- The International Monetary Fund (IMF) is alarmed by recent economic events in The Gambia, with lowering government revenues, an unexpected budget deficit and a poor outlook for the country's main sectors in 2009. Growth projections have been scaled down, even without analysing the poor market situation of the key groundnut and tourism sectors.
A mission by the Fund, headed by Tsidi Tsikata, visited The Gambia in the beginning of November, meeting with President Yahya Jammeh and stakeholders in the Gambian economy. Gathering information about the country's recent economic development, Mr Tsikata was alarmed by the new trends and warned government officials they had to start cutting state spending to avoid economic instability.
"So far, the financial system in The Gambia has not been affected directly by the global financial crisis," Mr Tsikata stated. "However, adverse impacts from recessions in Europe and the USA are likely to slow down real GDP growth from about 6 percent in 2008 to less than 5 percent in 2009." This means that The Gambia's economic growth perspective for next year is scaled down by more than one percent - from an estimated 6.0 percent predicted some months earlier.
While Mr Tsikata holds that the global financial crisis yet has to affect The Gambia, the Fund found other alarming developments already taking place in the country's economy. Statistics presented by Banjul officials revealed that the country will face a budget deficit this year due to a "weaker-than-expected revenue performance and an uncertain outlook for 2009."
The IMF mission estimated that government revenues would fall short of budget estimates by over Dalasi 400 million - or about 2 percent of GDP - in 2008. This had mainly been due to government subsidies of petroleum product prices and lower revenues from non-oil imports, for including re-exports. Record-high oil prices earlier this year had led to galloping subsidising costs. Also inflation had hit unforeseen levels.
With the global slowdown of the economy - including drastically lowering oil prices - some of these problems may have been solved on their own. Inflation was expected to slow down and oil subsidy costs were becoming lower. The Fund however urged Gambian authorities to take advantage of the situation by cutting subsidies even more, now that prices were low, to try to recover some of the losses made earlier this year.
But not only oil prices have turned lower. One of The Gambia's main export products, engaging most of its rural population, groundnuts, is facing equally dropping world market prices. If the groundnut market is to perform poorly for a longer time, as observers fear, this would have severe effects on the poorest segments of the Gambian population.
Also The Gambia's second foreign currency earner, the tourism sector, is expected to face a severe slowdown as recession has hit Europe, prompting travellers to cancel trips to exotic destinations. The Gambia is one of the destinations expected to be badly affected by the contraction of the European travel market.
The IMF assessment however does not particularly analyse the 2009 market situation for groundnuts and tourism. The prospects of these two major foreign currency earners - which other experts hold could be severely affected in 2009 - are therefore not part of the Fund's new economic growth projection. A 4-5 percent growth rate for the Gambian economy next year therefore is seen as an optimistic estimate.
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