- Gambian authorities are facing heavy critiques from the International Monetary Fund (IMF) as the national economy has grown out of control. The economy is detracting and poverty is on the rise as government has overspent and economic policy programmes had not been followed up. Economic data for 2001-2003 had been misreported.
The IMF has expressed "strong disappointment" with Gambian authorities after national economic policies were "far off track." In a March review of the Gambian economy and governance, published today, the Fund deplored the "poor execution of monetary and fiscal policy, reflecting serious deficiencies in governance."
Economic performance in The Gambia deteriorated substantially in 2002-2003, the IMF consultants found. A collapse of the groundnut harvest in 2002 had led to a contraction of real GDP by 3 percent, while also affecting export revenues in 2003. This had however been seriously deteriorated by the lack of financial control by Gambian authorities.
During the last years, The Gambia had overspent. In 2002, the reported overall fiscal deficit - excluding grants - reached 8.1 percent of GDP, compared with a target of 5.0 percent. Last year, the fiscal deficit is estimated to have declined somewhat to 6.0 percent of GDP, compared with a budget target of 4.5 percent, according to the IMF.
As spending grew too high, tax collection had not reached its targets. The deficit was funded by printing more dalasi bill, causing the exchange rate to depreciate and inflation to surge. The dalasi depreciated by 60 percent in terms of the euro and by 45 percent in terms of the dollar in the two years to end December 2003, and the consumer price index rose by 18 percent in the year to December 2003.
The IMF also criticised Gambian authorities for a "limited progress" with structural reforms during 2002-03. The Fund "regretted" that the IMF-funded poverty reduction programme had "gone far off track during 2003." This would lead to less IMF funds and a delay in debt cancellation as creditor demand a completed poverty reduction programme before negotiating debt reductions.
Given the poor performance of the Gambian economy, the IMF held it was "likely that poverty has increased markedly since 2001, owing to the crop failures of 2002, rising inflation, and limited provision of income support and social services." In 2001, The Gambia ranked 149th on the human development index.
Causing most stir was however the discovery that Gambian authorities had left out data about their overspending in earlier reports to the IMF. In October last year, IMF staff had been informed of "a series of substantial errors in data transmitted to the IMF for the period 2001-2003," the IMF said.
The "forgotten" data included public spending of US$ 28.5 million from the foreign exchange reserves in 2001. This had never been officially registered by central government or in central bank accounts. Further, in 2001-2003, there existed receipts of some US$ 16 million from foreign exchange bureaus which had not been delivered. Finally, there was lacking documentation of transaction commissions of nearly US$ 2 million.
Subsequently, the situation of the Gambian economy in 2001-2003 was substantially worse than previously reported and Gambian authorities were further out of line with targets set together with the IMF. The IMF Executive emphasised that the Gambia's "compliance with the Fund's safeguards assessment policy is critical to regaining access to Fund resources."
The IMF was nevertheless encouraging Gambian authorities to receive "technical assistance" from the Fund to help improve governance. Several reforms were now underway in The Gambia, which could improve control with financial policies, the IMF noted.
Other advices included thoughts on how to improve the performance of agriculture, including groundnuts. "A coordinated policy approach to ensure the security of high-quality seed supply and other agricultural inputs, and extended irrigation schemes and improved marketing arrangements could lessen substantially the adverse impact of inevitable weather-related shocks," the IMF held.
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