The International Monetary Fund (IMF) on Wednesday completed an assessment of Gambia’s economic performance and the impact of the Ebola outbreak in some parts of West Africa on the country’s economy.
An IMF statement sent to PANA in New York said that the IMF mission led by Mr. Bhaswar
Mukhopadhyay, visited Banjul, the Gambian capital city, from 8-14 January, noting that,
although Gambia was completely free of Ebola, the crisis had caused a deep decline in tourism related activities, the economy’s principal foreign currency earner.
It said that the mission assessed the effects of this shock to the Gambian economy and explored the possibility of agreeing on a Rapid Credit Facility (RCF) arrangement with the IMF.
The mission also discussed the Gambian authorities’ plans to address policy slippages over the past two years and the possibility of establishing a programme monitored by the IMF.
“While the discussions with the Gambian authorities have been fruitful, additional time is needed to reach a final agreement,” the statement sated.
It quoted Mr. Mukhopadhyay as saying: “Gambia has been spared from the Ebola outbreak, but the crisis has deterred tourists, reducing activity in the sector dramatically. A projected decline of about 60 per cent in tourism, Gambia’s principal export, will strain the country’s balance of payments.
“Also, delayed rains in 2014 are causing distress in the economy, leading to a significant decline in crop production, and combating the effects of these shocks will require concerted policy effort as well as greater support from the international community,” he said.
He said: “Even before the crisis, 2014 was a difficult year for the Gambian economy. The consequences of past fiscal slippages put pressure on the government budget, public enterprises, the private sector, and households.
“Government borrowing lifted interest rates, which increased interest payments considerably. Banks have restricted their lending to the private sector while higher debt burdens and import costs due to currency depreciation have weighed on the public enterprises.
“Difficulties in public enterprises have put further stress on the public budget and the local currency price of imported goods, especially basic foods, has risen,” the IMF official stressed.
Mr. Mukhopadhyay noted that, in light of substantially higher borrowing by the government and looming risks, it was imperative to reinforce corrective measures and to make bold choices about spending priorities.
He said that the mission welcomed the government’s determination to limit net domestic borrowing to one per cent of GDP this year, noting that, this plan was being implemented in the budget but would require vigilance to keep spending on path and to respond to any emerging spending pressures by reducing lower-priority expenditures.
Implementation of reforms is also urgently needed to put the National Water and Electricity Company (NAWEC) and other public enterprises on a sound financial footing and limit their strain on the state budget.
“The mission welcomes the authorities’ commitment to a comprehensive restructuring of the energy sector. Similar efforts will be required for a number of other public enterprises that have recently experienced financial distress.
“The government has taken bold steps in its budget agreements, its reform agenda for public enterprises, and its rallying of the donor community. These efforts will need to continue to turn interest rates around and reduce pressure on the Dalasi,” the statement said.
During the visit, the IMF mission met with Finance Minister Kebba Touray, Central Bank Governor Amadou Colley, other senior government officials, public enterprises, the banking sector, and development partners.