11 April 2013

Gambia: IMF Mission Chief Speaks On The Economy

"Inflation, however, has picked up, partly due to side effects from the introduction of the value-added tax (VAT) at the beginning of the year," said Mr. David Dunn, head of the International Monetary Fund (IMF) Mission visiting The Gambia from April 4 -10 2013. The IMF Mission was in the country to conclude discussions with officials on the first review of the government's macroeconomic and financial program supported by the IMF under its Extended Credit Facility (ECF). They met with senior government officials, including the President, Minister of Finance and Economic Affairs, Governor of the Central Bank of The Gambia (CBG) among others.

At the conclusion of the visit, Mr. Dunn issued a statement in which it was stated that "The Gambian economy is still recovering from the severe drought of 2011. Real gross domestic product (GDP) grew by an estimated 4 percent in 2012, led by a partial rebound in crop production and strength in the tourism sector. Inflation remained under control, ending the year at just under 5 percent, despite the depreciation of the Gambian dalasi during the second half of the year. A substantial overrun in government spending late in the year resulted in higher-than-budgeted domestic borrowing (3½ percent of GDP)."

According to the statement, the outlook for the economy is generally favourable for 2013, but there are risks. He said Real GDP growth is expected to accelerate, if the recovery in crop production is sustained. It added that by accessing new markets, the potential for growth in tourism looks good.

The IMF statement further noted that "although the VAT is applied to firms with a turnover of at least one million dalasis, they understand that many smaller businesses also raised their prices opportunistically." According to the statement, during the first quarter of 2013 the spending of government once again exceeded planned allocations, contributing to Treasury-bill yields. Correspondingly, it added, high bank lending rates are discouraging private sector borrowing.

"The mission welcomes the Government's decision to tighten fiscal policy by reducing its domestic borrowing needs to 1½ percent of GDP in 2013 and then to ½ percent of GDP a year or less, beginning in 2014, which will help lower the heavy domestic debt burden. The mission also welcomes the intention of the Government to submit a fully-funded supplementary budget to the National Assembly later this month."

It noted that the mission also welcomes the CBG's prudent monetary policy. Targets for reserve and broad money growth have been tightened to stem potential inflationary pressures and stabilize the dalasi, which has continued to weaken against most major currencies.

Mr. Dunn said the mission was encouraged by the authorities' determination to strengthen the Government's revenue collection and that it supported the target of the Large Taxpayers Unit of the Gambia Revenue Authority (GRA) to achieve 100 percent compliance with taxpayers' income tax filings in the current year, which he opined would help broaden the tax base. This, he said, is necessary if business-friendly tax reforms—such as a reduction in tax rates—are to be considered in the future and that the mission also welcomed efforts by the GRA to strengthen its audit functions,. The IMF Mission Chiefsaid the mission reached agreement on program targets for 2013 and the IMF Executive Board could consider the completion of the review by end-May 2013.

He concluded that the mission thanked the authorities for the candid and constructive policy discussions and expressed its appreciation for the excellent cooperation during its visit.

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