The real Gross Domestic Product (GDP) growth of The Gambia is projected to increase slightly by 6-6½ percent in 2013, driven by a further recovery in agriculture, an executive board of the International Monetary Fund (IMF) report has revealed.
The report that was available to the press indicated that the board also observed a generally favorable situation in the medium-term outlook for growth.
While it observed that inflation has been rising, the good news is that such is expected to fall back to around five percent a year over the medium term, as the Central Bank of The Gambia exercises monetary restraint.
"The main downside risk arises from possible fiscal slippages. There is also strong upside potential if critical reforms are achieved," it added.
While indicating that the Gambian economy has generally performed well over the past several years, the board however pointed out that it is still recovering from the 2011 drought, which led to a large drop in crop production and a sharp contraction in real Gross Domestic Production (GDP) in 2011.
"Although growth has been picking up, weaknesses in the balance of payments have persisted, leading to depreciation pressures on the Gambian dalasi," it added.
The board further observed that finance, mostly by domestic borrowing have added to the government's heavy debt burden, with interest on debt consuming a rising share of its resources in recent years, reaching 22½ percent of its revenues in 2012, most of which was paid on domestic debt.
As outlined in the authorities' Programme for Accelerated Growth and Employment (PAGE) launched in December 2011, the board reported that the government aims to gradually reduce the fiscal deficit and ease its heavy debt burden.
"Prior to the drought," it went on, "The Gambia made significant progress in the fight against poverty, suggesting that the execution of the PAGE, supported by commitments from development partners, would help to further reduce poverty, especially in rural areas, given a strong focus on agriculture."
The board also reported that the banking sector remains adequately capitalised, following a two-step increase in the minimum capital requirement implemented at end-2010 and end-2012. However, it also observed that non-performing loans have remained high.
The IMF executive directors then welcomed The Gambia's ongoing economic recovery from the 2011 drought and commended the authorities for achieving robust growth and significant poverty reduction in recent years. They however expressed concern that recent fiscal slippages and inconsistent policies have increased risks and vulnerabilities.
They welcomed recent progress in managing the government's external debt burden, and agreed that the authorities should continue to rely on grants or highly concessional financing to minimise exposure to external debt risks.