By: Kebba AF Touray
The International Monetary Fund (IMF), on Wednesday, 14th December 2022, announced the approval of US$27.41 million disbursement for the Gambia, by the Executive Board of the organisation, during its fifth review of its Extended Credit Facility arrangement.
According to the IMF, the completion of the review enables the immediate disbursement of the equivalent of SDR20.55 million, about US$27.41 million, to help meet the country’s balance-of-payment and fiscal financing needs amid challenges, including the repercussions of the war in Ukraine and the lingering impact of the COVID-19 pandemic.
The Executive Board, according to the IMF also approved an augmentation of access under the ECF arrangement from SDR55 million, to SDR70.55 million (or 113.4 percent of The Gambia’s quota from the Fund), which is the second augmentation of access under this ECF arrangement; that the Executive Board completed financing assurances review and granted a waiver of non-observance of a performance criterion on external arrears.
“The ECF arrangement with The Gambia was approved by the IMF’s Executive Board on 23rd March, 2022 with an initial total access of SDR35 million (or 56.3 percent of quota) that was augmented at the completion of the first ECF review on January, 15th 2022, to SDR55 million (88.4 percent of quota). The Gambia has also benefited from an IMF Rapid Credit Facility disbursement for catastrophe containment and relief trust of SDR15.55 million as well as debt service relief,” the IMF reported. The IMF further buttressed that the Gambian economy is facing multiple exogenous shocks, including the repercussions of the war in Ukraine, the lingering impact of the COVID-19 pandemic, and devastations caused by a major floods, saying “growth projections in 2022 have been revised downward from 5.6 percent to 4.5 percent, with inflation reaching a record-high level of 13.2 percent (year-on- year) in October 2022.”
The IMF also indicated that The Central Bank of The Gambia further increased its policy rate to 13 percent in December 2022, to tackle inflationary pressures.
“The balance of payments is adversely affected by disruptions of timber and cashew exports, weaker-than-expected tourist arrivals, lower remittance inflows, high food and fuel import bills, and elevated freight costs. These shocks are generating foreign exchange shortages and weighing on forex reserves. Budget execution is facing pressures, including civil service salary increases and fuel revenue losses to alleviate the impact of the high global fuel prices on the population.”
Mr Bo Li, Deputy Managing Director and Acting IMF Chair, in his statement said that The Gambia’s performance under the economic program supported by the Extended Credit Facility (ECF), has been broadly satisfactory despite economic and social challenges stemming from the repercussions of the war in Ukraine, the lingering impacts of the COVID-19 pandemic, and a recent major flooding.
He stressed that owing to these exogenous shocks, economic recovery and tax collection are weaker than anticipated, while inflationary pressures and foreign exchange shortages are intensifying.
He said the Central Bank of the Gambia is tightening the monetary policy stance to tackle inflation. “It would be paramount to allow smooth functioning of the foreign exchange market and ensure that the exchange rate reflects market forces, which would help restore equilibrium.”
He explained that the Fiscal policy aims at alleviating the impact of the high global fuel and food prices on the population while safeguarding debt sustainability, underscoring that to keep public debt on a downward path, it would be important to bolster domestic revenue mobilisation, streamline tax exemptions, rationalise subsidies to SOEs, strengthen cash management, and further prioritise public investment projects.
“In view of lingering vulnerabilities, including anticipated increases in debt service obligations at the expiry of the debt service rescheduling period, it would be important to maintain sufficient fiscal and external buffers. To this end, it would be advisable to contain domestic borrowing, strictly adhere to the external borrowing plan, and seek grants and highly concessional loans,” he said.