Gambian still faces heavy debt burden

An International Monetary Fund (IMF) mission led by Mr. David Dunn visited Banjul October 23–November 5 to assess performance at end-September for the sixth and final review of The Gambia’s three-year program under the Poverty Reduction and Growth Facility (PRGF). The mission met with the Minister of Finance and Economic Affairs, Abdou Kolley, and the Governor of the Central Bank of The Gambia, Momodou Bamba Saho, as well other senior members of government and representatives of the National Assembly, private sector, development partners, and civil society.

At the conclusion of the visit, the mission issued the following statement:

“The Gambian economy has performed better in 2009 than was previously projected, mainly because of a second consecutive year of strong growth in agriculture. Tourism, however, has been hard hit by the global economic crisis and a sharp drop-off in remittances from the Gambian diaspora has weakened residential construction.

The IMF mission expects real gross domestic product (GDP) growth to be about 4 ½-5 percent in 2009, up from its previous projection of about 3 ½ percent. Looking ahead, real GDP growth is projected to rise slightly in 2010, based on a partial recovery in tourism and remittances. Given the uncertainty of weather conditions for agriculture and prevailing weakness in some countries with economic linkages to The Gambia, there are still downside risks to the outlook for 2010. Inflation, which has already fallen considerably in 2009, is expected to remain low.

“Performance under the PRGF-supported program has been generally positive. All end-September quantitative performance criteria were met, except for the fiscal target, which was missed due to large spending overruns in the second quarter of the year. Targets on official international reserves and the central bank’s net domestic assets were achieved with comfortable margins. Implementation of structural benchmarks was good, although there were modest delays.

“The Gambian government still faces a heavy debt burden. Interest on government debt is expected to consume nearly 20 percent of government revenues in 2009, mostly in interest on domestic debt. In contrast to a slight reduction in domestic debt that was planned for in the 2009 budget, the spending overruns led to more debt and increased pressure on interest rates.

“The mission welcomes the Gambian authorities’ intention to take corrective actions for the missed end-September performance criterion, notably by preparing a budget for 2010 that will lower government’s domestic debt slightly, ease pressure on treasury bill yields, and generate savings from lower interest payments. On this basis, the IMF’s Executive Board could consider the sixth review of the PRGF in early 2010.”