with the creditors on a contribution consistent with the parameters of the Fund-supported program.

  • The Gambian authorities have indicated to staff that they engaged with the Venezuelan authorities (most recently in March 2020), offering to resolve the outstanding arrears (which arose due to international sanctions). The Gambian authorities tried making debt service payments to Venezuela in March 2020, via mutually-agreed banking channels, but this effort failed due to sanctions. The Gambian authorities are committed to their continued good faith efforts until all the remaining arrears are resolved, and hope to re-engage with Venezuelan authorities once the international sanctions are lifted.

  • The terms of the loan agreement between the Gambian authorities and Venezuela and the associated amortization payments are incorporated into the baseline projections of the Fund-supported program and the contributions are not disproportionate relative to terms sought from other creditors in the official sector.

3. The decision to provide financing despite the arrears is not expected to have an undue negative effect on the Fund’s ability to mobilize official financing packages in future cases. In staff’s view, providing financing to The Gambia despite the arrears is not expected to have an undue negative effect on the Fund’s ability to mobilize future financing packages, given strong support from the international community in the context of the Fund-supported program for The Gambia and The Gambian authorities’ efforts to resolve this in a timely manner.

Appendix I. Letter of Intent

Banjul, The Gambia

November 5, 2021

Ms. Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, DC 20431

Madam Managing Director,

1. On behalf of the Government and the people of The Gambia, we express our gratitude to the IMF for its continued strong support to our country in helping address the health and socio-economic impacts of the COVID-19 pandemic, including through the recent unprecedentedly large SDR general allocation. The completion by the IMF Executive Board in May 2021 of the second review under the ECF arrangement and the SDR general allocation were timely, helping alleviate the financing constraints of the 2021 budget and boost gross international reserves. This support also helped us address the second and third waves of the COVID-19 pandemic and launch a mass vaccination of the population, while supporting the post pandemic recovery. We are grateful for the IMF’s support for the G20 Debt Service Suspension Initiative (DSSI) and the fourth tranche of the debt service relief under the Catastrophe Containment and Relief Trust (CCRT).

2. The attached Memorandum of Economic and Financial Policies (MEFP) (i) outlines the progress we have made under the ECF-supported program since completion of the second review in May 2021 and (ii) updates our policies for the remainder of 2021, 2022 and beyond. Despite the pandemic and the electoral context, our commitment to the program remains unwavering. We observed all quantitative performance criteria (QPCs) and three out of four indicative targets (ITs) at end-June 2021. The performance of the IT on tax revenue suffered from the 2020 economic downturn that continued in early 2021, lower trade volumes and increased freight costs. One out of three end-June 2021 structural benchmarks (SBs) was timely completed. We are making good progress to complete by end-2021 the unobserved end-June SBs on the formulation of an internal framework at the central bank for stress testing banks’ balance sheets and the revision of the legal framework governing the operations of the Gambia Investment and Export Promotion Agency (GIEPA-Act), both of which require further technical support. Despite delays in disbursement of budget support, we will ensure that budget execution in the remainder of 2021, including the supplementary appropriation (SAP), remains in line with fiscal targets under the ECF-supported program. We have submitted to Parliament a draft 2022 budget consistent with program objectives, a prior action for the IMF Executive Board’s consideration of the third review of the program. The Parliament has approved this budget. It uses US$20 million from the SDRs general allocation to The Gambia to address pandemic related needs. This amount will be lent by the Central Bank of The Gambia to the Government under a memorandum of agreement which stipulates the terms and conditions of the loan and also ensures the financial autonomy of the Central Bank.

3. We continued our efforts to strengthen the governance and autonomy of the central bank and we will advance implementation of the outstanding recommendations of the IMF’s 2020 safeguards assessment. We approved a revised audit committee charter to align with leading practices and strengthen independent oversight of the CBG. The FY2020 audit of the CBG’s financial statements was completed in May and we have appointed joint auditors for the FY2021 audit. Building on the IMF technical assistance on reserve management, we are revising our investment policy and guidelines to align with leading practices and safeguard the central bank’s growing international reserves.

4. We remain committed to fulfilling our commitment to fostering full transparency in all COVID-19-related spending. In this regard, we have published on the website of the Gambia Public Procurement Agency (GPPA) the list of all COVID-19-related procurement contracts and their beneficial owners up to end-June 2021. The National Audit Office (NAO) completed the first phase of an ex-post audit of COVID-19 spending and transmitted the report to the National Assembly. The NAO is conducting the second phase of the audit with a view to transmitting the reports to the National Assembly by end-December 2021. Following the review process at the National Assembly, we plan to publish the two audit reports by end-March 2022. We will extend the transparency requirements for COVID-19 spending to cover 2021 and 2022.

5. Considering the resolve and commitment we have shown in implementing the agreed macroeconomic policies and reforms, and based on the strength of our policies and measures going forward, the Government of The Gambia requests completion by the IMF Executive Board of the third review of our ECF-supported program, the associated financing assurances review, and modification of an end-December 2021 performance criterion to reflect the general SDR allocation. Subsequently, we request the disbursement of the fourth ECF tranche of SDR 5 million to further strengthen our external position and help address our balance of payment needs.

6. We believe that the policies and measures set forth in the previous MEFPs, as supplemented by this MEFP, will help achieve the program objectives. Nonetheless, the Government will take any additional measures that may be required, particularly in response to COVID-19-related needs. The Government will consult with the IMF, or whenever the Managing Director requests such consultation, prior to adopting any such measures or revising the policies in the MEFP. We will continue to provide the IMF staff with all information needed to monitor our implementation of the economic and financial policies geared toward achieving the program objectives.

7. The Government consents to make public the contents of the IMF staff report, including this letter, the attached supplemental MEFP and Technical Memorandum of Understanding (TMU) as well as the Selected Issues Papers prepared for the 2021 Article IV consultation. We, therefore, authorize the IMF to publish these documents on its website in accordance with IMF procedures once the IMF Executive Board concludes the Article IV consultation and completes the third review under the ECF arrangement.

Sincerely yours,

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Attachments: I. Memorandum of Economic and Financial Policies (MEFP)

II. Technical Memorandum of Understanding (TMU)

Attachment I. Memorandum of Economic and Financial Policies

This Memorandum of Economic and Financial Policies (MEFP) summarizes our achievements under the ECF-supported economic and financial program since the completion of the second review in May 2021. It updates our policies, measures, and structural reform agenda. It also outlines our responses to the humanitarian and economic challenges induced by the COVID-19 shock, including through mass vaccination and support for a rapid and inclusive economic recovery, while ensuring macroeconomic stability.

Background

1. The third wave of COVID-19 cases in The Gambia and globally starting in mid-2021 amid slow vaccine rollout is softening the prospects of a robust economic recovery. Following regional trends, The Gambia entered a third wave of COVID-19 infections involving the delta variant starting in early July 2021. This new surge slowed economic recovery, particularly in the tourism and hospitality industry. We launched a mass vaccination campaign in March 2021 supported by the COVAX initiative and the World Bank, but it suffered some setbacks from supply constraints and vaccine hesitancy. However, the arrival of vaccines donated by the US and French governments, combined with our enhanced sensitization efforts, has helped boost the vaccination rate, reaching about 12 percent of the targeted population (above 18 years of age) as at end-September 2021, of which 11 percent are fully vaccinated. We will continue efforts to accelerate the vaccine roll-out and intensify communication to tackle vaccine hesitancy.

2. We continue to implement the COVID-19 spending transparency requirements, albeit with some delays due to capacity constraints. We continued the publication on the Gambia Public Procurement Agency website (GPPA) of the list of all COVID-19-related procurement contracts and their beneficial owners covering March-2020 to June 2021. This list has been extended to cover all the procurement contracts issued in 2021 by GPPA. The amount of COVID-19-related spending is shown in the monthly budget execution reports for 2020 and published on the Ministry’s website. For 2021, until September 2021, all spending related to COVID-19 spending of about GMD 200 million, are executed through a below the line account from the funds allocated in the 2020 budget. We have resumed the reporting on these spending starting October as new funds are allocated to COVID-19 spending from the contingency funds included in the 2021 budget. The National Audit Office (NAO) completed and submitted to the National Assembly in October the report from the first phase of an ex-post audit of the COVID-19-related spending covering March through October 2020, for the procurement and the distribution of food and medical supplies in the Greater Banjul Area, the largest COVID-19 spending items. The second phase of the audit, covering the entire year 2020, of the distribution of food and medical supplies in other regions and the procurement and payments for accommodation centers is well advanced. We plan to transmit to Parliament the related report by end-December 2021. Following a review process at the National Assembly, we aim to publish jointly the reports from the first and second phase audits by end-March 2022 (SB for end-March 2022). We are also conducting the flow of funds audit of the AfDB’s COVID-19 support. We will continue to implement the transparency requirements for COVID-19 spending to cover the entire years 2021 and 2022.

3. The transitional justice reforms continued, despite the stalled constitutional review. The Truth, Reconciliation and Reparations Commission (TRRC) completed public hearings in July 2020 and will submit its recommendations to the President when the report is completed. The Government is expected to issue a whitepaper on the findings of the report about six months after the submission of the report to the President. In the meantime, we are planning to include in the 2022 budget a provision for the payment of reparations to the victims of the atrocities and injustices committed by the previous regime. The President signed the Information Access Bill into law in August 2021, which will help enhance transparency and accountability in the public domain. The Anti-Corruption bill has advanced through all stages at the National Assembly; it is included in the agenda of the full house during the ongoing session and is envisaged to be adopted before end-2021. We will liaise with various stakeholders to resume the constitutional review process after the Presidential and Parliamentary elections.

4. We are preparing for the presidential and parliamentary elections scheduled for December 2021 and April 2022, respectively. Through the supplementary appropriation (SAP) approved in July 2021, we have fully covered the financing needed for the organization of the Presidential elections, including the purchase of the voter registration kits. The Independent Electoral Commission has registered 11 percent more voters for the upcoming elections compared with the 2016 elections. The voters’ validation process has been completed and the dates for nomination and the electoral campaign set. We are benefiting from technical assistance from our development partners, including UN agencies, ECOWAS, and EU, to ensure transparency at all stages of the electoral process, which will help foster broad acceptance by all parties (as represented in the Inter-Party Committee) and support peaceful elections. With support from the British government, a mediation process led by Ibn Chambas, a former UN representative in West Africa, has been put in place to help define a code of conduct and allow an orderly resolution of potential election disputes.

Recent Economic Developments

5. Economic activity is showing early signs of recovery from the pandemic-induced stagnation in 2020. Economic growth stood at -0.2 percent in 2020. However, the dip in tourist arrivals since March 2020 has narrowed in early 2021 and remittance inflows have remained strong, reaching US$ 535 million at end-August 2021 (compared to US$ 590 million realized during the full year 2020), helping finance a rebound in credit to the private sector, particularly to the construction sector. These developments were reflected in an improvement of the CBG’s composite index of economic activity. Nonetheless, the third wave of the pandemic has weighed on a vigorous recovery. Headline inflation increased from 5.7 percent (y/y) in December 2020 to 8.2 percent in July 2021 but decelerated to 6.9 percent in August 2021. Non-food inflation and core inflation followed a similar pattern.

6. Despite lower-than-anticipated tax collection and delays in budget support, our strong effort to contain spending has helped limit the impact on the overall fiscal deficit. Revenue collection was slow in 2021Q1 owing to sluggish economic activity, a decline in trade volumes, and an increase in freight costs. Revenue collection improved somewhat in 2021Q2, pushing total tax collection to about 93 percent of the target for 2021H1 (from 87 percent in 2021Q1). This improvement was due to: (i) higher collection of tax arrears following the expiration of the tax moratorium offered to a few SOEs and private entities in 2020; (ii) higher receipts on fuel products; and (iii) a significant reduction in duty waivers. Non-tax revenue was slightly higher than projected, supported by the collection of custom processing fees, despite a temporary suspension of the sale of assets seized by the Janneh commission. Also, the slow execution of project grants and the delay in the disbursement of the US$20 million budget support from the World Bank resulted in an overall low revenue intake. Nonetheless, we continued prudent execution of the overall spending envelope, notably by holding monthly Cash Management Committee meetings to ensure that government spending is based on the availability of resources. As a result, we contained the overall fiscal deficit at end-June 2021 at 2.7 percent of GDP (against a target of 2.6 percent of GDP). The net domestic borrowing, at GMD 1.1 billion, remained within the program ceiling, after adjusting for the shortfall in budget support.

7. A windfall revenue helped meet mounting spending pressures. We reached an agreement and received GMD1.5 billion (1.4 percent of GDP) settlement payments from British Petroleum, following their cancellation of an exploration contract in 2019 for Block A1 of our offshore petroleum exploration field. These resources were allocated through a supplementary appropriation (SAP) approved by Parliament in July 2021, for the preparation of the presidential and parliamentary elections, procurement of ambulances, road construction, and anti-drug enforcement amid increasing illegal drug seizures. This oil block has been returned to the government free of all encumbrances and will be put on the market for licensing.

8. The balance of payments continues to strengthen, helping accumulation of gross international reserves. The current account improved in 2020 owing to strong current transfers, despite COVID-19 and the resulting slump in tourism. However, the deficit is expected to widen in 2021, due to delayed resumption of tourism and an uptick in imports related to large infrastructure projects. The overall balance of payments continues to improve, supported by sustained private forex inflows and donor support. Gross reserves have strengthened by US$ 173 million since end-December 2020, reaching 5.7 months of prospective imports at end-September 2021, including the US$85 million SDR allocation. Commercial banks’ net foreign assets remained broadly unchanged in H1 2021. The CBG’s presence in the FX market has been limited and solely on the purchasing side to mobilize funds in anticipation of government’s FX needs, including for debt service. The dalasi slightly depreciated by an average 5.2 percent (y/y) against major international currencies but remained broadly stable against the US dollar at end-June 2021.

9. The Central Bank of The Gambia (CBG) maintained an accommodative monetary policy stance, to ensure adequate liquidity in the context of the COVID-19 pandemic. It maintained the monetary policy rate unchanged (at 10 percent) at its monetary policy committee (MPC) meetings in May and September 2021, following a 200-basis point reduction in May 2020 when the reserve requirement ratio was also reduced by the same magnitude. The resultant supportive policy stance helped inject liquidity into the banking system and support the economic recovery. Broad money expanded by 27.5 percent (y/y) at end-June 2021, driven by the accumulation of net foreign assets by both the commercial banks (31.0 percent increase) and the CBG (64.5 percent increase). Helped by the expansionary policy stance and record-high remittances, private credit expanded by 5.7 percent y/y at end-June 2021, compared to 0.8 percent at end-2020.

10. A few financial institutions suffered COVID-19-related transitory balance sheet weakening but the financial sector remains resilient, while enhanced mobile banking boosted financial inclusion. After some deterioration in December 2020 and March 2021, non-performing loans (NPLs) of commercial banks narrowed to 5.6 percent of gross loans in June 2021, with the ratio still high in a few small banks. A few non-bank financial institutions also witnessed balance sheet weakening; NPLs in microfinance companies (MFCs) increased from 4.4 percent of gross loans at end-2019 to 9.5 percent at end-2020 and averaged 10.4 percent in 2021H1, in the context of asset expansions that also helped financial inclusion. The banks and the MFCs remain liquid, profitable, and well capitalized, with the banking system’s capital adequacy ratio at 28 percent at end-June 2021, compared to a statutory 12 percent.

Performance Under the ECF Program

11. We met all quantitative performance criteria and all but one indicative targets at end-June 2021. The ceiling on the central government’s net domestic borrowing (NDB) was observed with a margin of about GMD 380 million or 0.4 percent of GDP, after adjusting for a shortfall in budget support. The adjusted floor on the stock of net usable international reserves (NIR) was exceeded by US$58.7 million or about 22 percent. The other four QPCs were also met, namely the zero-ceiling on non-concessional external debt contracted and guaranteed by the government, the zero-ceiling on the outstanding stock of external public debt with original maturity less than one year, the non-accumulation of external payment arrears, and the ceiling on new concessional external debt contracted or guaranteed by the government. Three out of the four end-June 2021 indicative targets were also met. The floor on poverty-reducing spending was just on target despite the slow execution of spending and the implementation below the line of about GMD 200 million on COVID-19 spending from the 2020 budget resources as well as other supports provided directly by partners. Domestic tax revenue collection was 0.4 percentage points of GDP below the indicative floor due to the pandemic-related slow recovery of economic activity, the fall in trade volumes, and high freight costs.

12. We met one out of three structural benchmarks (SBs) at end-June 2021 and we are making good progress to complete the two unobserved end-June SBs by end-December 2021. (Table 3).

  • (i) We prepared a roadmap for extending IFMIS to all projects and subvented agency accounts and started its roll-out from June 2021, with a view to enhancing fiscal transparency and oversight. By end-2021, five (5) of the fifty-two (52) subvented agencies will go live and by January 2022, an additional ten (10) agencies will go live. We aim for all agencies to go live by the first half of 2022.

  • (ii) The end-June 2021 SB on the approval and implementation of a new Tax Expenditure Policy in line with recent TA, including a review of investment tax incentives, the development of a new GIEPA Act, and streamlining all tax incentives was partially completed. The tax expenditure policy was approved by the Cabinet. However, the GIEPA act requires further coordinated work among all stakeholders, including the Ministry of Trade (MoT), the Ministry of Finance and Economic Affairs, the GIEPA, and the Gambia Revenue authority to align the draft Act to the overall objective of enhancing private sector development while rationalizing tax exemptions. We propose re-scheduling the completion of this SB to end-December 2021, which should contribute to our ongoing efforts to enhance financial sector stability.

  • (iii) We prepared a draft internal framework for stress testing banks’ balance sheets, which requires additional technical work to meet the SB. We propose re-scheduling this SB to end-December 2021 to contribute to our ongoing efforts to enhance financial sector stability.

Macroeconomic Outlook

13. The overall macroeconomic outlook seems positive, albeit contingent on a deceleration of the pandemic and peaceful presidential and parliamentary elections. Economic activity is expected to rebound in 2021 at a projected growth rate of 4.9 percent and strengthen further in the remainder of the medium term at an average 6 percent growth per year. These projections are predicated upon recovery in tourism, which appears slower than initially anticipated in view of the upsurge of the third wave of the COVID-19 pandemic. The increased availability of vaccines despite vaccine hesitancy, the easing of travel restrictions in the UK and The Gambia for vaccinated travelers ahead of the opening of the tourism season, and continued strong retail activity and remittance-financed private construction point to some optimism. Consumer price inflation is expected to increase from 5.7 percent (y/y) at end-2020 to 6.5 percent by year’s end, driven partly by projected increases in global oil and non-fuel commodity prices and freight charges. The anticipated domestic post-pandemic recovery will also boost domestic demand and, in the context of supply bottlenecks and increasing freight charges, add to price pressures.

14. The external position is projected to further improve in the medium term, reflecting our efforts to ensure external debt sustainability. This will be supported by the continued accumulation of FX reserve buffers and the limits on external borrowing under the ECF program. Additionally, the recent SDR general allocation has boosted gross reserves further, helping strengthen the external position in anticipation of the expiry of the debt service deferral period.

Macroeconomic Policies and Structural Reforms

A. The National Development Plan

15. We are formulating a new long-term vision and National Development Plan (NDP) focused on supporting the post-pandemic recovery and attainment of the Sustainable Development Goal (SDGs) as well as the African Union Agenda 2063. Our long-term development vision will integrate the Gambia’s long-term climate vision 2050 and will serve as a strategic framework for the development of successive medium-term national development plans. The formulation of a new medium-term development plan started during 2021Q3 and it is scheduled to be finalized in 2022 in time for the start of the 2023 budgetary process. To this end, preparatory activities, including Cabinet briefs, have been held.

16. With World Bank support, we have completed a draft Turn Around Allocation (TAA) strategy to address fragility and build resilience. Since the 2016/17 political transition, our Global Fragility Index improved from 89.4 in 2017 to 80.5 in 2021; our ranking ameliorated from 37th to 55th during this period. However, with the global pandemic, the socio-political and economic environment has weakened, compromising productivity and growth prospects in the short term. The Gambia’s IDA Performance-Based Allocation (PBA) for FY22 is $80 million with similar annual levels expected in FY23–24. The TAA allocation for FY22–24 is assumed to expand this envelope by 125 percent, subject to annual reviews of milestones in an updated TAA matrix. The TAA strategy will help re-ignite pre-pandemic gains, limit scaring from the pandemic, and build resilience.

B. Fiscal Policy

17. Despite challenges in tax revenue collection, we will continue to implement the 2021 budget (as augmented by the SAP) in line with the fiscal framework under the ECF-supported program. Revenue collection efforts will continue with the GRA’s annual revenue target remaining unchanged, albeit with some risks; we endeavor to pursue the improvement in collection observed in 2021Q2 to the second half of the year. Non-tax revenues are supported by a settlement payment from BP and our efforts to accelerate the sale of stolen assets as per recommendations of the Janneh Commission, following the recent favorable Supreme Court ruling on this matter. However, overall revenue will likely fall below original projections due to delays in budget support disbursements. We will continue prudent budget execution and strict adherence to PFM rules in implementing the SAP to ensure enough resources are allocated for COVID-19 containment efforts, including mass vaccination and mitigation of the socio-economic impacts of the pandemic on the most vulnerable population through better-targeted support. We will make all necessary efforts to remain within the fiscal balances and net domestic borrowing agreed during the second review of the ECF-supported program. To address the shortfall in budget support and potential risks on domestic revenue, we will continue to strictly adhere to Cash Management Committee decisions and discipline, to align spending with available resources, while protecting poverty-reducing spending. For instance, the strict enforcement of these decisions helped control the execution of domestically financed spending (GLF) to 49 percent at end-July 2021, instead of an expected execution of 55–60 percent during the same period. This prudent budget management allowed us to contain net domestic borrowing below the program ceiling as mentioned above. Moreover, subsidies budgeted for some key SOEs will likely not be fully utilized.

18. We will fast-track the required structural reforms needed to unlock donor budget support and project grant disbursements. The government submitted the GPPA act to the National Assembly and requested fast-tracking its approval, which is one of the prior actions for the disbursement of a US$ 20 million budget support from the World Bank. However, the National Assembly could not approve this act during its last session, owing to the extraordinarily heavy legislative reforms that they are currently reviewing. The government will request another fast-track procedure for the approval of this GPPA act. Similarly, we are facing some challenges on the triggers of budget support from the European Union. We completed the trigger related to the revision of the voters list for the upcoming elections. We are making progress on two triggers related to the finalization by NAO of the audit of the government’s 2019 financial statements and the submission to NAO of the 2020 financial statements. However, the completion of triggers on seats for female candidates at the National Assembly and on the Vetting bill may be delayed. We will make all necessary efforts to complete these reforms.

19. The National Assembly approved the 2022 budget which shows some fiscal consolidation, while allowing adequate resources for addressing the pandemic and supporting the economic recovery. The 2022 fiscal framework targets an overall fiscal deficit of about 3 percent of GDP. The domestic primary balance is projected to stabilize at a surplus of ½ percent of GDP as in 2021, supported by strong domestic policies. More specifically:

  • On the revenue side: The acceleration for revenue collection in 2021H2 helps form the basis of the domestic revenue target in 2022. Revenue collections will be ensured by the continuation of the exemption rationalization process initiated in 2021, an improved collection process through the electronic payment platform, the upgraded taxpayer registry and other revenue administration measures (see Section E below). In addition, the GRA will leverage its increased tax audit and data matching capacity to help improve compliance across major taxpayers. Furthermore, compliance in the commercial real estate sector will be improved, as the GRA will make use of the results of the Rented Property Survey conducted in 2021 to update its tax base. Revenues will also be supported by non-tax collections from the sales of stolen assets as authorized by the Janneh Commission, the Senegambia Bridge toll receipts, and an expected one-off receipt of US$30 million from the petroleum sector.

  • On the spending side: The 2022 spending addresses pandemic-related needs, including a provision of GMD400 million (about 0.3 percent of GDP) to cover the vaccination logistics, the running of the COVID-19 hospitalization centers and medical supplies, and a pandemic-related contingency envelop of GMD450 million (about 0.4 percent of GDP), which is the same envelop as in 2021. In addition, other pressures in current spending emerging in 2022 are related to: (i) personnel emoluments due to the increase in the compensation of health personnel and the resumption of recruitments in the security sector following the expiration of the hiring freeze period; (ii) subsidies and transfers as input subsidies to GGC increased by GMD 225 million in 2022 to GMD 525 million and a provision of GMD 150 million is included for crop financing (which will support rural poor population); and (iii) other non-pandemic related spending on goods and services, especially to cater for the organization of the parliamentary elections (about GMD 120 million). On capital expenditure, nearly 80 percent of spending is expected to be externally financed, with the bulk of this financing coming from grants. Domestically-financed capital expenditure is also expected to remain high, with more than half of the envelop representing one-off provisions for the last phase of the Banjul Rehabilitation Project and for the construction of the Bertil-Harding Highway ahead of the 2022 Summit of the Organization of Islamic Cooperation (OIC).

  • Financing: budget support grants are expected to increase from 1.0 percent of GDP in 2021 to 2.3 percent of GDP in 2022, as the African Development Bank resumes support, and postponed disbursement from the World Bank and the European Union add to support already scheduled for 2022. Project grants are projected to reach 8.4 percent of GDP to help support infrastructure development. On the domestic front, implementation of the budget is expected to require a net domestic borrowing of GMD 659 million. This amount assumes adequate provision for the rollover of maturing domestic debt. Domestic financing will be supplemented by privatization proceeds (from the sale of a state asset, MegaBank), for which a consultant has been contracted and potential investors have been identified. In addition, the 2022 budget uses US$20 million out of the US$85 million SDR allocation to The Gambia. This amount will be lent by the Central Bank of The Gambia to the Government in compliance with the Central Bank Act. A legally binding memorandum of agreement will be signed by the two parties which stipulates the terms and conditions of the loan and also ensures the financial autonomy of the Central Bank. The memorandum of agreement should include safeguards measures specifying that the loan is made in foreign currency, ensuring that the government shall repay the loan to the central bank when and if the corresponding SDRs were to be redeemed, clarifying that the loan is made with an interest rate sufficient to cover the central bank’s interest or charges payments for the borrowing, and determining an adequate maturity period of the loan.

C. Debt Sustainability

20. We continue to face a difficult trade-off between addressing financing needs and ensuring debt sustainability. The COVID-19 pandemic has heightened the urgent need for investment to close our infrastructure gap, including in the health sector, and meet the SDGs. In this regard, as our public debt profile continues to be deemed sustainable but at high risk of distress, we will deploy additional efforts to reduce debt vulnerabilities. Following a thorough reconciliation with some of our bilateral creditors, the stock of external debt was revised up in 2019 and 2020 to 47 percent of GDP and 49.7 percent of GDP, respectively. We aim at reducing the present value of total public debt below the benchmark of 55 percent of GDP around 2025. This objective will be achieved through a combination of a strong medium-term fiscal framework and a prudent borrowing policy. We will continue to improve efforts to bolster data collection and reconciliation, including on debt service deferrals agreed with creditors in 2019. In this regard, we will initiate a bi-annual data reconciliation exercise with our creditors and coordinate with managers of foreign-financed projects to ensure that their disbursement requests are processed through MoFEA’s Directorate for Loans and Debt Management (DLDM) and processed disbursements systematically communicated to DLDM. We have made some progress in re-engaging with the Libyan authorities to resolve outstanding arrears, and we will attempt to engage with the Venezuelan authorities once the international sanctions are lifted.

  • Medium-term fiscal framework: The medium-term budget will be anchored on achieving debt sustainability while addressing the social and infrastructure needs. We will aim at bringing the primary fiscal balance from a deficit of 1.2 percent of GDP at end-2021 to an average surplus of 1–1½ percent of GDP between 2022 and 2026. This will support a steady decline in the public debt-to-GDP ratio from 82.2 percent in 2021 to 54.6 percent in 2026. Achieving these objectives will require a gradual and steady increase in domestic revenue (excluding one-offs) from close to 13½ percent of GDP in 2021 to about 15 percent of GDP in 2026, supported by implementation of the GRA’s strategic reform plan, digitalization of tax administration, and rationalization of tax exemptions. We will also broaden the tax base by tapping into the revenue potential of the hospitality, cable television, and real estate sectors. Improved public financial management, including an expanded use of project selection criteria through the Strategic Review Board, a well-functioning of the cash management committee, and e-procurement will help contain spending and enhance efficiency. The support package included in the 2021–22 budgets will be gradually phased out as the economy recovers and progress is made on the rationalization of wages and subsidies to SOEs and subvented agencies.

  • Borrowing policy: we will continue to adhere to the agreed borrowing plan and rely primarily on grants and highly concessional borrowings to finance our infrastructure gap. The government will continue prudence in the contracting of new loans. Regular meetings are held with the EIB and AfDB to ensure that the financing of the Banjul port extension is on concessional terms. Regarding the construction of the Bertil-Harding highway in preparation for hosting the summit of the Organization of Islamic Cooperation (OIC) countries, we are looking for alternative options, including using domestic resources, to ensure least cost financing and avoid contracting non concessional loans.

  • Debt management and transparency. We continued the reconciliation and cleaning of the external debt data and the recording of the domestic debt in the Meridian system. We have completed the update of the debt strategy and regularly publish the quarterly debt bulletin and the revision and publication of annual borrowing plans and monthly bond issuance plans. Additionally, the extension of the CCRT relief between mid-October 2021 and mid-January 2022 will reduce the debt service owed to the IMF by SDR1.1 million.

21. We will continue to strengthen the governance and financial situation of SOEs to minimize contingent liabilities despite the stalled constitutional reform. In this context, we will align the SOEs bill with the existing constitution and submit it to the National Assembly by end-2021 as agreed in the program (end-December 2021 SB). In addition, to improve transparency and accountability of the SOEs, we will by end-December 2021: (i) identify and agree on a set of key financial indicators for the main SOEs and set up a system to collect the relevant data on a quarterly basis and (ii) publish the audited financial statements of SOEs that have been approved by the National Assembly (end-December 2021 SB). To improve the efficiency of SOEs and mitigate the risks on government budget, the Ministry of Finance and Economic Affairs has signed a performance contract with NAWEC in 2021; additionally, we will extend the signing of performance contracts between MoFEA and three additional key SOEs, including target-based key operational and financial indicators by end-September 2022 (end-September 2022 SB). We will update the cross arrears between SOEs and ensure effective functioning of the new Directorate of SOE oversight in the MoFEA to improve monitoring of SOEs. The fiscal risks associated with the use of trade credit facility from the Islamic Trade Finance Corporation (ITFC) have significantly declined, as GGC settled its outstanding balance and now relies fully on domestic banks for funding its ground nut campaign, and NAWEC and GNPC are servicing their debt obligations without government support.

D. Monetary Policy and Financial Sector

22. Monetary policy will remain accommodative to support post-pandemic economic recovery, but the CBG will consider tightening the policy stance as needed to head off any inflation pressure. Considering the fragility of the budding economic recovery, our monetary policy committee in March and September 2021 maintained the accommodative policy stance. Reserve money, liquidity, and credit to the private sector continued to expand. Inflation accelerated in 2021H1 but moderated in August. Donors’ disbursements, CBG FX purchases (which was enabled by record-high private remittances), and the IMF’s general SDR allocation boosted gross international reserves. If inflation pressures intensify and liquidity remains ample, we stand ready to tighten the monetary policy stance at a subsequent MPC meeting. Our policy options will start from moderating CBG’s purchases on the FX market to reduce liquidity injection and increasing the deposit facility rate to narrow the corridor with the lending facility rate. We will also tackle structural obstacles hindering credit extension by banks, such as access constraints, collateral recovery problems, and default risks. The CBG will continue strengthening its liquidity forecasting with technical assistance from the IMF.

23. We are addressing localized vulnerabilities in the financial sector, while strengthening crisis preparedness. The overall financial sector appears broadly resilient to the impact of the pandemic, except in a few banks and non-bank financial institutions (NBFIs) exposed to sectors affected by the pandemic. Thus, we continue to shun a blanket weakening of prudential requirements and we will withdraw progressively any remaining case-by-case supervisory forbearance extended at the onset of the pandemic, as the situation is neither widespread nor systemic. Nonetheless, consistent with recommendations from the IMF’s 2019 Financial Sector Stability Review (FSSR), we have drawn up a strategic plan and are building up in-house expertise for stress testing banks for early signs of distress. In this context, we are preparing an internal framework to guide stress testing of banks’ balance sheets. Furthermore, with the support of a prospective resident advisor from the IMF, the CBG will conduct balance sheet stress tests of one large and one medium-sized bank by end-September 2022 (end-September 2022 SB). Moreover, the CBG will set up a Financial Stability Unit/Department and assign it a macroprudential policy mandate, in accordance with the recommendations from the 2019 FSSR. We are utilizing a Regulatory, Compliance and Supervision System (RegCoSS) software introduced in April 2020 to access real-time information to support banking supervision; and we are strengthening risk-based supervision of banks with TA support from AFRITAC West2. Furthermore, we have set up a taskforce to collect information for a review of our Business Continuity Plan and a crisis management and resolution team to strengthen our crisis preparedness. A parallel approach is being adopted for strengthening the supervision of NBFIs, for which purpose we will require technical assistance.

24. We are strengthening safeguards in line with recommendations from the IMF’s 2020 safeguards assessment. The CBG’s oversight and capacity will be further strengthened to bolster policy credibility and effectiveness. The CBG Board has approved a revised audit committee charter to strengthen independent oversight of the central bank. A new Board member appointed to the audit committee is a qualified accountant. We have also designated a director for our Internal Audit Department to strengthen its capacity. Furthermore, all foreign exchange cash handling has been transferred to the purview of our Currency Department. We plan to update our investment policy and guidelines in line with the technical assistance received from the Fund in April 2020. The auditors issued a clean audit opinion on the FY2020 financial statements in May 2021. For FY2021, we have appointed joint auditors, including an international firm with central bank auditing experience to audit the CBG’s financial statements and will publish the results on our external website once completed, after which the joint audit arrangement will be reviewed with the support of the IMF’s Finance Department.

25. We plan to maintain, at least, our current level of foreign exchange reserves. We will save part of the recent general SDR allocation to ensure a strong reserve position in anticipation of government’s prospective demand for foreign exchange to meet debt service obligations at the expiration of the 2019 debt relief and as a buffer against unanticipated shocks. In parallel, we are maintaining a flexible exchange rate regime, to support our reserve position as well as our external competitiveness. Accordingly, the CBG will limit its presence in the FX market to solely prevent disorderly volatility and, if warranted, anticipate government’s FX transactions.

E. Structural Reforms

Domestic Revenue Mobilization

26. The GRA’s 2020–24 Corporate Strategic Plan (CSP) is anchored on the reforms identified via the Tax Administration Diagnostic Assessment Tool (TADAT) and continues to guide our revenue mobilization efforts:

  • Tax registry cleaning project: The register cleansing project is now fully completed for the Large Taxpayer Unit (LTU) and all tax offices in the Greater Banjul area. The campaign is ongoing for the remaining tax offices in the provinces. The project is expected to be finalized by end-December 2021. Data held in excel files will be migrated to the GAMTAXNET platform. An AFW2 STX mission is planned to develop and implement the registration data migration strategy for migrating the cleansed registration data held in Excel to GAMTAXNET recent version (V4). This will ensure quality taxpayer data is maintained in GAMTAXNET to support revenue collection improvement. Once the automated upload of the cleaned tax registry is completed, we will develop, approve, and use an accurate tax ledger for the large taxpayers by end-September 2022 (end-September 2022 SB) and later expand it to all taxpayers to better monitor and manage tax obligations, including tax arrears.

  • GAMTAXNET remediation plan: The remediation plan has now been executed and with all modules within the plan (registration, returns filings, payments, audit, refunds, MIS report and system fixes) now developed and deployed in the seven main tax offices of Banjul, Kanifing, Brusubi, Serrekunda, Tallinding, Wellingara and Brikama. The users in these offices have been supported on the usage of the enhanced modules, especially where major changes have occurred. The roll-out of GAMTAXNET V4 continue to the rest of the provincial offices with completion of full roll out envisioned for end-October 2021. Thereafter additional training on the full GAMTAXNET functionality will be conducted for all system users. Contract negotiations are also currently underway with the GAMTAXNET developer to continuously ensure GAMTAXNET is fully operational, adequately maintained and system errors continue to be fixed during the first year of usage after the full rollout.

  • Digital transformation: Efforts will continue with our IT initiatives to achieve the digital transformation of the GRA. This includes the migration from ASYCUDA++ to ASYCUDA World with the support of the AfDB and the acquisition of a new Integrated Tax Administration System (ITAS) with the support of the World Bank under the Fiscal Management Development (FMD) project to replace GAMTAXNET. The FMD project has commenced with the appointment of a contractor, Ernest and Young (E&Y) Ghana. The project charter and inception reports were finalized and approved. E&Y Ghana undertook a Business Process Re-engineering (BPR) mission and drafted a report on the current GRA business processes. The report was reviewed by GRA and the WB and the final report is expected soon. The new ‘To Be’ or future BPR report is also expected to be completed during the 3rd quarter 2021. Based on the ‘To Be’ BPR report, E&Y Ghana will assist with the procurement of the new ITAS system that will include e-registration, e-filing, and e-payment functionalities. The consultant also recommended a benchmark visit to two other revenue administrations, the outcome of which will further facilitate the decision on the type of ITAS to be selected. Engagement with GAMTEL is also ongoing to secure faster internet connections through fiber optic cabling to tax offices in anticipation of the two new web-based systems (ASYCUDA World and new ITAS). The planned connection to a more reliable and faster internet will also further support the smooth implementation of e-services as part of the reform initiatives also outlined in the GRA corporate strategic plan 2020–24. We also migrated from EPICOR version 9 to version 10 in line with the government’s PFM reform agenda. The automation of the Records Management system is currently at the pilot stage.

  • Tax expenditure policy (TEP): A consultant has been recruited with the support of the World Bank to assist MOFEA with the implementation of the TEP report recommendations. The Cabinet adopted a Tax Expenditure Policy in late 2020. The revision of the GIEPA act is underway. Further critical collaboration between all stakeholders took place in the third quarter of 2021 and will continue in the fourth quarter to consider all the impact of reforms, with a view to submitting the GIEPA Act to the National Assembly by end-2021 (reset end-December 2021 SB). The committee, comprising MoFEA-MoT-GRA, in charge of a holistic control of tax exemptions is rigorously carrying-out its duty. The strengthening of internal controls in adhering to legislative and regulatory requirements, together with improvement in the Customs department’s adherence to all policy measures and operational protocols especially regarding exemptions to ensure accuracy in valuations and charges, have year-to-date resulted in disallowance of exemption applications of GMD 1.3 billion. Furthermore, a tax audit campaign will be conducted by end-September 2022 on at least five exempt entities holding Export Processing Zones License (EPZL) or GEIPA Special Investment Certificates that are close to graduation and for a predetermined number of tax years as allowed by Paragraph 216 and 220 of the Income and Value Added Tax (IVAT) 2012 (end-September 2022 SB). It is envisioned that the campaign will result in additional revenue collection, improve the sector’s tax compliance, further create a database of much needed financial and tax information on the exempt entities, improve skills levels, and enhance future TEP decision-making.

  • Other measures: To improve the ease of doing business in The Gambia, and as part of the WB FMD project, the Taxpayer Charter has been updated and internally validated. We will complete and adopt the Taxpayer Charter to improve the relationship between GRA and taxpayers and increase taxpayers’ compliance by end-June 2022 (end-June 2022 SB). Several regional bilateral and tripartite cooperation agreements are being negotiated with other countries including with Guinea Bissau and Mali. We are also working with stakeholders to gain access to the Revised Kyoto Convention. A Customs Brokers Policy has been developed to guide registration for these brokers. We continue to strengthen our audit activities through capacity building in specialized areas such as Risk Management, Post Clearance Audits, Intelligence and Investigation and Tax Analysis and Revenue Forecasting, Data analytics. Through the WB FMD project, a TOR has been drafted for the development of a comprehensive compliance management strategy for the organization. Our GRA website will be upgraded; a TOR for the design and development of a bilingual website has been drafted and shared with the WB FMD project PIU for finalization and advertisement.

Public Financial Management (PFM)

27. Our 2021–25 PFM reform strategy will continue to guide our efforts. In particular:

  • Public procurement: Despite the delay at the National Assembly of the revision of the Procurement Act (GPPA Act), we were able by July 2021 to ensure all procurement processes are digitalized, the legal and regulatory framework in procurement process is standardized, and a unified procurement contracts system over all the MDAs and public sector entities is implemented. We have revamped our website to enhance transparency through the publication of all contracts approved in 2021. We are training GPPA staff on e-procurement including through tours study in Ghana to better absorb the support expected from the World Bank. We have made considerable progress on our procurement process. The number of contracts awarded on single sourcing and request for proposal has been reduced markedly with the bulk of our public contracts is now awarded based on “restricted tender”. With the completion of the consultative process on the GPPA Act at the National Assembly, we will push for a special session to approve the Act. This approval will allow approval of the draft regulations and manuals prepared with support from the European Union and the World Bank.

  • Civil service reforms: The Civil Service reform program 2018–27 was approved by the Cabinet in 2018 and its implementation is well under way. As part of the reform, a new pensions bill is drafted and is currently at the National Assembly awaiting enactment. Similarly, a new Pay and Grading system has been designed as part of the pay reform initiatives. In the same vein, a review of generic, sector and cadre specific allowances is now completed and approved by the Cabinet. The transfer of Payroll Management Function initiated in June 2020 is completed. The reforms continued with the validation in January 2021 of the Performance Management System policy that is expected to be implemented in 2022. Since February 2021, all salaries are paid electronically through commercial banks, microfinance institutions, mobile money service providers, and credit unions. In addition, the Secretary General and Head of the Civil Service has directed all heads of departments to purchase Biometric Time and Attendance Register System to better control the payroll in their departments. The specifications for the system were developed by the Accountant General’s Department, Ministry of Information and Communication Infrastructure (MoICI) and Personnel Management Office (PMO) and includes capability of integration with payroll to assist in ensuring payroll efficiency and integrity.

  • Integrated Financial Management Information Systems (IFMIS): During 2021 and despite the difficulties generated by the COVID-19 pandemic, the IFMIS has been rolled out to all sub-Treasuries, local government authorities, six self-accounting projects and 22 embassies with plans to roll out to the remaining two embassies and the remaining projects by end-December 2021. Two subvented agencies, namely the office of the Ombudsman and the Human Right Commission, have also been connected to IFMIS. For the remaining subvented agencies, a need assessment has been conducted, and five pilot sites have been identified (Independent Electoral Commission, National Nutrition Agency, Edward Francis Small Teaching Hospital, Gambia Bureau of Statistics, and Social Development Fund) to deploy the system. By end-June 2021 the IFMIS, MERIDIAN and the CBG’s T24 have been interfaced and they are currently under user acceptance test.

  • Cash management: The Cash Management Committee plays a key role in aligning spending with available resources, which is particularly important in the execution of the 2021 budget given delays in budget supports from donors and uncertainty about domestic revenue collection. The committee helps prevent fiscal slippages. The cash management system will be strengthened by the ongoing progress towards the operationalization of the Treasury Single Account (TSA), which is expected to be completed by end-December 2021. MOFEA will urge all key MDAs to update their cash plans over the budget year and provide the Cash Management Unit (CMU) of essential inputs in the production of its monthly cash forecasts. The TSA will allow centralization and instantaneous recording of all government revenues not collected through the GRA. More government accounts at commercial banks have been moved to the Treasury account at the Central Bank and the sweeping of accounts is being carried out more frequently, such as for some sub-treasury accounts (i.e. revenue collected in regional offices) and the SeneGambia bridge. We will make sure that key aspects of the TSA completion are completed, including (i) an updated inventory of government’s bank accounts in commercial banks; (ii) the finalization of the design of the TSA structure; (iii) the setting up of the TSA Implementation Unit. Implementation of the TSA single view ledger system has commenced. The contract has been signed and implementation of the revenue and payment platform has started. A first edition manual is in place; it will be revised/updated after all the payment platforms are implemented. The implementation of the payment platform is ongoing, and the design document has been submitted and is being reviewed by the implementation team.

  • Public Finance Bill: The review and amendment to the Public Finance Act (PFA) enacted in 2014, the update of the PFM Strategy 2016–20, and the development of the PFM Manual are underway. The hiring of a consultant to review the Public Finance Act is proceeding. This review will aim at strengthening budgetary processes, including exceptional budget procedures, treasury management, internal controls, and fiscal reporting. However, the completion of the review and the submission to the National Assembly will likely take longer time than expected and it is now expected by end-June 2022 (reset end-June 2022 SB).

  • COVID-19 spending: We plan to complete the second phase of the ex-post audit and transmit the reports to the National Assembly by end-December 2021. Following the review process at the National Assembly, we plan to publish jointly the reports from the phase 1 and phase 2 audits by end-March 2022 (end-March 2022 SB). We will continue the transparency requirements for COVID-19 spending to cover the entire years 2021 and 2022.

  • Investment selection: The training on Project Selection and Appraisal Template for MDA has been conducted by MOFEA in 2019 to better prepare sectors in their project selection and appraisal process and the projects’ mapping exercise completed. The annual in-country portfolio performance review has been conducted for the World Bank, the AfDB and the IsDB. Key issues highlighted during the review include challenges relating to delays in project effectiveness and start-up, inadequate qualified staff in financial management, safeguards and procurement and inadequate oversight of steering committees of MDAs during implementation. To address these challenges, the following recommendations were made: (i) ensure adequate preparation for projects by increasing the use of trust funds and project preparation facilities for feasibility studies, (ii) continuous capacity building on fiduciary and safeguard, (iii) improve coordination between PIUs and beneficiaries; (iv) conduct more frequent Country Portfolio Performance Reviews to address some of the these bottlenecks in project implementation; (vi) explore the opportunities of a centralized fiduciary unit for donor financed projects including safeguards and (vii) stakeholders meeting to discuss cross-cutting issues on Agriculture, Lands, Environment, Health, CBG, Energy, Petroleum and NAWEC. So far, the Gambia Strategic Review Board (GSRB) has evaluated nine foreign-financed public investment projects including one Public-Private Partnership (PPP) project in the tourism sector. As most of the GLF projects being currently implemented were initiated before the full operationalization of the GSRB, the Board has not reviewed any domestically financed project yet. Going forward, we will systematically submit to the GSRB all domestically and foreign-financed projects and ensure a positive opinion before their inclusion into the Budget.

  • Public Investment Program (PIP): the Aid Coordination Directorate (ACD) is currently working with a World Bank team on a pilot PIP for selected sectors (agriculture, education, health, infrastructure, energy, and environment). To this end, ACD together with DDP are tasked to provide a draft Terms of Reference for the sector working group of the PIP. The draft TOR has been developed and shared for comments with stakeholders before final submission to the World Bank team. The PIP is intended to ensure that sector strategies are translated into programs and projects in the form of a PIP as one of the policy actions under the sustainable development financing policy for the next 2022 fiscal year. The PIP is a five-year medium term investment resource envelope that would be available to the government during the period 2022–26 for the implementation of the prioritized projects and programs by MDAs. The overarching objective of the PIP is to strengthen public investment management based on priority programs and projects of the government within the planning period in line with the debt situation and fiscal sustainability for the realization of the NDP.

  • Aid Policy Action Plan: the Gambia Aid Policy 2015–20 together with the NDP and the Development Finance Assessment 2018, provide a cardinal guide on how aid to the Gambia should be provide and managed. This is in recognition of the fact that further developments in human and institutional capacity are necessary to support the successful implementation of the national development blueprints. As the Aid policy 2015–20 has expired, DAC is currently working on drafting a new Aid Policy to strengthen the alignment and harmonization of aid resources towards achieving the development blueprints through effective resource mobilization. A consultant for the new Aid policy has been identified and requested to submit a proposal. Similarly, plans are underway to review, validate and publish an Aid Bulletin.

  • Fiscal Risk Management: we will include a Fiscal Risk Statement in the 2023 budget documentation to be submitted to the National Assembly and we will publish a Fiscal Risk Statement that includes information on macroeconomic and debt sustainability risks, and specific fiscal risks (such as contingent liabilities stemming from SOEs, guarantees and eventually PPP contracts).

  • Vehicle policy: In June 2021, the new government vehicle policy aimed at improving efficiency in the handling of government vehicles was validated by MoFEA and Ministry of Justice (MoJ).

Governance, Corruption and Trafficking in Persons

28. The recent signing into law of the information access bill will enhance transparency and accountability in governance. After two years since its submission, the National Assembly passed the information bill which was signed into to law by the President in August 2021. We will continue to liaise with the National Assembly, overwhelmed with bills for the institutional and legal reforms required for the political transformation of the Country, to ensure that the anti-corruption bill is also passed, in view of strengthening our anti-corruption framework ahead of the conduct in 2022 of the Governance Diagnostic for the Country with IMF support.

29. We continue our efforts to combat human trafficking and to strengthen the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework. Our efforts include:

  • Human trafficking: Despite our continued effort in combatting Human Trafficking, The Gambia remained at Tier 2 Watchlist on the US Department of State Human Trafficking Report. We will continue to closely work with the US state department to avoid falling back to Tier 3, which would halt our cooperation with the US government. This cooperation has recently strengthened with the signing of a 5-year US$15 million agreement to support the NDP’s strategic priority of restoring good governance, respect for human rights, the rule of law, and empowering citizens.

  • AML/CFT: The Gambia’s first national AML/CTF Risk Assessment exercise completed in 2019 was finalized and submitted to Cabinet for approval in January 2021. This risk assessment has enabled the country to better understand the action plan to mitigate the risks identified. The GoAML application has been provided to the Gambia Financial Intelligence Unit (FIU) by United Nations Office on Drugs and Crime (UNODC) to enhance and digitize the suspicious transactions AML/CFT reporting regime for The Gambia. The staff of the FIU has been trained in the use of the software and process to domesticate the application has started. The Gambia is working closely with the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) on steps required for the completion of the second round of the Mutual Evaluation Exercise. A pre-assessment workshop was held in February 2021, the onsite visit by the GIABA secretariat and the assessors was conducted from August 22nd to 3rd September and the Mutual Evaluation report is expected to be discussed at the GIABA Plenary and Technical Committee meeting in May 2022.

Business Environment

30. The development of the private sector remains at the center of our post-pandemic recovery plan to create jobs, reduce poverty and limit scaring from the pandemic. Our efforts to improve the business environment and promote diversification, with a view to enhancing investment and innovation opportunities and to creating jobs, have suffered a serious setback with the socio-economic and financial consequences of the pandemic on businesses and the social fabric. Given the preexisting structural impediments to private sector development, notably the low level of physical and human capital, the lack of access to long-term finance, the high cost and unreliability of energy supply, and delays encountered in courts in resolving commercial disputes, we are updating the GEIPA Act to level the playing field and re-focus on business facilitation. Also, we have launched the second National Export Strategy by GEIPA in August 2020 to support export-ready and export-potential firms to enter regional and global value chains; this will boost agri-business and strengthen its linkage with the tourism sector. Also, with the new financial inclusion strategy expected to be finalized soon, we are working on removing obstacles to accessing finance by working towards effective functioning of the credit reference bureau, improving the collateral registry, expanding digital finance, leveraging on remittances. We are working with the MoJ to reestablish commercial courts to facilitate contract enforcement. We are also making efforts to improve the reliability and access to electricity and digitalizing the tax system-- the second and third main obstacles to doing business in The Gambia.

Poverty Reduction, Gender Issues, and Climate Change

31. Poverty reduction: the government remains committed to social safety programs, including an annual contribution of GMD 10 million to the World Bank-supported social safety net program. We have disbursed about GMD 70 million out the GMD 160 million included in the budget to support the implementation of the Program for Accelerated Community Development (PACD) aiming at addressing poverty and inequality at community level. We have also included GMD 250 million in the draft 2022 budget for the PACD. In addition, a National Health Insurance Bill was submitted to the National Assembly. To improve the efficiency of our social safety net programs, we will expand the social registry to cover six additional districts, which will allow us to better target the most vulnerable population (end-June 2022 SB).

32. We are embracing gender sensitive budgeting. The MOFEA, with support from the IMF, will develop a roadmap for Gender Budgeting (GB) implementation and present to the cabinet for endorsement. To signal our commitment to implementing GB, we will include a statement on the Government’s commitment to GB in the FY22’s Budget Speech and work further on improving GB statement for next budgets, to capture MDAs information on the impacts of budgets on gender equality. The Ministry of Gender, Children and Social Welfare (MoGCSW) will develop an overarching National Gender Results Framework, by identifying national gender gaps and setting objectives to address these gaps, which will serve as the basis for incorporating gender priorities into the National Development Plan and sector strategies. The Women Enterprise Fund, which is managed by the MoGCSW and whose objective is to provide support to women entrepreneurs, has seen its budget increased to GMD 10 million in 2021 from GMD 6 million in 2020. This increase has allowed the granting of loans amounting to GMD 8.3 million with 2,060 direct beneficiaries, as well as the approval of 350 women groups applications with a total of 7,000 beneficiaries, who are currently undergoing training on entrepreneurship and management skills.

33. We will strengthen our policies to build resilience to climate change. A low topography, a high dependence on rain-fed agriculture, an inadequate drainage and stormwater management system in the context of rapid urbanization, and tourism vulnerability to sea-level rise (as recent years have witnessed disappearances of coastal structures and local beaches), places The Gambia among the countries most vulnerable to climate change. We are taking very seriously these challenges and The Gambia is the only country in the world which has submitted plans that are deemed compatible with the goals of the Paris climate agreement according to the Climate Action Tracker. The Budget Directorate continues to explore options to have climate sensitive budgeting. The Ministry of Environment and Climate change is working with other MDAs, particularly the Ministry of Agriculture and the Ministry of Energy, to foster resilience to climate change. We continue to enforce the ban on the use of plastic bags. We introduced a feed-in tariff for renewable energy sources (2013 Renewable Energy Act) and are improving our energy mix toward more renewal energy by building a 20 MW solar photovoltaic plant with World Bank support and the supply of 1,100 schools and hospitals with solar energy supported by the EU and the European Investment Bank (EIB). We have initiated the restoration of 10,000 hectares of forests, mangroves, and the savanna belt to help reduce climate vulnerabilities. We are working with various climate finance institutions, in particular the Green Climate Fund (GCF), to fund projects such as the Ecosystem-Based Adaptation (EBA) project which aims to enhance the climate resilience of rural communities and facilitate the development of a sustainable natural resource-based economy. We launched in February 2021, a multi-donor funded US$80 million project in the agriculture sector, the Resilience of Organizations for Transformative Smallholder Agriculture Project (ROOTS), that will enhance food security, nutrition, and smallholder farmers’ resilience to climate change in The Gambia. We are seeking further IMF’s support to assess the macroeconomic impact of climate change to set a basis for designing a comprehensive reform plan in this area.

34. Capacity development: We will continue to leverage technical assistance from our development partners to strengthen revenue administration, public financial management (including cash management, fiscal transparency, project appraisal and selection processes), macroeconomic statistics production, debt management, monetary policy design, and bank supervision capacity.

F. Program Monitoring

35. The government will continue to take all necessary measures to meet quantitative targets and observe structural benchmarks under the ECF-supported program. The program will be subjected to semiannual reviews and performance criteria, indicative targets and structural benchmarks as set out in Tables 1, 2, 3, and 4 of this Memorandum and defined in the attached Technical Memorandum of Understanding (which also sets out the requirements for data reporting to IMF staff). The fourth and fifth program reviews will be based on targets and benchmarks through end-December 2021 and end-June 2022, respectively.

Table 1.

The Gambia: Proposed Quantitative Targets and Indicative Targets, 2020–21

(Cumulative from beginning of calendar year to end of month indicated; local currency millions, unless otherwise indicated)

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For definitions and related adjustors, see the Technical Memorandum of Understanding (TMU). End-June and End-December are test dates. End-March and end-September targets are indicative, except for continuous performance criteria.

These criteria apply on a continuous basis, including beyond end-December 2021.

This includes US$65 million for Banjul Port expansion, of which US$50 million on concessional terms and US$15 million in nonconcessional borrowing, which is expected to blended with a grant to meet the required 35-percent grant-element requirement.

The zero ceiling applies to all outstanding credit (for example, overdrafts and advances) at non-market terms as of the end of each quarter, excluding the RCF onlending and the 30-year bond held by the CBG.

A performance criterion at end-December 2020.

Excludes grants under the CCRT.

The grant for debt service falling due through October 15 , 2021 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13 , 2022.

Table 2.

The Gambia: Proposed Quantitative Performance Criteria and Indicative Targets, 2022

(Cumulative from beginning of the calendar year to end of month indicated; local currency millions, unless otherwise indicated)

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For definitions and related adjustors, see the Technical Memorandum of Understanding (TMU). End-June and End-December are proposed test dates. End-March and end-September targets are indicative, except for continuous performance criteria.

These criteria apply on a continuous basis, including beyond end-December 2021.

This includes US$65 million for Banjul Port expansion, of which US$50 million on concessional terms and US$15 million in nonconcessional borrowing, which is expected to blended with a grant to meet the required 35-percent grant-element requirement.

The zero ceiling applies to all outstanding credit (for example, overdrafts and advances) at non-market terms as of the end of each quarter, excluding the RCF onlending and the 30-year bond held by the CBG.

A performance criterion at end-December 2020.

Excludes grants under the CCRT.

The grant for debt service falling due through October 15, 2021 is available under the CCRT. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for a total period of two years, through April 13, 2022.

Table 3.

The Gambia: Prior Action and Structural Benchmarks, 2021

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Table 4.

The Gambia: Proposed Structural Benchmarks, 2022

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Attachment II. Technical Memorandum of Understanding

Introduction

This memorandum sets out the understandings between The Gambian authorities and the staff of the International Monetary Fund (IMF) regarding the definitions of quantitative targets and structural benchmarks that will be used to monitor performance under the ECF-supported program through end-2022. It also sets out the related reporting requirements and describes the adjustors that will be applied to certain quantitative targets under the program.

Quantitative Targets

A. Net Domestic Borrowing of the Central Government

1. Definition: The net domestic borrowing of the Central Government is defined as the change in net claims on the Central Government by the domestic monetary sector (monetary authorities and deposit money banks) plus the change in the discounted value of domestic government securities held by the non-monetary sector. Net domestic borrowing also covers the change in any other net claims on the Central Government by the domestic non-monetary sector, as well as the change in government arrears on domestic debt service obligations. Central Government excludes local and regional governments and public enterprises. In computing the net domestic borrowing of the Central Government, the following components are excluded: (i) onlending of the IMF credit (under RCF or ECF) to the budget and lending to the Treasury of any portion of the SDR general allocation, (ii) changes in the balances of the project accounts listed in Table 1, and (iii) the face value of government securities issued to increase the CBG’s capital to the statutory level enshrined in the CBG Act.

2. Adjuster: The NDB targets (ceilings) will be adjusted downward/upward by the excess/shortfall of the dalasi equivalent of the total budget support grants received in that period relative to the program forecasts specified in the table below. The upward adjustment of the NDB targets at each quarter’s end for the shortfall in the disbursements of budget support amounts specified in Table 2 below, may not exceed GMD 1.0 billion.

3. Supporting material: Reporting on net domestic borrowing will form part of the consolidated budget report described in ¶32 below.

B. Net Domestic Assets of the Central Bank

4. Definition: The net domestic assets of the CBG are defined as the difference between reserve money and the net foreign assets of the CBG. Reserve money is defined as the sum of currency issued by the CBG (i.e., currency in circulation) and the deposits of commercial banks at the CBG. Net foreign assets are defined as foreign assets minus foreign liabilities. Foreign assets and foreign liabilities are defined as claims on nonresidents and liabilities to nonresidents, respectively.

5. For program monitoring purposes, in the calculation of the net domestic assets of the CBG, foreign assets and liabilities will be converted at the end-of-period market exchange rates prevailing at end-October 2020: 51.84 GMD/USD, 1.17 USD/EUR, 1.30 USD/GBP, 0.92 CHF/USD, 1.41 USD/SDR, 104.58 JPY/USD. Foreign assets and liabilities denominated in other currencies will be converted into U.S. dollars at the prevailing end-of-period market exchange rates for end-October 2020, and then into dalasi at the rate listed above. These are accounting exchange rates only and should not be construed as projections.

6. Supporting material: Net domestic assets of the central bank will be transmitted as part of the balance sheet of the CBG (compiled based on the TMU rates) on a monthly basis within four weeks of the end of each month. For analytical purposes, the balance sheet of the CBG compiled on a current-rate basis will also be submitted.

C. Net Usable International Reserves of the Central Bank of The Gambia

7. Definition: The net usable international reserves (NIR) of the CBG are defined as the difference between usable reserve assets and reserve liabilities. To this effect, usable reserve assets are readily available claims on nonresidents denominated in convertible foreign currencies. They include the CBG holdings of SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country’s reserve position at the IMF. Excluded are any assets that are pledged, collateralized, or otherwise encumbered, claims on residents, claims in foreign exchange arising from derivatives in foreign currencies vis-à-vis domestic currency (such as futures, forwards, swaps, and options), precious metals, assets in nonconvertible currencies, and illiquid assets (including capital shares in international organizations). Reserve liabilities are all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives (such as futures, forwards, swaps, and options), and all credit outstanding from the IMF, but excluding any liabilities to the IMF’s SDR Department.

8. For program monitoring purposes, in the calculation of the net usable international reserves of the CBG, foreign assets and liabilities will be converted at the exchange rates listed in ¶5 above.

9. Adjuster: The quarterly NIR targets (floors) for each quarter will be adjusted downward/upward by the US dollar equivalent of the shortfall/excess of total budget support grants and loans received in the period preceding quarter’s end relative to the program forecasts, as specified in Text Table 1. The downward adjustment to the quarterly NIR floors, on account of a shortfall in budget support amounts as specified in Table 2 above will be capped at US$20 million.

Text Table 1.

The Gambia: Projected Budget Support Flows, 2022

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Sources: The Gambian authorities; and IMF staff estimates.

10. Adjuster: In case of an allocation of SDRs by the IMF, the net usable international reserves of the CBG will be adjusted upward by the full amount of the SDR allocation.

11. Supporting material: A detailed reserve statement with end-month data on net usable international reserves of the CBG will be transmitted within seven days of the end of each month.

D. New External Debt Payment Arrears of the Central Government

12. Definition: External debt payment arrears are defined as external debt obligations of the central government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods).

13. For program purposes, external arrears exclude (i) financial obligations of the government for which the creditor has accepted in writing to negotiate alternative payment schedules before the relevant payment; (ii) arrears on claims which the government has represented as being disputed; (iii) arrears on claims that cannot be settled due to international sanctions; and (iv) arrears on trade credits, with the exception of arrears on payments due to the International Islamic Trade Finance Corporation (ITFC). Non-accumulation of new external debt payment arrears by the central government is a target, to be observed continuously.

14. Supporting material: An accounting of non-reschedulable external arrears (if any) by creditor countries, with detailed explanations, will be transmitted on a monthly basis within four weeks of the end of each month. This accounting would include, separately, arrears owed by the Central Government and other public sector entities to Paris Club, non-Paris-Club, private, plurilateral and multilateral creditors.

E. New Non-Concessional External Debt Contracted or Guaranteed by the Central Government

15. Definition: This target refers to new non-concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian dalasi. It applies not only to debt as defined in ¶8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014), but also to commitments contracted or guaranteed for which value has not been received. For program purposes, the guarantee of a debt arises from any explicit legal or contractual obligation of the central government to service a debt owed by a third-party debtor (involving payments in cash or in kind). A debt will be considered contracted when conditions for its entrance into effect have been met, including approval by the National Assembly. Loans or purchases from the IMF and concessional debts as defined below, are excluded from this target as is any debt with maturity of one year or less. This performance criterion will be assessed on a continuous basis

16. For program purposes, a debt is concessional if it includes a grant element of at least 35 percent, calculated as the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt. The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt. For debts carrying a variable interest rate in the form of a benchmark interest rate plus a fixed spread, the PV of the debt would be calculated using a program reference rate plus the fixed spread (in basis points) specified in the debt contract. The program reference rate for the six-month USD LIBOR is 2.42 percent and will remain fixed for the duration of the program. The spread of six-month EURIBOR over six-month USD LIBOR is -250 basis points. The spread of six-month JPY LIBOR over six-month USD LIBOR is -250 basis points. The spread of six-month GBP LIBOR over six-month USD LIBOR is -150 basis points. For debts with a grant element equal or below zero, the PV will be set equal to the nominal value of the debt. The discount rate used for this purpose is the unified discount rate of 5 percent set forth in Executive Board Decision No. 15248-(13/97).

17. Supporting material: A comprehensive record, including a loan-by-loan accounting of all new concessional and non-concessional debt contracted or guaranteed by the Central Government with detailed explanations, will be transmitted on a quarterly basis within four weeks of the end of each quarter.

18. MoFEA will forward, within four weeks of the Central Government contracting or guaranteeing any new external loan, the loan’s terms and conditions including interest rate, grace period, maturity, interest, fees, and principal payment schedule with all annexes.

F. New Concessional External Debt Contracted or Guaranteed by the Central Government

19. Definition: This target refers to new concessional external debt contracted or guaranteed by the Central Government denominated in any currency other than the Gambian dalasi. It applies to debt as defined in ¶15. Concessionality of debt is as defined in ¶16.

20. For borrowing packages comprising both loan and grant components to meet the concessionality requirement (grant element of 35 percent), only the loan components will count toward the borrowing limit.

21. Supporting material and data provision: Refer to ¶17 and ¶18.

G. Outstanding Stock of External Public Debt with Original Maturity of One Year or Less

22. Definition: This target refers to the stock of outstanding external public debt with original maturity of one year or less, owed or guaranteed by the public sector.1 Public sector consists of the Central Government and regional governments and other public agencies, including the central bank. Trade credits are excluded from this target including the ITFC credits.

23. Supporting material: A comprehensive record of all external debt with original maturity of less than one year owed or contracted by the public sector, with detailed explanations, will be transmitted on a quarterly basis within four weeks of the end of each quarter.

H. Tax Revenue

24. Definition: This indicative target refers to taxes and duties collected by the Domestic Taxes Department and Customs and Excises Department of the Gambia Revenue Authority (GRA). Tax revenue is the sum of revenues collected against all the tax codes outlined below (Text Table 2). Nontax revenue, such as licensing fees, fines, and levies collected by the GRA are excluded from this target. Levies collected by the GRA on behalf of other organizations are also excluded (National Education & Technology Training Levy, AU Levy, ECOWAS Levy).

25. Supporting material: A monthly report on revenue collected by the GRA will be transmitted within four weeks of the end of each month.

Text Table 2.

Tax Revenues Collected by The Gambia Revenue Authority

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I. Central Bank Credit to the Central Government at Non-Market Terms

26. Definition: This target refers to the consolidated balance on the Treasury Main Account, the Consolidated Revenue Fund, and other revenue accounts. It also covers all gross claims on the Central Government on the balance sheet of the central bank, with terms (including maturity and yield) materially different from the ones prevailing in the market for Treasury bills and bonds around the time of acquisition of these claims. The target also covers any overdue payments of principal and interest on Central Government securities held by the central bank. This performance criterion will be assessed at the end of each month.

27. Supporting material: Reporting on new central bank credit to the government at nonmarket terms will form part of the monetary sector data described in ¶34 and ¶35 below.

J. Poverty-Reducing Expenditures

28. Definition: Poverty-reducing expenditures consist of expenditures financed out of The Gambia Local Fund (GLF) on the following areas: Agriculture and Natural Resources; Education; Health; Nutrition, Population and HIV-AIDS; Infrastructure Program; Social Fund for Poverty Reduction; Implementation and Monitoring of Poverty Reduction Programs; Support to CrossCutting Programs; ICT Research and Development; Decentralization and Local Government Capacity Building; Governance and Civil Service Reform Program. The poverty-reducing expenditure includes the COVID-19 spending including those implemented through the COVID-19 project accounts.

29. Supporting material: A monthly report on poverty-reducing expenditures will be transmitted within four weeks of the end of each month.

Other Data Requirements and Reporting Standards

30. In addition to providing the data needed to monitor program implementation in relation to the program’s performance criteria, indicative targets, and structural benchmarks, as set out above, the authorities will transmit the following data within the time frame specified below:

K. Prices

31. The monthly disaggregated consumer price index, including weights for each major category, with January 2020 = 100, will be transmitted within four weeks of the end of each month.

L. Government Accounts Data

32. A monthly consolidated Central Government budget report (i.e., the analytical table) on budget execution for the month and cumulatively from the beginning of the year, will be transmitted to the IMF within four weeks of the end of each month. The report will cover: (i) revenue data by major items (such as taxes on income, profits, and capital gains; domestic taxes on goods and services; taxes on international trade and transactions; other taxes; non-tax revenue); (ii) external grants by type (e.g., budget support grants, project grants); (iii) details of recurrent expenditure (including goods and services, interest payments, and subsidies and other current transfers); (iv) details of capital expenditure and net lending (including data on externally financed capital expenditure, expenditure from the Gambia Local Fund, and net lending); (v) the overall balance, the primary and the basic balance; and (vi) details of budget financing (including net domestic and net external borrowing and their components).

33. End-week data on net domestic borrowing (including data on the project accounts listed in Table 1) will be transmitted weekly within five business days of the end of each week.

M. Monetary Sector Data

34. The balance sheet of the CBG, prepared on the basis of current and program exchange rates, will be transmitted on a monthly basis to the IMF within four weeks of the end of each month. The balance sheet will explicitly identify all claims on, and liabilities to, the government. Claims include overdrafts, holdings of treasury bills, government bonds, advances to the government in foreign currency, and other claims on the government. Liabilities include balances in the treasury expenditure account, the consolidated revenue fund and other revenue accounts, the treasury bill special deposit account, the privatization proceeds account, and other deposit accounts. The transmission will include the individual balances on the government accounts listed in Table 1.

35. The consolidated balance sheet of the commercial banks and a monetary survey (i.e., a consolidation of the accounts of the CBG and commercial banks), including foreign currency deposits held by residents of The Gambia with commercial banks, will be transmitted within four weeks of the end of each month.

36. Daily data on reserve money will be transmitted weekly within five business days of the end of each week.

N. Treasury Bill Market and Interbank Money Market

37. Weekly data on the amounts offered and issued, net issuance, over/under subscription, and yields (interest rates) of the various instruments will be transmitted on a weekly basis within five business days of the end of each week. Data on treasury bills and CBG bills outstanding (both at face value and at discounted value and including information on the distribution by bank and non-bank holders) will be transmitted on a monthly basis within six weeks of the end of each month.

38. Daily data on the interbank money market (interest rates, maturities, and volumes of transactions) will be transmitted weekly within five business days of the end of each week.

O. External Sector Data

39. The CBG will also forward within four weeks of the end of each month, data on transactions in official reserves.

40. Daily interbank market exchange rates, defined as the simple average of the daily weighted average buying and selling rates, will be transmitted on a weekly basis within five business days of the end of the week. Weekly interbank market exchange rates, defined as the simple average of the weekly weighted average buying and selling rates, will be transmitted on a monthly basis within seven days of the end of the month. The CBG’s monthly average and end-month exchange rates, including those for all currencies in which foreign assets and liabilities are denominated, will be transmitted within seven days after the end of each month.

41. Daily data on foreign exchange intervention by the central bank will be transmitted weekly within five business days of the end of each week.

42. A detailed reserve statement with end-week data on net usable international reserves of the CBG will be transmitted weekly within five business days of the end of each week.

43. The CBG will also forward monthly data on the volume of transactions (purchases, sales, and total) in the foreign exchange market by each major group of participants (CBG, commercial banks, and foreign exchange bureaus) in dalasi within seven days of the end of each month.

P. Public Enterprises’ Data

44. MoFEA will forward within eight weeks of the end of each quarter, data on monthly cash flow of NAWEC, GNPC, GAMTEL, GAMCEL, GCAA, SSHFC, and NFSPMC.

45. MoFEA will forward within eight weeks of the end of each quarter, data on the stock of consolidated Central Government’s stock of payment arrears to NAWEC at the end of each month.

Table 1.

The Gambia: List of Projects Accounts at the CBG Excluded from the Calculation of NDB

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Table 2.

The Gambia: Data Reporting Requirements

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1

The strong policies and macroeconomic performance were accompanied by close engagement with the IMF, from staff-monitored programs (2018–20) to an ECF arrangement (2020) and successful conclusions of two reviews under this arrangement (2021).

2

The latest poverty rate shown in Text Figure 1 is based on the 2015 Integrated Household Survey (IHS), which is the most recent publicly available data. A new survey was conducted by the Gambia Bureau of Statistics in Q1 2021, but the results are not yet released.

3

See Selected Issues Paper: “Towards a More Sustainable and Inclusive Post-Pandemic Recovery”.

4

Survey by the Gambia Chamber of Commerce and Industry (GCCI) and 3A’s Solutions (a consulting firm).

5

Gambia Bureau of Statistics and World Bank’s High Frequency Survey on the Impact of COVID-19 on Households in The Gambia.

6

World Bank estimates based on the international poverty rate published in The Gambia Macro Poverty Outlook, October 2021.

7

GIEPA: Gambia Investment and Export Promotion Agency.

8

More background analysis can be found in the Selected Issues Paper (SIP) on “Towards a more Sustainable and Inclusive Post-Pandemic Economic Recovery”.

9

The Gambia scores low on many global governance and transparency indicators, including the Worldwide Governance Indicators (WGI) published by the World Bank and the Global Competitiveness Report (GCR) published by the World Economic Forum. However, since the demise of the Jammeh’s regime in January 2017, the social contract between citizens and the state has improved, with increased civil society participation. Most WGI (voice and accountability, political stability, government effectiveness, rule of law, control of corruption) have improved significantly since 2016. Similarly, The Gambia scored 45.92 points out of 100 on the 2019 GCR, reflecting an average annual improvement of 1.44 percentage points since 2017.

10

Collaboration with the IMF could support this reform, in the context of a governance diagnostic mission planned after the presidential elections.

11

This delay is partly due to some revisions of public debt service data from the authorities, following recording verification of the 2019 deferrals and updated information from creditors.

12

Detailed background analysis is presented in the two selected issues papers on “Financing the Infrastructure Gap” and “Reaping Benefits from Large Infrastructure Projects.”

13

The Gambia has benefitted from debt service relief from both bilateral and multilateral creditors since the onset of the pandemic. The authorities have requested an extension of the DSSI through end-December 2021. Additionally, the extension of the CCRT relief through October 2021 would reduce The Gambia’s external debt service owed to IMF by SDR 1.9 million. The authorities are disputing debt service liabilities to Libya due to a disagreement over the amount owed; discussions are underway. They are in good faith discussions with Venezuela to resolve outstanding arrears, but international sanctions have frustrated progress.

14

The authorities noted that they have experienced delayed responses from creditors on their requests.

15

The process was initiated under the 2022 budget.

16

The GIABA’s second mutual evaluation report on the Gambia’s AML/CFT framework and practices is expected in 2022.

17

This approach would allow to finance the 2022 budget deficit while keeping the borrowing from the domestic banking system broadly unchanged from the 2nd ECF review. Although the SDR lending will increase nominal domestic debt, the loan conditions will likely be more favorable than other domestic or external sources.

18

The Fund disbursement related to the conclusion of the 3rd ECF review will help fill the balance of payments financing gap and will not be used for budget support.

19

The seemingly low share in 2021 is due to the important amount of SDR allocation.

1

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly.

1

The term “debt” has the meaning set forth in ¶8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to Executive Board Decision No. 15688-(14/107), adopted December 5, 2014, as amended. “Domestic debt” is defined as debt denominated in Gambian dalasi, while “external debt” is defined as debt denominated in any currency other than the Gambian dalasi.

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Cover IMF Staff Country Reports
The Gambia: Article IV Consultation, Third Review under the Extended Credit Facility Arrangement, Request for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Gambia
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2021: Issue 265
Publisher:
International Monetary Fund
ISBN:
9781616356767
ISSN:
1934-7685
Pages:
138
DOI:
https://doi.org/10.5089/9781616356767.002
Text Figure 1.

The Gambia: Fragility Indicators
Text Figure 2.

The Gambia: Economic Activity Indicators, 2019–21
Text Figure 3.

The Gambia: Inflation and Exchange Rates, 2019–21

(12-month percent changes, unless otherwise indicated)
Text Figure 4.

The Gambia: Monetary Policy and Interest Rates, 2017–21
Text Figure 5.

The Gambia: FX Inflows and Excess Reserves, 2017–21
Text Figure 6.

The Gambia: Governance Indicators, 2016–19 1
Text Figure 7.

The Gambia DSA: Indicators of Total Public and External Debt
Figure 1.

The Gambia: Recent Economic Developments, 2014–21
Figure 2.

The Gambia: Fiscal Sector Developments, 2014–21
Figure 3.

The Gambia: Recent Monetary Developments, 2016–21
Figure 4.

The Gambia: Recent Financial Sector Developments, 2017–21
Figure 5.

The Gambia: Medium-Term Outlook, 2019–26