15th April 2020, the Executive Board of the International Monetary Fund (IMF) has approved a disbursement of SDR 15.55 million (about US$21.3 million or 25 percent of its SDR quota) for The Gambia under the Rapid Credit Facility (RCF). The financing provided under the RCF will help the country meet its urgent balance-of-payments (BOP) need as well as support the authorities’ efforts to contain the spread of COVID-19 and limit its adverse economic and social impacts.
The Gambia is being severely affected by the COVID-19 pandemic. While the spread of the virus in the country remains contained, The Gambia is extremely vulnerable to the pandemic due to the density of its population and a weak health system.
The economic impact is large. The global pandemic and related emergency measures have halted tourism (the mainstay of The Gambian economy), disrupted trade, and reduced remittances and private capital inflows. The real GDP growth projected for 2020 has been revised from 6.3 percent to 2.5 percent and the BOP outlook has weakened by about US$46 million (2.4 percent of GDP). The immediate gross fiscal impact, including revenue shortfalls due to the disruption of economic activity and the expected delay in public investment, is estimated at about 3.6 percent of GDP. Half of this amount corresponds directly to emergency spending on healthcare and logistics, and increased spending on social support, including food distribution, compensation to frontline workers and support to small businesses.
The emergency support to The Gambia will supplement financing from the IMF under a US$47.1 million Extended Credit Facility arrangement for The Gambia approved on March 23, 2020. To accommodate the worsened BOP outlook, the IMF Executive Board also approved today the authorities’ request to modify the ECF performance criteria on net usable international reserves and net domestic assets of the central bank.
The Gambia has also benefited from the IMF Executive Board decision of April 13, 2020 to provide debt service relief to all countries eligible for support from the International Development Association (IDA) in the form of grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT). As a result, The Gambia will receive relief from the CCRT on debt service falling due to the IMF in the next 6 months (about US$2.9 million). This relief could be extended for up to 2 years, subject to the availability of resources under the CCRT.
Following the Executive Board discussion, Mr Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
“The global COVID-19 pandemic is straining The Gambian economy, notably as international travel and tourism are halted. The Gambian authorities are acting decisively to contain the domestic spread of the pandemic and mitigate its impact on the economy. The IMF Executive Board’s approval of a disbursement under the Rapid Credit Facility will help fill the urgent balance-of-payments need and augment budget resources.
“The authorities’ support for social programs is being severely tested. In this context, a better targeting and timely delivery of social assistance to the most affected households and sectors is needed during the pandemic.
“It is important to establish appropriate criteria and reporting requirements for the use of emergency spending and ensure that COVID-related operations and outlays undergo a full independent audit to enhance transparency. In order to safeguard debt sustainability, the authorities are encouraged to seek additional grant financing for emergency spending.
“The Central Bank of The Gambia should continue to monitor developments in the financial sector, to ensure adequate liquidity and oversight, while avoiding a blanket weakening of supervisory standards. A strengthening of market surveillance under the existing regulations will help detect and address appropriately any weakening of banks’ foreign exchange positions. Maintaining a flexible exchange rate will help absorb balance-of-payments shocks. “