By Omar Bah
The gross domestic product of The Gambia is projected to grow by 6 percent in 2021, despite the coronavirus pandemic. But the International Monetary Fund (IMF) has advised the government to take its economic reforms very seriously.
The Gambia’s economy contracted 1.5 in 2020 versus a previous estimate of 6.5 growth as a result of the impact of the Coronavirus pandemic on tourism.
But the International Monetary Fund said the country’s economic outlook is positive as growth is projected to rebound to 6 percent this year and to average 6.5 percent in the medium-term.
“This growth is predicated upon the implementation of the stimulus package included in the 2021 budget as well as the normalisation of the global conditions. The discovery and rollout of the vaccine is expected to support the recovery of the tourism sector towards the end of the year,” IMF said.
The IMF said The Gambia’s performance under its supported 39-month Extended Credit Facility has been good as the authorities have maintained prudence in economic management albeit under very difficult circumstances.
In this regard, the agency said its executive board has approved an immediate disbursement of about US$28.8 million to The Gambia to help meet the country’s financing needs and support social spending and the post-pandemic recovery. This brings total disbursements under the arrangement to SDR 25 million, about US$36 million.
Covid- funds
IMF said Gambian authorities have also adhered to the transparency requirement for the use of the Covid-19 financing through the publication of the Covid-19 spending and contracts as well as the launching, by the National Audit Office, of an audit of the Covid-19 spending to be finalised by mid-2021.
“The 2021 budget is also consistent with achieving debt sustainability objectives and will be the basis of our engagement in 2021. Strong revenue mobilisation and prudent expenditure management moderated the fiscal deficit while delivering the much-needed health and humanitarian support in 2020,” the agency said.
The agency said the prudent monetary policy helped the country to maintain price stability and lowered the borrowing cost.
The banking sector, IMF added, continues to be healthy despite some localised increase in non-performing loans mainly affecting banks exposed to the tourism sector.
“The overall balance of payments was positive amidst a record high inflow of remittance and capital transfers which are signs of the Gambian Diaspora’s attachment to their country. Remittance and capital transfers stood at US$5882million in 2020, representing an increase of 78 percent compared to 2019. This has more than compensated for the losses in tourism and re-export trade inflows. In the light of this, gross international reserves continued to increase, reaching 4.6 percent of prospective imports, which created the conditions for a stable dalasi,” they added.
Debt
The agency said the country’s risks of debt distress remain high according to the last debt sustainability analysis despite a projected decline in the debt-to-GDP ratio from 80.1 in 2019 to 76.4 percent in 2020.
But the agency said the outlook is however subjected to significant uncertainties especially with the recent surge in new Covid-19 cases including the discovery of the new strain of the virus in the country. The IMF said the electoral process could also have an impact on economic activities.
Reforms
“Therefore, it is extremely important to remain vigilant and maintain the reform momentum and continue to implement the measures defined in the 2021 budget in order to mitigate the health and socio-economic impact of the pandemic and support the post pandemic recovery,” IMF added.
The agency said the government should focus on building infrastructure to create the conditions for private sector development and enhance domestic revenue mobilisation, particularly the reforms of the telecom sector and the extension of the congested Port of Banjul for which support from partners exist.
“Focus on fiscal consolidation through strong revenue mobilisation efforts and the unwinding of the post-pandemic stimulus packages as the economy recovers; Preserve debt sustainability by strengthening debt management, prioritising grant and highly concessional financing and avoiding non-concessional borrowing,” they added.
The agency advised for the country to improve the financial conditions of SOEs to reduce fiscal risks, continue the governance reforms in public financial management, governance of the SOEs (SOEs Law), public procurement (GPPA act and E-procurement), Anti-Money Laundering and the overall anticorruption framework to enhance transparency.
