The IMF approves $100 million for The Gambia’s extended credit facility arrangement, ending 2023 Article IV consultation, to strengthen economic recovery, tackle inflation, reduce debt vulnerabilities, and promote inclusive growth.

The Executive Board concluded its 2023 Article IV consultation with The Gambia, focusing on inflation drivers, implications of the gender gap, climate risks, debt sustainability, and external stability.

According to the IMF, The Gambia has adapted better to exogenous shocks like COVID-19 and Russia’s war in Ukraine. Economic growth is expected to reach 5.6% this year, with medium-term growth projected at around 5%. Headline inflation remains high at 18.0% year-on-year but is expected to ease with a tighter monetary policy stance.

The IMF directors also warned that foreign exchange pressures and shortages are reemerging in The Gambia, with forex reserves projected to decline slightly in the medium term due to the debt service deferral period. However, they remain at an adequate level with the support of the IMF and other development partners.

The executive directors supported the staff’s assessment, praising the government for strengthening democratic processes and effectively implementing economic reforms. However, they highlighted potential risks such as high inflation, renewed pressure on foreign exchange, and debt vulnerabilities despite a strong economic recovery. They stressed the need for sustained reform efforts and government ownership of programs to ensure macroeconomic stability and inclusive growth. The new agreement, combined with capacity development, will aid the government’s reform agenda and attract further financial support.

Directors emphasized revenue-based fiscal consolidation for fiscal sustainability, streamlining tax incentives, addressing SOE risks, and enhancing public financial management. They recommended building buffers, enhancing debt management, and prudent external borrowing.

The IMF’s Executive Board Assessment

Directors commended the central bank’s monetary policy actions and noted that further tightening, guided by inflation developments, could be needed. Welcoming the central bank’s publication of the foreign exchange policy, directors stressed the importance of a market-determined exchange rate to ease foreign exchange pressures and safeguard reserves. They emphasized the need for consistent implementation of this policy to ensure stability and promote economic growth.

The previous 2020–23 ECF arrangement accompanied the country’s reforms and helped alleviate the repercussions of the COVID-19 pandemic and Russia’s war in Ukraine. Considering the outstanding challenges and the authorities’ 2023–27 Green Recovery-Focused National Development Plan (RF-NDP), the authorities have requested a new ECF-supported program with the Fund.

The Program Endpoint with The Gambia

The ECF-supported program aims to tackle inflation, reduce debt vulnerabilities, strengthen governance, and address long-term challenges like climate change and gender gaps.

Addressing inflation and foreign exchange pressures: The central bank will further tighten the monetary policy stance based on inflation developments, reaffirm a market-determined exchange rate, and ensure the smooth functioning of the forex market.

Reducing debt vulnerabilities and overhauling the SOE sector: As both public and external debt are at high risk of distress, fiscal consolidation efforts will be sustained. This will require bolstering domestic revenue mobilization and enhancing expenditure efficiency through prioritization and strict PFM principles. Efforts will be made to turn SOEs into revenue-generating assets, including through partial privatization.

Strengthening governance and unlocking growth potential: Key recommendations from a recent governance diagnostic will help guide reforms. The business environment will be strengthened to foster strong and inclusive growth.

Addressing long-term challenges related to climate change and gender gaps: The Gambia is highly vulnerable to climate shocks. The authorities have produced key climate policy documents. Closing gender gaps will bolster income and reduce inequality.