The Gambia: Selected Issues
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International Monetary Fund. African Dept.
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Publication Date:
10 Dec 2021
eISBN:
9781616356828
ISBN:
9781616356828
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English
Keywords:
response plan; pandemic fatigue; relief program; health access indicator; health sector; Women; Climate change
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THE GAMBIA—TOWARDS A MORE SUSTAINABLE AND INCLUSIVE POST-PANDEMIC ECONOMIC RECOVERY

Abstract

THE GAMBIA—TOWARDS A MORE SUSTAINABLE AND INCLUSIVE POST-PANDEMIC ECONOMIC RECOVERY

The Gambia—Towards a More Sustainable and Inclusive Post-Pandemic Economic Recovery1

The Gambia registered strong macroeconomic performance following the socio-political turnaround in 2016–17. However, the COVID-19 pandemic has halted some of the hard-won progress. The pandemic affected disproportionately different groups of population; in particular, the poorest, women, and rural population experienced larger loss of employment and income relative to other groups. Going forward, in the near term, priorities should focus on protecting lives and livelihoods by providing resources to combat the pandemic – including vaccination – and provide targeted support to the most vulnerable population. As the pandemic subsides, reforms should aim at creating a job-rich, inclusive, green, and sustainable growth to eliminate the scars from the pandemic and accelerate development. In this regard, measures should be taken to unlock the full potential of digitalization and financial inclusion; employment and income-generation opportunities should be expanded to reduce inequalities while building resilience to climate change.

A. Background: Pre-Pandemic Economic Performance

1. The reforms following the remarkable political turnaround in 2017 led to strong economic performance prior to the onset of the global COVID-19 pandemic at end-2019. Economic growth accelerated from about 2 percent in 2016 to an average of 6.7 percent in 2018–19, supported by improved confidence leading to a sustained increase in foreign capital inflows and tourist arrivals. Stronger fiscal performance on both revenue and spending sides coupled with international partners’ support improved the fiscal position and helped reduce domestic interest rates and debt vulnerabilities. Consequently, credit to the private sector accelerated, the external reserves strengthened. In addition, The Gambia’s ranking on the fragility state index improved from 37th in 2017 to 55th out of 179 countries in 2021.

2. The reforms that underpinned the strong performance were far-reaching, covering economic, legal, and governance areas. Economic reforms mainly centered on enhancing revenue mobilization, restoring fiscal discipline, reducing debt vulnerabilities, and strengthening stability of the financial sector including the governance of the Central Bank. The cleaning-up of the tax registry and the setting-up of the treasury single account were initiated; the medium-term fiscal framework is being produced regularly; the thirteen SOEs have been audited; a new central bank act has been enacted to limit the monetization of the budget deficit and strengthen audit and internal controls. The government made significant strides in transitional justice reforms aimed at strengthening the democratic systems, good governance and respect for human rights and the rule of law. Nonetheless, key constitutional reforms are stalled in Parliament and progress on security and civil service reforms was slow.

3. Despite the good macroeconomic performance, the Gambian economy still faced key socio-economic challenges. The country ranked 172nd out of 189 countries on the 2020 Human Development Index (HDI). About half (48.6 percent) of the population live below the national poverty line with large disparities between the rural (69.5 percent) and urban (31.6 percent) areas. The business environment is challenging due to low access to finance, low access and unreliable quality of energy, transport, and information and telecommunication (ITC) system. The labor participation rate is low (about 53 percent) due to high level of housewives, who comprise 31 percent of those outside the labor force. Employment is limited to 64.8 percent including 17.4 percent underemployment predominantly among women working in the informal and service sectors. The opening of the Senegambia Bridge in 2019 and the African Free Trade Agreement offer an opportunity for expanding trade and promoting private sector development.

Figure 1.
Figure 1.

Pre-Pandemic Economic Performance and Social Performance

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: Gambian authorities and the IMF Staff calculations.

B. The Pandemic and Containment Efforts

4. Like most developing countries, the rapid spread of covid-19 had overwhelmed the health system which neither foresaw, nor was adequately prepared for a pandemic of this magnitude. About 10,000 people have now contracted the virus since it was first reported in The Gambia on May 16, 2020, with recoveries of about 9,500 and a fatality rate of 3.5 percent. The surge of the pandemic strained the already fragile health system and stretched government’s ability to properly respond to the pandemic, especially in terms of testing, management of treatment centers, and budgetary resources. Thus, the authorities had to rely on international partners for support, including on the procurement of essential equipment and Covid-19 vaccines, the strengthening of local response capacities, and the provision of emergency relief.

5. The country was able to mitigate the rapid spread of the three waves of the pandemic, thanks to partners’ support and the experience derived from the 2014 subregional Ebola outbreak. Measures taken to control the spread of the virus included border closures, the imposition of a night-time curfew, a ban on all public gatherings and closure of all non-essential businesses, educational institutions, and places of worship. Although the country has higher mortality rate compared to its peers, its response capacity has quite improved. The health spending was increased by 128 percent above the initial 2020 budget provision. Through the joint collaboration of the government, donors and the private sector, the national preparedness and prevention efforts were enhanced with the supply of ambulances, ICU beds, and medical supplies, the improvement of the national lab’ s capacity to handle the COVID-19 tests, and the rehabilitation of a 87-bed hospital (Ndemban Clinic) equipped with modern equipment including 68-beds for COVID-19 treatments.

6. The authorities launched a mass vaccination campaign in March 2021 to vaccinate 60 percent of the population by end-2022, supported by the COVAX-Initiative and a US$8 million grant from the World Bank. Although progress had been registered in the vaccine rollout, it has been slowed by supply constraints and vaccine hesitancy especially among the rich and the urban population, who are mostly exposed to the misinformation on social media. As of August 2021, the country has received about 363,000 doses of vaccine mainly coming from the COVAX initiative, supported and supplemented by the World Bank, Senegalese, French, and US governments. As of end-September 2021, about 12 percent of the population above 18 years of age were vaccinated, of which 11 percent fully vaccinated.

Figure 2.
Figure 2.

COVID-19 Dashboard, 2020-Sept-2021

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: John Hopkins CSSE; and IMF staff calculations.

7. Various spending measures were taken in 2020 and 2021 to support the health sector and mitigate the socio-economic impact of the pandemic. Measures equivalent to 3.6 percent of GDP were implemented in 2020, supported by development partners. These spending included 0.5 percent of GDP funding for the initial COVID-19 response plan, 0.9 percent of GDP nation-wide food distribution plan targeting 84 percent of households including all rural households, as well as additional spending, allocated in the supplementary appropriation (SAP) approved in July 2020, for health, food distribution and support to households and businesses including in the tourism sector. The supplementary budget appropriation also included 0.9 percent of GDP infrastructure spending to support the economic recovery and supply jobs. The initial 2021 budget, which is expected to support the post pandemic recovery, included 2.8 percent of GDP locally funded capital projects, and 0.5 percent of GDP contingency spending for unforeseen COVID-19 spending. Additional infrastructure and health related spending, including 80 ambulances, were provisioned in the 1.5 percent of GDP 2021 SAP.

8. Social safety net programs were strengthened, involving various development partners. The government, in partnership with development partners, financed GMD 224 million food support distributed through the World Food Program in early 2021. In 2020, several UN agencies provided cash and food transfers to 7,029 women living in food insure households with children under 5 years of age. The UNPD provided cash transfers to 6,219 targeted informal workers that lost their jobs in the tourism sector because of the pandemic. The World Bank scaled up its social safety nets through the NAFA quick program to provide cash to 83,000 food insecure households in the 30 poorest districts of the country.

Table 1.

The Gambia: COVID-19 Additional Spending in 2020

article image
Table 2.

The Gambia: Donor COVID-19 Support in 2020–21

article image

C. Socio-Economic Impacts

9. The Gambian economy contracted for the first time since 2015. GDP growth fell from 6.2 percent in 2019 to -0.2 percent in 2020 well below the 6.4 percent projected prior to the pandemic. The tourism and hospitality industry were the hardest hit due to international travel restrictions and lockdown measures. On-season tourists arrival numbers plummeted by 83 percent between 2018/2019 and 2020/2021 seasons. While government’s efforts to administer the price of essential commodities helped reduce inflation in 2020, the persistence of the pandemic and increased supply constraints caused headline inflation to reach 8.2 percent at end-July 2021, its highest level since June 2017, before declining to 6.9 percent at end-August 2021.

10. The pandemic adversely affected a lot of businesses and has compounded the existing vulnerabilities. The Gambia has a challenging business environment. The private sector has a large share of informal sector (71 percent of firms surveyed on the 2018 enterprise survey reported competing with a non-registered firm). Most of them operating in retail and tourism industry that were severely impacted by the pandemic. According to a recent business survey by Gambia Chamber of Commerce and Industry (GCCI) and 3A’s Solutions (a consulting firm), the greatest impact of the pandemic on businesses has resulted in partial loss of income (48 percent), scaling down of operations (43 percent), total loss of income (23 percent), shutdown of operations (19 cent) and total job losses (11 percent).

11. The pandemic also affected people’s lives and livelihoods and exacerbated existing inequalities between the poor and the rich. Despite the government and development partners’ relief programs, more than 9 in 10 people reported a decrease in income between March and August 2020. Several people (figure 3) have lost their employment while the rural population, who mainly live on agriculture lost access to markets due to border closures and the initial ban on weekly local markets dubbed Lumos. This loss of business opportunities also led credit to the private sector to stagnate. Consequently about 25,000 Gambian are pushed to extreme poverty based on World Bank estimates.

Figure 3.
Figure 3.

Socio-Economic Impact of COVID-19

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: World Bank, Gambian authorities; and the IMF Staff calculations.

12. Access to basic services was hampered by the lockdown measures and the fear of contracting COVID-19 that may cause long term scars. The school closures between mid-March and end-October 2020, left several children across the country, especially the poor, with very limited learning opportunities due to the shift to e-learning which was impossible to implement for the majority of the schools including for those in the private sector. The need for medical care also expressed by households drastically reduced at the peak of the pandemic (August 2020) reaching 31 percent compared to 50 percent in October 2020. The maternal mortality worsened at the peak of the pandemic to a point that a hashtag “Gambian Women Lives Matter” trended on social media. The pandemic is expected to leave long lasting impact on the country as real GDP per capita is projected to return to its pre-pandemic level only in 2022 and will remain well below its pre-pandemic path in the medium term (Figure 3) thereby reducing the pace and prospect of meeting the SDGs. The pandemic has also dampened prospective for the achievement of key targets of the National Development Plan by end-2021 including (i) increasing the MSME contribution of employment in the economy from 63 to 75 percent, (ii) increasing MSME’s contribution to GDP from 26 to 30 percent, (iii) decreasing youth unemployment from 38 to 30 percent, and (iv) increasing total exports as a percentage of GDP from 9.4 to 17 percent.

13. On a positive note, remittance inflows were exceptionally high during the pandemic (Figure 4). Although the pandemic took a toll on the incomes of the immigrant population with the overall inflow of remittances in SSA declining by 8.8 percent in 2020 and is projected to further decline by 5.8 percent in 2021, The Gambia seemed to have been spared. It recorded 79 percent increase in the volume of remittances in 2020, and 60 percent in Jan-June 2021. The increase is impressive even after discounting for the increase in number of MTOs (contributing 6.4 percent in 2020) and the transfer of informal inflows to formal channels, estimated by CBG at between 20 and 30 percent.

Figure 4.
Figure 4.

Remittances Flows 2020–21

(In millions of US$)

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: Gambians authorities and IMF staff calculations

14. The use of digital platforms has also mitigated the impact of the pandemic, with the volume and value of mobile money transactions doubling in 2020. Current trends suggest it could triple its pre-pracademic level by end-2021 (table 3). GamSwicth reported more than fourfold increase in transaction value on its payment terminals in 2020, while banks expanded ATM access and the use of mobile and internet banking in a bid to satisfy their client while observing the health measures.

Table 3.

The Gambia: Increase in Digital Transactions, 2020–21

(in percent of the pre-pandemic period, 2019)

article image
Source: Gambian authorities, Africell, GamSwitch, IMF staff calculation

D. The Way Forward to a More Sustainable and Inclusive Post-Pandemic Economic Recovery

15. Policies should follow a two-step approach: short-term priority should focus on protecting lives and livelihoods; as the pandemic subsides, reforms should aim at creating a job-rich, inclusive, green growth. With the increased uncertainty about the end of the pandemic and the slow roll-out of vaccines, the authorities’ short-term priorities should focus on protecting lives and livelihoods by providing resources to combat the pandemic including vaccination and provide targeted support to the most vulnerable population while preserving the hard-won progress on debt sustainability. Thereafter, the authorities should aim at eliminating the scars from the pandemic and accelerating growth and development. In this regard, based on the established evidence, The Gambia could gain in strengthening the business environment and accelerating transformative reforms in the areas of digitalization and financial inclusion where the infrastructure exists; and provide equal opportunities for employment and income generation to reduce inequalities while building resilience to climate change.

Protecting Lives and Livelihoods

16. Scaling-up the resilience of the health sector will help contain the pandemic and support the country effort in achieving the SGDs. Despite recent efforts to improve the primary health care system which improved the number of hospital bed per 10,000 people, The Gambia had limited capacity, with only two referral hospitals, 5 ICU beds, and no COVID-19 testing capability at the onset of the pandemic. With barely 6.5 percent of the national budget allocated to health in 2018 and about 10,000 patients per doctor (figure 5), The Gambia was not ready to handle a major health crisis. However, more attention has been given by the authorities and the development partners to revamp the health sector. The completion of planned projects to build a modern surgery and imagery equipment, and an oxygen plant at Ndemban clinic as well as the construction of the national infectious disease for infectious and public health emergency laboratory and training center some of which are financed by the World Bank US$18 million COVID-19 support and the US$ 30 million essential health services strengthening, will enhance resilience and improve health indicators toward meeting the SDGs and the objectives of the National Development Plan.

Figure 5.
Figure 5.

Health Access Indicators, Most Recent Observations

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: World Bank, and IMF staff calculations.

17. A more inclusive and sustained sensitization are needed to accelerate the roll-out of the COVID-19 vaccine ahead of the tourism season and the presidential elections. With the vaccine financed by donors and the G20 vaccine access support contributing to ease the supply constraints, the government should put in place the logistical, administrative, and financial requirements, including training sufficient staff for the mass vaccination. The improved vaccination will not only limit the spread of the virus but will accelerate the recovery in the tourism sector and support a message of end-to-end safe tourism for the Destination Gambia ahead of the tourism season. This will also minimize the risk of new waves of infections during the electoral campaign period. In this regard, coordinated communication efforts with the government, the local authorities, media, civil society, and the development partners will be needed to minimize the pandemic fatigue and eliminate the increasing vaccine hesitancy.

18. Strengthening cordination and improving better targeting will achieve a more impactful and efficient relief to the population and businesses. The cordination and the sequencing of the various interventions in 2020 under the National social protection secretariat created in 2019, reduced the risk of duplication and extended the period of relief support for the vulnerable population. In addition, the use of mobile money and electronic cash transfers helped reduce the distribution cost. Building on this experience and finalizing the establishment of the social registry as well as the digitalization of the civil registry will strengthen the targeting and delivery mechanisms for a more efficient social safety net system. This is particularly important as The Gambia is still in high risks of debt distress and the country social and economic development needs are amplified by the pandemic.

Promoting and Inclusive and Sustainable Growth

19. Improving the business environment and promoting diversification will create more opportunities for investment and innovation, to support employment and boost private sector contribution to the economy. The ongoing reforms of the GEIPA Act should ensure that it focuses on business facilitation and promotion and less on investment certificates distribution, the excess of which distort competition and reduce government revenue. Progress on governance in recent years will need to be pursued to address the key areas of weaknesses that hider the business environment. The large remittances inflow, some of which alleviate the financing constraint of businesses particularly MSMEs, need to be formalized to reduce delivery cost, and channeled toward more productive investments. The agriculture value chain through export or linkage to the Tourism industry, a major importer of fresh products, have a great potential for growth, employment, and poverty reduction. To unlock this potential, the government will need to accelerate the implementation of its ambitious business reform initiative launched in 2020, the energy road map to deliver high access to reliable energy supply, the modernization of the ill-equipped Port of Banjul, the digitalization of the tax administration, as well as taking full advantage of the Africa free trade agreement by improving the trade relation with its unique neighbor Senegal.

20. The information and communication technologies (ICT) development, as supported by empirical evidence and experience during the pandemic, could boost productivity growth and employment. The Gambia has a relatively well-developed digital infrastructure (figure 6) with 94.3 percent of Gambians living within 10 km off a fiber node, 98 percent covered by mobile cellular network and the country ranked 5th in Africa on mobile phone density (140 active mobile sim card for 100 inhabitants). Notwithstanding, the digital infrastructure is underutilized with high access cost due to poor international connectivity, limited competition compounded with regulatory gaps, low access of energy and high level of poverty and informal economy. In this regard, connecting to another more reliable and cost effective international fiber optic cable and mutualizing the existing equipment some of which are exclusive used by the public company2, and ending the government moratorium on the deployment of private fiber networks will boost competition, reduce cost, and improve the quality of service. The implementation of the 2020–24 Gambia broadband strategy along with the digitalization of public services (IFMIS, E-procurement, ASYCUDA world, payment system, ITAS for GRA) will boost revenue, improve the efficiency and transparency of public spending, and accelerate the digitalization process as well as support the recovery. The Gambia ranked 181st out of 193 countries on the e-government development index well behind its peers. The ITU (2020) showed that a 10 percent points increase of the broadband access could lead to 2.46 percentage points growth in Africa.

Figure 6.
Figure 6.

Enhanced Digital Access Index, 2019

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: Alper and Miktus (2019), IMF staff calculations.

21. Meanwhile, The Gambia could leverage its large network of financial service providers and digitalization to improve the very low access to formal financial services. The country compares well with peers in terms of bank branch and ATM coverage. The microfinance is relatively well developed yet, according to the 2019 Finscope survey, 69 percent of Gambians adult are financially excluded, with only 5 percent banked and 14 percent using the non-bank financial services. The financial exclusion is smore prevalent in rural areas (75 percent) and among youth (77 percent), but women are less financially excluded (66 percent). The use of mobile money, which is at 2 percent, is also among the lowest in the region while other forms of digital financial services such as e-money, e-credit, e-insurance are nonexistent. Addressing the real economic issues related to poverty, unemployment, and financial literacy could accelerate access to finances, which is the main constraint to doing business in the Gambia. The Government should finalize its financial inclusion strategy and accelerate regulatory reforms that enable the development of digital finance.

Figure 7.
Figure 7.

Financial Inclusion in Gambia

Citation: IMF Staff Country Reports 2021, 266; 10.5089/9781616356828.002.A001

Sources: 2019 Finscope survey.

22. The COVID-19 has exacerbated existing inequalities in the Gambia which need to be addressed through targeted policies toward employment and empowering women and youth. The loss of employment and income disproportionally affected the poor population and the rural areas (figure 3) mostly dominated by women and youth. Despite some improvement regarding women access to primary education and primary health, and narrowing wage gaps, inequalities persist in access to high education, economic participation and opportunity, and political empowerment (table 4), which prevent the full women’s contribution to the economy. A growth decomposition from an IMF 2015 study suggests that reducing gender inequality in The Gambia to the average of SSA countries could boost average annual per capita GDP growth by 0.2 percentage point; and that if it is increased to the level of the average of Brazil, Chile, Columbia, Mexico and Peru, average annual per capita GDP growth could increase by 1.2 percentage points. While the creation of a ministry in charge of women affairs and the willingness to make progress on gender-budgeting is encouraging, accelerating the revision of the existing discriminatory laws, and the finalization of the 2021–30 gender policy that will take into account the impact of the pandemic on women, particularly the heightened gender-based violence, will improve women contribution to the economy and their participation in the political sphere. Strengthening and accelerating the implementation of current policies to support youth entrepreneurship and employment could contribute to peace and stability and reduce youth vulnerabilities to illegal immigration.

Table 4.

The Gambia: Gender Gap Indicators, Most Recent Available Date

article image
Sources: WEF Gender gap Report 2020, UNDP, World development indicators, World bank gender statistics, The Gambia Labor Force Survey 2018.

23. The Gambia is among the most vulnerable countries to climate change thus making climate mitigation and adaption policies macro-critical. Although the country’s contribution to greenhouse gas emissions is negligible, it has been identified by the Intergovernmental Panel on Climate Change (IPCC) as one of the most vulnerable countries in Africa to the impacts of climate change. Windstorms, floods, sea level rise, coastal erosion, and droughts are becoming more frequent and severe. As a result, the country has adopted a series of climate friendly measures including joining the Kyoto protocol, and the Paris agreement, and banned the use of the plastic bags. According to Climate Action Tracker, an independent scientific analysis of government climate action sand 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. The authorities are also pushing policies toward increasing renewable energy, and sustainable agriculture.

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1

Prepared by Mamadou Barry, Francis Kumah, Bernard Mendy, and Shivani Singh.

2

The Gambia is connected to the Africa-Coastal-Europe (ACE) submarine fiber optic cable that is subject to frequent breakdowns and complemented with an expensive and unreliable back-up connection from Senegal. In line with the NDP objective to transform the Gambia into the digital economy, the government financed through external loans the construction of a well-developed national backbone fiber optic network: the 817 km ECOWAN completed in 2016 and the 420 km National Broadband Network (NBN) completed in 2019. The NBN is exclusively managed and used by Gamtel (the national public telecom company), which lack proper management and financing to connect the end-users. The government also introduced a moratorium on the deployment of private fiber optic cables to protect the investment made by the government.

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Cover IMF Staff Country Reports
The Gambia: Selected Issues
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2021: Issue 266
Publisher:
International Monetary Fund
ISBN:
9781616356828
ISSN:
1934-7685
Pages:
45
DOI:
https://doi.org/10.5089/9781616356828.002
Figure 1.

Pre-Pandemic Economic Performance and Social Performance
Figure 2.

COVID-19 Dashboard, 2020-Sept-2021
Figure 3.

Socio-Economic Impact of COVID-19
Figure 4.

Remittances Flows 2020–21

(In millions of US$)
Figure 5.

Health Access Indicators, Most Recent Observations
Figure 6.

Enhanced Digital Access Index, 2019
Figure 7.

Financial Inclusion in Gambia