IMF thumbs up Gambia’s economic policies; approves increase in financial aid of about US$ 9.3M

The Executive Board of the International Monetary Fund (IMF) has applauded the economic policies of the government of The Gambia which it said brought about robust growth and moderate inflation.

This information is contained in a press release obtained from the department of state for Finance and Economic Affairs. According to the release, this development came after the board completed the fourth review of The Gambia’s performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement.

The board also approved an increase in financial assistance under the arrangement in an amount equivalent to SDR 6.215 million (about US$ 9.3 million). This money is earmarked to help mitigate the impact of the global slowdown. According to the release, the completion of the review allows for the immediate disbursement of an amount equivalent to SDR 5.11 million (about US$7.5 million) – including SDR 3.11 million (about US$4.6 million) from the augmented amount, bringing total disbursements under the arrangement to SDR 13.11 million.

The IMF Executive Board also approved the authorities’ request to waive the non-observance of the fiscal basic balance performance criterion, and to modify quantitative performance criteria for end-March 2009. The release went on to say that the PRGF arrangement for The Gambia was approved on  February 21, 2007 for an amount of SDR 14 million (about US$20.7 million). Following the Executive Board’s discussion, the release added, Mr Murilo Portugal, deputy managing director and acting chair, said:

"The Gambian authorities are to be commended for the satisfactory implementation of their PRGF-supported program and their commitment to prudent economic policies, which have contributed to robust growth and moderate inflation."

The IMF senior official added: "The authorities remain committed to achieving sustained growth and poverty reduction by maintaining fiscal discipline, reducing the still high debt level, and promoting private sector development. The authorities will increase the share of budgetary resources allocated to poverty reduction, in line with priorities of their poverty reduction strategy, in order to foster progress towards achieving the Millennium Development Goals (MDGs)."

Murilo went on to acknowledge government’s intention to review the system of investment incentives to improve the climate for private investment while maintaining fiscal prudence. Fiscal policy, he said, is being strengthened to ensure long-term fiscal sustainability. He said that The Gambia have also appropriately scaled back their expenditure plans to partially compensate for the contraction of revenues. "They have also maintained to retail prices of petroleum in government revenues. Going forward, it will be important to improve the revenue base, rationalize taxation, better align the budget with PRSP priorities, and further strengthen public financial management.

"The commitment of the Central Bank of The Gambia (CBG) to maintain a monetary policy designed to keep inflation at single-digit levels," Murilo said, "is commendable." Plans by the Gambian authorities to rebuild international reserves in order to provide a stronger buffer against adverse external developments, and the augmentation of access under the PRGF arrangement, he observed, will provide helpful support in this regard. He called for the formulation of a national debt strategy to guide government borrowing decisions and ensure long-term sustainability. "As much as possible, there should be reliance on grants to finance the country’s development programs," he said.

The PRGF is the IMF’s concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country’s Poverty Reduction Strategy Paper. This is intended to ensure that PRGF- supported programs are consistent with a comprehensive framework for macroeconomic, structural and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5/1/2 year grace period on principal payments.