IMF’s Board Approves over D6 Billion Extended Credit Facility

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By: Kebba AF Touray

The Board of the International Monetary Fund (IMF)has approved a new 36-month Extended Credit Facility (ECF) arrangement with a requested access of Special Drawing Rights (SDR) of 74.64 million (US$100 million), equivalent to approximately six billion two hundred million Dalasi (D6,200,000,000).

As explained by the IMF in a press release, the ECF supported programme aims to strengthen economic recovery by tackling inflation and addressing foreign exchange pressures, reduce debt vulnerabilities, advance structural reforms, and foster strong and inclusive growth.

According to the release, Article IV on policy consultation focused on drivers of inflation, macroeconomic implications of the gender gap, climate-related risks and policies, debt sustainability and external stability, and the Executive Board’s decision enables an immediate disbursement of SDR 10.9 million (US$ 14.56 million). The release indicated that the programme will build on the recently completed 2020-2023 ECF support programme and the authority’s’ 2023-2027 recovery focused National Development Plan (NDP), in order to strengthen economic recovery by tacklinginflation and addressing foreign exchange pressures, reduce debt vulnerabilities; advance structural reforms, and foster strong and inclusive growth.

The Gambia, as highlighted by the IMF, has weathered more resiliently successive exogenous shocks namely the COVID-19 pandemic and Russia’s war in Ukraine, when compared to peer countries.

“Economic growth supported by tourism and public and private construction, is expected to go up at 5.6 percent this year, down from 4.9 percent in 2022. In the medium term, growth is expected at around 5 percent, supported by strong remittance inflows, sustained recovery in the tourism sector, and new infrastructure projects,” the IMF release said.

The IMF release reported that the country’s headline inflation remains elevated at 18.0 percent year on year in October 2023, driven primarily by international commodity prices, and that inflation is projected to gradually ease following the tightening of the monetary policy stance.It added that foreign exchange pressures and shortages are re-emerging adding that forex reserves in months ahead for imports, are projected to slightly decline in the medium term due partly to the expiration of the debt service deferral period, but will broadly remain at an adequate level of around 4 months, with the support of disbursements from the IMF and other development partners.

Mr. Bo Li, the Deputy Managing Director and acting Chairperson of the IMF Board, said: “The Gambia has been consolidating its democratic transformation, and the 202023 ECF arrangement has accompanied the country’s socioeconomic reforms and helped alleviate the repercussions of the COVID19 pandemic and Russia’s war in Ukraine.

Nonetheless, inflation persists, and foreign exchange pressures are re-emerging, and debt vulnerabilities remain high. The authorities are committed to maintaining macro-economic stability and to reduce debt vulnerabilities, and pursuing reforms under a new IMF supported programme. The fiscal, monetary and exchange rate policies under the new programme aim to address the near and medium term challenges. As such, policy efforts should focus on fiscal consolidation to build fiscal resilience, while safeguarding priority and poverty reduction spending,” Mr Li said.

He continued that monetary and exchange rate policies will aim to tackle inflationary pressures and address foreign exchange pressures through a market determined exchange rate.He said that to firmly put public debt on a downward trajectory, it is paramount for the authorities to implement the planned medium term fiscal strategy including further streamlining of tax incentives and fuel subsidies, by rationalizing subsidies to state-owned enterprises, and better prioritizing public investment projects.

The authorities, as pointed out by Mr. Li, are committed to overhaul the SOE sector, bolster domestic resource mobilization and advance governance reforms, in line with the recommendations from an IMF governance diagnostic mission.

“In view of lingering vulnerabilities including the upcoming expiration of debt service deferrals, it would be important to build fiscal and external buffers. In this regard, maintaining prudent domestic borrowing by strictly adhering to external borrowing plans and seeking grants and highly concessional financing would be key,” he said.

Mr. Li said the authorities are encouraged to persevere in their ambitious structural reform agenda including enhancing governance and improving the business environment to support private sector-led growth and poverty reduction. He concluded by saying that adopting strong climate-related policies and tackling gender inequality, would also support more resilient and inclusive growth.