The pandemic of COVID-19 is expected to decrease Gambian economy growth to 2.5% by 2020, and in order to resolve the urgent need for the balance of payments, the IMF Executive Board has approved financial assistance under the rapid credit facility amounting to US$21,3 million for the Gambia. IMF debt service relief under the Catastrophe Containment and Help Trust will be a challenge for the country, as will the immediate challenge of reducing COVID-19 spread, improving medical care, implementing social distancing and other containment steps, and mitigating the economic impact of the pandemic, especially for the most vulnerable.
The International Monetary Fund (IMF)’s Executive Board today approved the disbursement for Gambia of SDR 15.55 million (approximately US$ 21.3 million or 25% of its SDR quota) under the Rapid Credit Facility. The RCF funding will help the country achieve its urgent balance of payments (BOP) need and support efforts by the authorities to reduce COVID-19 spreads and its adverse economic and social impacts.
The COVID-19 pandemic has badly impacted the Gambia. While the disease spreads throughout the world, Gambia is extremely vulnerable to the pandemic because of its population density and a poor health system.
The economic impact is important. Tourism (the Gambian economy’s main business), interrupted trade and decreased exports and private capital inflows have been halted by the global pandemic and associated emergency steps. The real GDP growth projection for 2020 has been lowered from 6.3% to 2.5%, and the BOP outlook has decreased by about US$ 46 million (2.4% of GDP). The immediate gross fiscal effect is projected at about 3.6 per cent of GDP, including income deficit arising from disturbances in economic activity and the anticipated delay in public spending. Half of this is directly linked to health and services emergency expenditure and increased social welfare expenditures, including food procurement, benefits for frontline staff, and small business assistance.
The Gambia emergency assistance will complement IMF funding under an Extended Credit Facility Agreements of US$ 47.1 million for the Gambia, authorised on 23 March 2020. The IMF Executive Board accepted today the proposal of the authorities to change the ECF performance requirements on net reserves and net central-bank domestic assets to accommodate the deteriorating BOP outlook.
The Gambia also benefited from IMF Executive Board decision of April 13, 2020, to provide debt relief in the form of assistance under the Catastrophe Containment and Relief Trust (CCRT) window to all the countries that have been eligible for assistance from the International Development Association (IDA). As a result, Gambia will obtain debt service relief from the CCRT that will fall due to the IMF over the next six months (around US$2.9 million). Subject to available services under the CCRT, this relief could be extended for up to 2 years.
Statement of the Executive Board, the Deputy Chairman and Acting Chief Executive Officer Mr Zhang released as “The global COVID-19 pandemic strains Gambia’s economy, particularly with the cessation of international travel and tourism. The Gambian authorities take decisive measures to curb the spread of the pandemic domestically and to minimize its economic effects. Approval by the IMF Executive Board of the Rapid Credit Facility would help meet the immediate balance of payments need and raise budget funding.”
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“Social services funding from the authorities is being seriously checked. In this context, social assistance needs to be better tailored and distributed quickly to the most impacted households and industries during the pandemic.”
“The development of appropriate emergency spending guidelines and reporting standards and ensuring that COVID-related operations and expenditure undergoes a completely independent, transparency-enhancing audit. To safeguard the sustainability of debt, the authorities are urged to obtain additional funds for emergency expenditure.”
“The Central Bank of Gambia will continue to track financial sector developments, ensuring sufficient liquidity and supervision, while preventing a sweeping weakening of supervisory standards. The strengthening of market surveillance under the current rules would help to adequately identify and fix any weakening of foreign currency positions of the banks. The preservation of a stable exchange rate would lead to a mitigating balance of payments shocks.”
Data source: International Monetary Fund (IMF)