|
Note: You must be registered in order to post a reply.
To register, click here. Registration is FREE!
|
| T O P I C R E V I E W |
| Momodou |
Posted - 22 May 2015 : 17:16:10
Gambia’s economy at crossroads
By: Lamin Jahateh
The Point: Published on Friday, May 22, 2015
 The Gambian economy requires strong corrective actions and comprehensive reforms to neutralise its current challenges and set it on a path to sustainable higher growth rate, the International Monetary Fund has said in a report.
The IMF Country Report on The Gambia, which x-rayed the country’s economy based on different indicators, states that “extended period of poor economic performance has left The Gambia facing serious economic difficulties”.
The report noted that the government’s public debt had risen to 100 per cent of the country’s total gross domestic product (GDP) by end-2014.
The continuous domestic borrowing by government has almost drained the banks of the needed resources to extend credit to the private sector for development purposes.
However, the IMF pointed out that The Gambia government’s heavy borrowing is not only for use by the central government but also its loss-making public institutions like the national electricity and water provider, Nawec, and the national telecommunications giants, Gamtel and Gamcel.
The budget support disbursements that were withheld by multilateral institutions and “some other factors” also contributed to pushing up the government’s net domestic borrowing, according to the IMF.
At the moment, not only did the commercial banks have little resources to give credit to the private sector, they “have very limited resources to meet the government’s financing needs,” the IMF country report said.
The rationale behind this is that “the Central Bank of The Gambia (CBG) has maintained reserve requirements at elevated levels, while increasing the policy rate to 22 per cent”.
Economy decline
The IMF report stated that The Gambia’s real GDP is now estimated to have declined by ¼ per cent in 2014 due to the lost tourism receipts and crops.
“With tourism receipts continuing to be negatively affected [by the Ebola outbreak in the sub-region] in the first part of 2015, even under the best-case scenario, the 2015 recovery will be dampened,” the report says.
However, if the regional Ebola outbreak is brought under control by the third quarter of 2015, Gambia’s real GDP is expected to grow by about 5 per cent in 2015 driven by the recovery of agriculture.
Even though neighbouring countries are also reporting a substantial impact on their tourism sectors due to the Ebola outbreak, the impact on The Gambia’s is more severe since tourism provides a much larger contribution to the country’s foreign exchange earnings.
The IMF report pointed out that due to the slump in tourism and fiscal slippages, at end-2014 the level of Gambia’s gross international reserves declined to 4 months of import cover.
The reduction of the reserves indicates that government’s ability to pay for imports and service debts to foreign creditors has reduced and it makes the country more volatile to external shocks.
Inflation increases
The report on The Gambia also noted that the annual inflation rate picked up from 5.5 per cent until August to 7 per cent by January 2015 due to the exchange rate depreciation and the food supply shock.
Corrective measures
“Addressing these problems will require strong policy adjustment and significant levels of external assistance,” the report said, adding:“In the absence of strong corrective actions by the authorities, The Gambia would risk undergoing a forced adjustment.”
The IMF said that since half of the government’s debt is from domestic sources, interest payments accounts for more than one third of the country’s revenue in 2015.
The institution warned that in the absence of corrective actions, it is projected that the domestic borrowing in 2015 would crowd out completely room for private credit, the public debt to GDP ratio would edge up further to 105 per cent by year-end, and the gross reserves’ import coverage would decline to about 3¼ months.
“These developments would escalate substantially the rollover risks of domestic public debt and push it onto an unsustainable path, increasing significantly the risk of a loss of confidence in the currency as international reserves fall to an uncomfortable level, and potentially triggering a banking crisis given the elevated level of commercial banks’ exposure to government debt,” the IMF said.
“Such a scenario would have long lasting economic repercussions and drastic corrective policies would be required to address such problems.”
|
| 1 L A T E S T R E P L I E S (Newest First) |
| Momodou |
Posted - 23 Jun 2015 : 11:03:35
GAMBIA NEEDS URGENT CORRECTIVE MEASURES TO SALVAGE DETERIORATING ECONOMY Says IMF Mission Chief
by Ousman Sillah
Foroyaa: Published on June 22, 2015
 Bhaswar Mukhopadhyay, the International Monetary Fund (IMF) Chief of Mission to The Gambia, advised that the Gambia government needs to urgently implement corrective policies to prevent a further deterioration of the country’s worsening economic situation that could bring about a disruptive forced adjustment with devastating consequences.
This alarm bell was raised at the second IMF outreach Forum with Civil Society Organisations (CSOs) held on Friday, 19 June, 2015 at the TANGO conference hall.
The IMF Mission Chief said the Gambia government has been implementing loose fiscal policies for a very long time which has created serious economic problems. He said these slippages alongside the persistent financial difficulties in public entreprises have pushed the country’s extended credit facility arrangements off track. He said the excessive borrowing from local sources through treasury bills to address significant government over spending financed by the Central Bank of The Gambia (CBG) which include unbudgeted spending, among others, are no longer sustainable. He added that the recent exchange rate restrictions, pressures on the Gambian Dalasi, withholding of donor support and external shocks such as the Ebola etc. have also contributed in exacerbating the economic problems.
Mr. Mukhopadhyay said the purpose of this IMF Mission visit to the Gambia this time round is not about giving financial support to the country but to impress on the authorities the need to urgently undertake corrective actions to stave off an impending economic catastrophe.
He said things have become much worse than expected as domestic debt is now 50 percent of GDP.
“We have passed the message to both the government and the National Assembly,” said the IMF official.
The IMF’s Mission Chief gave an assessment of a worsening economic situation if the correct fiscal policies are not immediately implemented. It indicated that policy implementation has been characterized by very large fiscal slippages, including quasi-fiscal spending to address financial difficulties in key public entreprises such as NAWEC, Gamtel and Gamcel on loan repayments and operations.
Mr. Mukhopadhyay disclosed that the IMF has been talking to the government of the Gambia and that there is an understanding among officials of the gravity of the problem and the need to adopt immediate corrective measures to save the already bad situation from deteriorating further. He, however, added that it is unfortunately not the case at all levels of government, especially among those who should take the decisions.
The IMF head of mission said “there is no time for Gambia to waste in implementing corrective measures before the bottom drops out.”
He said Gambia government’s main source of revenue is on import duties and value added tax (VAT) on goods and services. He explained how pressures on the Gambian Dalasi based on restrictions and an overvalued currency affects imports as well as revenue earnings from these sources.
The IMF official further revealed that the government’s net domestic borrowing through treasury bills was targeted at 2.5 percent of GDP as advised but that it reached 12.5 percent in 2014.
He said the commercial banks have limited resources and can no longer meet the government’s excessive financing needs and that as such the Central Bank has stepped in by printing money and dipping into the reserves which will increase pressure on currency and inflation.
The IMF noted that even if all the corrective measures are undertaken and external shocks avoided, it will take some time for the economy to fully recover.
The IMF Mission Chief said the purpose of meeting with civil society is to share with them information on the current economic problems facing the country with a view to engaging them in the process of influencing policy changes.
Also addressing the forum were Mr. Gaston K. Mpatswe, IMF Resident Representative in The Gambia, Mr. Ousman Yarbo, Executive Director of TANGO, and Mr. Kebba K. Barrow, Programme Officer-Networking, TANGO.
The IMF delegation also included Madam G. Nkhaya, Senior Advisor –Gambia, and Mr. Bernard Mendy, local Economist.
|
|
|
| Bantaba in Cyberspace |
© 2005-2024 Nijii |
 |
|
|
