(JollofNews) – Despite receiving over US$10 million bailout money from the International Monetary Fund (IMF) in April, the Gambia’s economic outlook remains gloomy and its external and fiscal sustainability are at a grave risk, a senior IMF official has warned.
Bhaswar Mukhopadhyay, IMF chief of mission to the Gambia, who was in Banjul from June 9-22 to conduct discussions for the 2015 Article IV consultations and to take stock of performance under the Staff Monitored Programme (SMP) approved in April 2015, said unless urgent steps are taken, the country’s economic woes will not end anytime soon.
Mr Mukhopadhyay said although the Gambian authorities as part of the terms of the bailout undertook to implement corrective policies with the broad objective of achieving a sound fiscal position over the medium-term, the country’s outlook for 2015 is again clouded by policy slippages.
He observed that parts of the country’s economic problems are self-inflicted particularly President Yahya Jammeh’s decision to interfere with the foreign exchange market.
Mr Mukhopadhyay said: “Significant spending pressures have emerged since April 2015, and faced with pressures on the exchange rate at the onset of the lean season for foreign exchange receipts, the authorities issued a directive fixing the exchange rate at a level overvalued by more than 20 per cent compared with prevailing market rates in May. The significant revenue fallout from this measure and the spending pressures have started to weigh on the government’s domestic borrowing.
“As a result, the Gambia’s external and fiscal sustainability are at a grave risk. Moreover, in the absence of urgent action, the social progress made in recent years is also under threat.”
The IMF chief of mission urged the Jammeh regime to implement quickly the measures identified in the 2015 budget and to also rescind the recent exchange rate directive as soon as possible and return the Gambia to a flexible exchange rate policy, which has served the country well.
He added that as the imposition of the exchange directives has materially damaged the economic prospects and fiscal situation facing the country, President Jammeh and his government must take additional steps in order to limit domestic borrowing.
Mr Mukhopadhyay said while in Banjul, his delegation have encouraged the regime to strengthen efforts to address the financial problems of the country’s only water and electricity supplier [NAWEC] and other public enterprises in order to limit their strain on the state budget.
He added that the Gambian authorities also need to get a firm grip on key public enterprises’ cash flow and establish promptly a monthly monitoring mechanism. He added that over the medium term, the authorities should also expeditiously firm up the medium-term restructuring strategy on the energy and telecommunication sectors.
“Although the Gambia has made visible progress in improving social indicators, there is still significant scope to enhance prospects for inclusive growth,” he said.
“ The authorities are encouraged to delineate a strategy to reduce vulnerability to droughts so as to avoid repeated breaks in economic growth. In this regard, the government’s medium-term development plan currently being developed should prioritise continued investment in the country’s water management system to boost agricultural productivity and rural incomes.
“There is significant room to enhance the business environment by simplifying the tax system, improving access to electricity and creating room for lending to the private sector in order to unlock private sector investment and growth.”