- Gambian government has been hailed for maintaining a successful macroeconomic stability as well as sustaining a high economic growth since 2006.
This was contained in a report by the International Monetary Fund (IMF) mission to The Gambia. The mission headed by Mr Tsidi Tsikata held consultations with Gambian authorities, including the Minister of Finance and Economic Affairs, Mousa Gibril Bala-Gaye, on the 2008 Article IV and the third review under the Poverty Reduction and Growth Facility (PRGF).
The mission was impressed with the West African country's good fiscal performance characterized by a monetary policy that maintains low inflation.
"Real GDP growth has been strong at over 6% a year, a performance that compares favorably with the record of other countries in the region," the mission reported, noting high growth in the construction, tourism, and telecommunications sectors, facilitated by a steady inflow of foreign direct investment and remittances.
Apart from maintaining a "relatively tight monetary policy stance," the appreciation of the local currency, Dalasi, have helped the country to contain the impact of rising world food and oil prices on inflation. From less than 1% in December 2006, inflation rose to 6-7% during most of 2007, but has been falling thus far in 2008. However, the trend may be reversed if world prices remain high.
The Gambia government was also hailed for adjusting the pump price of petroleum products in order to safeguard the budget from the heavy burden that would be associated with subsidizing these products, which would tend to benefit the better off segment of the population more than the poor.
While noting the government's recent decision to remove the sales tax on rice imports in order to provide some relief, especially to poor households, the mission advised Gambian authorities to "avoid generalized subsidies, which tend to be ineffective and have created budgetary problems in neighboring countries."
It said the "marked appreciation of the Dalasi over the last year appears to have reduced the profitability of the tourism industry and the re-export trade, and would likely contribute to slower growth in 2008. The main factors affecting The Gambia's international competitiveness, however, include weak infrastructure, lack of access to long-term financing, and the burden of a multiplicity of taxes and local government charges. These problems will need to be addressed through further structural reforms."
IMF welcomed the government's intention to use the savings from debt relief to boost poverty reducing expenditures in line with the priorities in the PRSP and also to pay down domestic debt in order to put downward pressure on interest rates. It urged the authorities to speed up the preparation of a national debt strategy to help the country avoid falling back into debt distress.
"With regard to the PRGF-supported program, the mission found that performance against the quantitative financial targets has been strong. However, progress has been slower than expected in implementing some structural reform measures such as establishing a fully functioning credit reference bureau."
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