Reform of Gambian public enterprises remain critical – says IMF report

Sierra Leone Telegraph: 14 December 2017

Yayah Jammeh is gone, but it seems his shadow is still lurking in every corner of the Gambian economy. And as the country continues to make key reforms in the public and private sectors, there are plenty of reasons to be hopeful. But the journey to reform will be tough.

The IMF has just concluded its review of the Gambian economy after its three day visit to the country. In a statement published yesterday, it says that the economy has started to recover, following the sharp growth slowdown in 2016; performance to date  has been broadly encouraging, but more progress is needed; and that The Gambia’s heightened debt stock of 120 percent of GDP remains a serious challenge.

Led by Mr. Ulrich Jacoby, the IMF team visited Banjul on the 2^nd to 15th November and 7^th to 12^th December 2017,  to conduct consultation discussions and review performance targets that were agreed with the authorities in June 2017.

So how well has the Gambian economy performed?

At the end of the review, Mr. Jacoby issued the following statement:

“The economy has started to recover following the sharp growth slowdown in 2016, which stemmed from a bad harvest, foreign exchange scarcity, and a drop in tourism due to the political turmoil after the presidential elections in December 2016.

“Economic growth in 2017 is projected at 3 percent, with a strong rebound in tourism and trade, and renewed interest from foreign direct investors in energy, tourism, agriculture and transportation. Inflation has reversed its rising trend, reflecting the stabilization of the dalasi and a gradual decrease in food prices.

“With much improved fiscal discipline and external financial support, the dalasi has remained stable since April and international reserves recovered strongly.

“Economic growth is expected to gradually accelerate to about 5 percent by 2020, assuming continued good policy implementation and a significant expansion in electricity supply, expansion of irrigation and commercial farming, investment in the tourism and trade sectors, and continued infrastructure investment.

“Headline inflation is expected to decline to slightly below the Central Bank of The Gambia’s (CBG) 5 percent target in the medium term.

“Performance to date under the Staff Monitored Program has been broadly encouraging, but more progress is needed. The drastic reduction in government’s net domestic borrowing—stemming from increased donor support, fiscal consolidation and the recent pick-up in domestic revenue—has contributed to the decline in interest rates.

“Looking ahead, the authorities will need to maintain fiscal discipline and implement the remaining fiscal and structural measures committed to under the SMP.

“The Gambia’s heightened debt stock of 120 percent of GDP that the new government inherited is a serious challenge. Maintaining debt sustainability will necessitate refraining from large-scale investment projects involving loans or contingent liabilities before additional fiscal and borrowing space has been achieved, and leveraging private capital.

“Careful evaluation and prioritization of investment projects within the due diligence procedures of the Investment Implementation Task Force will be crucial in that regard. Mobilization of additional external resources to foster debt sustainability and implementation of the authorities’ debt strategy will be important to create borrowing space.

“Reform of public enterprises remains critical as they pose significant fiscal risks and contribute to high public debt. The mission welcomes ongoing reform efforts which should continue, including medium-term strategic plans for achieving financial viability.

“The CBG should continue maintaining a flexible exchange rate regime and further rebuild reserves, given external vulnerabilities and the high debt. Safeguarding the stability of the financial sector in light of the decline in interest rates is also a key priority.

“Access to financing remains the most important obstacle to doing business, and private sector credit growth remains sluggish despite the decline in interest rates. Promoting credit information systems and financial literacy as well as strengthening creditor rights and their enforcement would help support private credit growth.

“The mission met with President Barrow, Finance Minister Sanneh, Central Bank Governor Jammeh, other senior government and public enterprise officials, members of parliament, representatives of the private sector, civil society organizations, and development partners.”

The future of the Gambian economy looks promising, after years of neglect and rampant corruption by the Jammeh government. But it will take a lot more than goodwill and promises by president Barrow, for the implementation of major reforms that could transform the economy and create much needed jobs.