An extended credit facility (ECF) allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money.
The staff level agreement was reached after an IMF team led by Jaroslaw Wieczorek visited Banjul between February 3 and February 11 to take stock of the 2019 SMP implementation and agree with The Gambian authorities on policies underpinning their request for a three-year program.
Commenting on the Gambian economy, Mr. Wieczorek said “real GDP growth in 2019 is estimated to have reached 6 percent despite the temporary drop in tourist arrivals in November 2019 following the bankruptcy of Thomas Cook (UK) and a much lower agricultural output due to the erratic rainfall”.
“This strong performance reflected The Gambia’s gaining competitiveness as a tourist destination, strong private sector consumption and investment supported by foreign exchange inflows, greater availability of credit, and a much-improved reliability of electricity and water supply,” he said, adding that over the medium term, “sound macroeconomic policies will underpin the prospects for sustained growth, the strengthening of foreign exchange buffers, and inflation moderating from an average of 7.1 percent in 2019 to the Central Bank of The Gambia’s target of 5 percent”.
He said “significantly improved fiscal efforts in 2018 and 2019 helped to reduce the deficit, in major part, thanks to strong domestic revenue mobilization.”
“The public debt-to-GDP ratio declined from nearly 87 percent of GDP in 2018 to around 81 percent of GDP in 2019. The Gambia’s 2020 Budget, approved in December 2019, is aligned with IMF staff’s projections. It aims to stabilize the domestic public debt, building on a continued strong domestic revenue performance and appropriate tax policy measures, with additional resources channeled toward public investment and social spending.
“The Gambia’s performance under the 2019 SMP has been strong. Quantitative targets, including on domestic borrowing by the government and on poverty-reducing spending were met. The implementation of the 2019 budget was accompanied by strong tax revenue effort, improved expenditure control and debt management,” Wieczorek added.
In addition, measures were taken to enable the clearing of domestic payment arrears with suppliers and among state-owned enterprises while timely preparation of a medium-term fiscal framework strengthened the strategic orientation of the 2020 budget and enhanced its credibility.
“The Gambia is making concerted efforts to bridge governance gaps, tackle the vulnerability to corruption and take concrete actions to prosecute human traffickers. The works of the Janneh Commission and the Truth, Reconciliation and Reparations Commission have been particularly laudable, helping to identify past corruption, laying the basis for asset recovery and dispensing justice to the victims of the previous regime. The draft Anti-Corruption Bill, recently submitted to the National Assembly, is expected to increase efficiency in tackling corruption,” Wieczorek said.
He said “The Gambia has made much needed progress on the restructuring of its external debt. Debt service deferrals, agreed with most of participating creditors, have markedly improved The Gambia’s debt outlook and enabled it to exit from debt distress. Nonetheless, great care is needed to avoid contracting any new non-concessional debt, given the high level of the public debt and the large existing pipeline of the already contracted project loans”.
“With the anticipated debt relief, the prerequisites for The Gambia to enter into a financing arrangement with the IMF are largely in place. An ECF arrangement will catalyze much needed resources from other international partners and enable The Gambia to fulfill its economic potential, address pressing social needs, and build on the structural reform agenda of the 2019 SMP”.