The latest International Monetary Fund (IMF) mission to The Gambia has reported impressive developments in The Gambia's economic sector in the first quarter of 2014, pointing out that the government has "implemented concrete measures to boost revenue and contain expenditure, as well as instituted a cash budgeting scheme to strengthen budget execution".
In a press release issued at the end of its nine-day mission, the team, led by Bhaswar Mukhopadhyay, said during the visit, the mission assessed the authorities' progress in implementing policies during the first quarter of 2014 to bring their reform programme back on track, which is supported by an Extended Credit Facility (ECF) arrangement with the IMF. The mission also held talks with the vice president, H.E Aja Dr Isatou Njie Saidy; secretary general and minister of Presidential Affairs; Finance minister, Kebba Touray; as well as the Central Bank governor, Amadou Colley and other senior officials, members of National Assembly, senior officials in public enterprises and the banking sector and development partners.
The mission indicated that government's improved policy implementation has begun to restore confidence as reflected in the stabilisation of the dalasi exchange rate in recent months. "The level of gross international reserves is recovering slowly, but remains at the comfortable level of four months of import cover. To restore macroeconomic stability, the authorities embarked on a programme of corrective measures over the first quarter of 2014," the mission indicated.
It further pointed out that real Gross Domestic Product (GDP) was estimated to have grown by 6¼ percent in 2013 and is expected to grow by nearly 7½ percent in 2014 on the basis of continued recovery in agriculture and a strong 2013/14 tourism season. It noted that the external current account is projected to continue to improve, which inflation is reported to have stood at 6.1 percent in October 2013, has gradually eased to 5.6 percent in February 2014. "Significant fiscal slippages caused by sharply higher than budgeted levels of spending pushed the fiscal deficit to about 8¾ percent of GDP in 2013. In response, as the monetary policy stance tightened, interest rates rose significantly and the domestic interest bill grew to almost 25 percent of domestic revenue in 2013, while the level of public debt rose above 80 percent of GDP at end-2013," the mission reported.
It further asserted that the expansionary fiscal stance contributed to increasing pressures on the exchange rate and the balance of payments, while noting that the level of gross external reserves fell to about four months from 4¾ months of imports by end-2013. The dalasi depreciated by 10 percent following the lifting of exchange controls in early October 2013, it observed.
It stressed that improvements in the macroeconomic outlook this past quarter will require sustained efforts to consolidate, saying the interest rates on government debt remain high and pressures on the Dalasi could return during the lean season for exports. The mission further stressed that continued policy action will provide a sound basis to lower the government's domestic borrowing, allow interest rates and domestic interest payments to decline from their presently very high levels, and create room for spending on social and development priorities and private credit growth. "As economic gains are consolidated, we will see a return in international reserves, a vital shock absorber for a small open economy such as The Gambia. It will be important to ensure that public enterprises are operated on a sound financial basis and steadily implement reforms, particularly in the energy sector to minimise emerging pressures on the budget," it stated.
The mission however welcomed the determination expressed by The Gambian authorities to contain spending, improve revenues, and macroeconomic stability, saying the IMF stands ready to support them in their endeavours. "Strong policy implementation would serve as the basis for presenting the second review under the ECF for the IMF Executive Board's consideration in the second half of 2014," it stressed, while thanking the authorities for candid and constructive discussions during the visit.