Gambia’s Financial Sector Regulation in Focus as IMF Completes First Review Under Extended Credit Facility Arrangement

IMF Executive Board Completes First Review Under Extended Credit Facility Arrangement for The Gambia

The International Monetary Fund (IMF) Executive Board has completed the first review under the Extended Credit Facility arrangement for The Gambia, paving the way for a disbursement of approximately $10.95 million. The review was completed on July 9, 2024.

Economic Recovery Continues Robustly

According to the IMF, economic activity in The Gambia continues to recover robustly, with growth estimated at 5.3 percent in 2023 driven by strong performances from:

Agriculture
Services
Telecommunications
Construction sectors
Tourist arrivals, which showed a sustained good performance although still slightly below pre-pandemic levels

Inflation Remains a Challenge

However, inflation remains a challenge, easing from a peak of 18.5 percent (year-on-year) in September 2023 to 11 percent in April 2024 due to declining global food and energy prices. Despite this, inflation is still above the central bank’s medium-term objective of 5 percent.

Foreign Exchange Policy and International Reserves

The introduction of a new foreign exchange policy in December 2023 has helped to largely close the wedge between the official and parallel market exchange rates, easing foreign exchange shortages. International reserves remain at a comfortable level of above 4.5 months of imports.

Outlook Remains Subject to Downside Risks

Despite these positive developments, the outlook remains subject to downside risks from:

Global and regional conflicts
International commodity price volatility
Lower tourist arrivals
Weak remittance inflows

Statement by Deputy Managing Director Bo Li

Deputy Managing Director Bo Li issued a statement following the Executive Board’s discussion, highlighting the Gambian authorities’ continued efforts to implement democratic and justice reforms. “Program performance under the Extended Credit Facility arrangement has been satisfactory despite the challenging environment,” he said.

Recommendations for Monetary Policy and Fiscal Policy

The central bank is encouraged to:

Maintain its tight monetary policy stance to fight inflationary pressures
Ensure a market-based exchange rate and smooth functioning of the foreign exchange market

In terms of fiscal policy, the outturns in 2023 reflected good revenue performance but exceeded projections due to accelerated infrastructure project execution. The authorities are encouraged to:

Bolster domestic revenue mobilization
Reprioritize spending
Focus on grants and concessional loans
Limit fiscal risks from state-own enterprises and public-private partnerships
Implement a strong medium-term fiscal framework

The adoption of the anti-corruption bill by the National Assembly was an important milestone. Further progress is critical to enhance governance, improve the business environment, and foster a strong recovery and inclusive growth. Adopting strong climate-related policies would also be essential to build The Gambia’s resilience to climate risks.