December 6, 2022

IMF team just returned from The Gambia and says its economy is rebounding from COVID-19 but Russia’s war in Ukraine is fueling inflation

Managing Director Kristalina Georgieva participates in a Bloomberg Green interview. IMF Photo/Kim Haughton 22 January 2021 Washington
Managing Director Kristalina Georgieva participates in a Bloomberg Green interview.

A team from the International Monetary Fund (IMF), led by Mr. Ivohasina Fizara Razafimahefa, Mission Chief for The Gambia, held discussions with the Gambian authorities during March 28–April 8, 2022 on the fourth review of The Gambia’s economic program supported by the IMF’s Extended Credit Facility arrangement (ECF). 

After the mission was completed, the IMF said on Saturday that economic activity in the Gambia “is rebounding from the low level induced by the COVID-19 pandemic, but the repercussions of the war in Ukraine are weighing on the rebound and fueling inflationary pressures.” Yes, many things are now expensive because of the war in Ukraine, America and its allies have been saying in recent days.

According to the Washington DC-based Fund, “The government is determined to take all necessary measures to tackle the implications of those external shocks, such as the revenue loss stemming from the recent surge in global commodity prices. Monetary policy will need to be tightened in the face of increased inflationary pressures, while safeguarding the fragile economic recovery.”

It added that “structural reforms are progressing, including on the institutional framework of State-Owned Enterprises, transparency of COVID-19 spending, other areas of public financial management and revenue administration.”

“The mission team reached staff-level agreement with the authorities on the financial and economic policies that could support the IMF Executive Board’s completion of the fourth review under the ECF arrangement. Despite the challenges caused by the COVID-19 pandemic and a shortfall in external budget support grants, all but one quantitative performance criterion and all but one indicative target at end-December 2021 were met. Structural reforms are advancing. The IMF Executive Board’s consideration of the staff report on the review is tentatively scheduled in June 2022. Upon the Board’s approval, SDR 5 million (equivalent to about US$7.0 million) will be made available to The Gambia,” wrote Mr. Razafimahefa at the end of the mission.

He added, “Notwithstanding the impact of the various waves of the pandemic on economic activity, growth rebounded to 5.6 percent in 2021 primarily due to some recovery in the tourism sector and robust private construction. Inflation increased to 7.6 percent in December 2021 and accelerated further to 8.3 percent in February 2022. Fiscal performance weakened in 2021 as spending pressures mounted due primarily to additional health spending and election-related security spending. The Central Bank continued to maintain a supportive monetary policy stance. Foreign exchange reserves strengthened further, reaching almost 6 months of prospective imports in December 2021, partly reflecting the IMF’s August 2021 SDR allocation.

“The Gambian authorities continue to fulfill their commitments to full transparency of COVID-19-related spending. They continue to regularly publish the list of all COVID 19-related procurement contracts and their beneficiary owners on the Gambia Public Procurement Agency’s (GPPA) website . The National Audit Office (NAO) completed and published the first phase of an ex-post audit of COVID-19 spending. Good progress has also been made in strengthening the institutional framework of State-Owned Enterprises, as well as revenue administration and public financial management, including tax expenditure policy, digitalization of tax collection systems, and budget and debt management processes.

“Going forward, economic growth is expected at around 5.6 percent in 2022 and strengthening to an annual average of 6 percent in the medium term. The government is determined to take all necessary measures to tackle the implications of external shocks, especially the revenue loss stemming from the recent surge in global commodity prices. Monetary policy will need to be tightened in the face of increased inflationary pressures, while safeguarding the fragile economic recovery.

“The mission team met with His Excellency Adama Barrow, President of The Republic of The Gambia and Her Excellency Isatou Touray, Vice President of The Republic of The Gambia; and held discussions with Minister of Finance and Economic Affairs, Mambury Njie; Minister of Justice, Dawda Jallow; Minister of Trade of Trade, Industry and Regional Integration, Seedy Keita; Minister of Tourism and Culture, Hamat Bah; Governor of the Central Bank of The Gambia, Buah Saidy; senior staff of the Ministry of Finance and Economic Affairs; Central Bank of The Gambia; Ministry of Health; Ministry of Agriculture; Ministry of Transport, Works and Infrastructure; Ministry of Justice; Ministry of Petroleum and Energy; Ministry of Tourism and Culture; Ministry of Environment and Climate Change; Ministry of Trade, Industry and Regional Integration; Ministry of Information and Communication; and some state-owned enterprises.

The mission team also had fruitful discussions with representatives of the private sector, civil society, banks and microfinance institutions, and development partners, who all showed strong support for the reforms under the ECF-supported program. The mission team would like to thank the Gambian authorities for the constructive discussions and their cooperative spirit.”

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