The Gambia: Economy in Focus, Requires Significant Repair

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The Gambian economy bears the scars of both the COVID-19 pandemic and the Russia-Ukraine war, with inflation soaring to 18%, exacerbating economic challenges for its citizens.

Despite concerted efforts by the Government and the Central Bank of The Gambia to mitigate these external shocks, comprehensive measures are needed to fully recover and stabilize living conditions for the populace.

The International Monetary Fund (IMF) has recognized the Gambian government’s strides in consolidating democratic reforms. Through the IMF’s 2020-23 Extended Credit Facility arrangement, the government has implemented socio-economic reforms to alleviate the impacts of the pandemic and the war.

However, persistent inflation, resurfacing foreign exchange pressures, and high debt vulnerabilities remain significant concerns, as highlighted in the IMF’s recent statement.

While the IMF approves a $100 million program for The Gambia over three years, Bo Li, the IMF Deputy Managing Director, underscores the importance of fiscal, monetary, and exchange rate policies to address near- and medium-term challenges.

Fiscal consolidation is prioritized to enhance fiscal resilience while safeguarding essential spending. Monetary and exchange rate policies aim to counter inflationary pressures and manage foreign exchange rates through market mechanisms.

To reverse the upward trend of public debt, the Gambian government plans to streamline tax incentives, rationalize subsidies to state-owned enterprises, and prioritize public investment projects. Structural reforms in the state-owned enterprise sector, alongside enhanced governance and improved business environments, are crucial for private sector-led growth and poverty reduction.

Building fiscal and external buffers remains imperative, especially considering the looming debt service deferrals. Prudent borrowing practices, adherence to external borrowing plans, and seeking concessional financing are emphasized.

The Gambian government’s ambitious reform agenda focuses on governance enhancement, fostering private sector-led growth, and addressing climate change and gender disparities. Strong climate-related policies and initiatives to tackle gender inequality will support resilient and inclusive growth.

The new ECF-supported program with the IMF will center on four key pillars: addressing inflation and foreign exchange pressures, reducing debt vulnerabilities, enhancing governance, unlocking growth potential, and tackling long-term challenges related to climate change and gender equality.