Breaking News: IMF expresses concern over Gambia’s move to host AU Summit-Citing the “ailing Economy and lack of funds”
  Breaking News: IMF expresses concern over Gambia’s move to host AU Summit-Citing the “ailing Economy and lack of funds”
                      By: An Editor
  The International Monetary Fund (IMF) is expressing concern over the move taken by The Gambian government to host the much talked about African Union Summit, citing the country’s ailing economy and lack of sufficient budget to host the AU Banjul forum. The Firm in a statement forwarded to the Freedom Newspaper says maintaining fiscal discipline in 2006, was going to pose a challenge to The Gambian authorities, adding that the funding of the October elections and the AU Summit would have some devastating economic effects on our weak economy. 
  
  IMF expresses concern over Gambia's hosting of the AU Summit, citing the "ailing economy and lack of sufficient funds."
  “Maintaining fiscal discipline in 2006 is going to pose a challenge to the authorities. Two major events—the hosting of an AU summit and general elections—could put the budget under stress. The authorities assured the mission that they would do their best to stay within budget for the two events, and were optimistic about the prospects for obtaining external assistance to supplement the country’s own resources.” said the IMF statement. 
  Despite the government’s move to allay the IMF’S fears over the implications of milking the country’s worsening economy, the firm urged authorities in Banjul to  cut down unnecessary government expenditure in months ahead. 
  “While the greatest risks to the program relate to fiscal slippages, there are others. These include monetary accommodation of fiscal lapses, implementation capacity constraints, high turnover of senior government officials involved with the program, and exogenous shocks. The CBG assured the mission that it stood ready to tighten monetary policy to prevent fiscal slippages from re-igniting inflation. On capacity constraints, the authorities are receiving a wide range of technical assistance to help strengthen capacity at both the CBG and the DoSFEA. Effective assistance in the area of public financial management will be critical for monitoring budget execution and fiscal developments more generally. Finally, there has been a high rate of turnover among senior officials in government, including at the DoSFEA. This can be disruptive to program implementation and monitoring.” said the world leading financial body. 
  
  
  According to the IMF delegation which concluded an official mission to Banjul “Policies, however, weakened in the first quarter of 2005. There have been significant fiscal slippages owing primarily to unbudgeted expenditures of D 101 million (¾ percent of GDP). These expenditures have led to a substantial increase in the net debt of the government. Accommodating policies by the central bank led to excessive growth in monetary aggregates. Prospects for 2005 are further jeopardized by the decision to license a monopoly quasi-public enterprise, the Gambian Agricultural Marketing Corporation (GAMCO), to market and process groundnuts.”
  A prominent Gambian businessman close to President Jammeh and other operators hijacked the groundnut industry in recent years, even though they have proven to be unable to purchase farmers produce. For the past four years, Gambian farmers had been selling their nuts on credit and up to the time of piecing this story together, a good number of farmers are still indebted by local ground operators in the tiny West African country. 
  The IMF officials further observed that “This has had a near disastrous effect on exports of processed groundnuts, as GAMCO has been unable to raise the finances to purchase what was a bumper harvest for groundnuts. The mission estimates that a substantial proportion of groundnut exports could be lost in the 2004/05 crop season.”
  In the groundnut sector,according to the statement  "Directors expressed disappointment with the decision to license a public monopoly, The Gambia Agricultural Marketing Corporation to market and process groundnuts. They noted that the authorities had agreed to license firms to compete with the Gambia Agricultural Marketing Corporation, but emphasized that it will be essential to avoid further government intervention and accelerate implementation of the sectoral strategy agreed with major donors including the privatization of the Gambia Groundnut Corporation."
  After a long delay, the statement went on “the authorities recently completed the first annual progress report of the Poverty Reduction Strategy Paper covering the period July 2002-December 2003. Progress on structural reforms has been mixed. The authorities have fallen behind in their schedule to privatize the Gambia Groundnut Corporation. On the fiscal side, the National Emergency Fiscal Committee (NEFCOM) had some positive effects in ensuring greater control over expenditures. Further, steps are being taken to strengthen the public expenditure management system. A new organic budget law has been passed and the financial regulations are currently being implemented. The authorities are in the process of developing a statistical strategy to be presented to donors. However, basic macroeconomic statistics remain weak.”
  
  Executive Board Assessment
  Meanwhile, the Firm’s executive Directors observed that “The Gambia's economic performance in recent years was marked by inconsistent implementation of sound macroeconomic policies, poor governance, exogenous and policy-induced shocks, and inappropriate policy responses to those shocks. Directors concurred that the main medium-term challenge for The Gambia is to make a decisive break from the past "stop-go" policies, and embark on a comprehensive economic program that would establish the conditions for sustainable growth and poverty reduction. Key elements of such a program should include measures to preserve macroeconomic stability and to achieve debt sustainability. The program should also incorporate reforms aimed at promoting faster growth and poverty reduction through improvements in the investment climate, and the strengthening of public expenditure management, governance, and accountability.”
  In this context, said the statement, directors commended the authorities for their implementation of strong financial policies over the past 18 months, which has led to an improvement in the basic primary fiscal surplus, a reduction in inflation, the stabilization of the exchange rate, and the rebuilding of international reserves. Directors noted that the improved macroeconomic conditions had paved the way for the recent easing in interest rates.
  While welcoming this progress, the IMF went on “directors expressed disappointment with the fiscal slippage—stemming from extrabudgetary expenditures—that occurred in the first quarter of 2005. They urged the authorities to address it by fully implementing the proposed quarterly ceilings on discretionary expenditure, improving cash management, and enforcing the public enterprises' repayment of government loans. In this process, it will be important to avoid adverse effects on pro-poor spending. Directors also urged the authorities to phase out the subsidization of petroleum products by adjusting prices and enforcing the terms of the petroleum price mechanism, bearing in mind the social implications of the adjustment.”
  
  In addition, said the statement, “they recommended strengthening revenues by improving tax administration, and broadening the tax base by phasing out tax exemptions. Directors were encouraged by the recent implementation of reforms to promote enhanced fiscal transparency. They welcomed the passage of the organic budget law and encouraged the authorities to finalize implementation of the supporting financial regulations. They also noted the progress being made in auditing the government accounts, and urged the authorities to intensify efforts to bring the accounts up to date.”
  While The Gambia, is gripped by economic and political uncertainties, the IMF warns that “external debt sustainability could pose a major challenge for The Gambia over the medium term. Under the assumption that The Gambia borrows only on highly concessional terms and reaches the HIPC completion point in 2007, the net present value (NPV) of the external debt-to-exports ratio is projected to decline from 312 percent in 2005 to 183 percent by 2010.15 Although all the key ratios for gauging sustainability are projected to decline, they remain well above the sustainability thresholds for poorly performing low-income countries.”
  The firm add “However, reaching the HIPC completion point will make The Gambia eligible for the Multilateral Debt Relief Initiative (MDRI), under which the country’s remaining repayment obligations to the Fund, the International Development Association (IDA), and the African Development Fund (AfDF) on debt disbursed before January 1 2005 would be canceled.”
  
  Both Touray and Hydara were indicted
  for massive corruption and abuse of office,but
  are still working for The Gambian government
  Meeting the IMF HIPC target, is the million dollar question. The Jammeh administration has been accused by critics of lack of judicious management and official corruption. The government rehired Ministers indicted for corruption by the Paul Commision. Justice Minister Sheikh Tijan Hydara and agriculture Minister Yankuba Touray were both indicted by the commission for abuse of office. Touray is still owing the state about D3Million dalasis. The government did not stop at that it also returned confiscated assets of the Minister. Meanwhile, President Jammeh, has purchased fleets of hummers and other expensive vehicles in preparations for the AU Summit, when the average Gambian cannot afford one decent meal a day. 
  According to the IMF “the status of the HIPC completion point triggers is summarized in Table 7. Structural Reforms CBG governance and operational independence. Implementation of the Action Plan approved by the CBG Board in July 2005 to tighten internal controls is a key component of the SMP. 
  Firm officials went on to add that “other specific measures under the SMP include the codification of improvements in accounting practices, and quarterly audits of the accounts underlying the program’s net usable international reserves and net domestic assets of the CBG. The new CBG bill designed to strengthen the central bank’s operational independence was passed by the national assembly in December 2005.“
  According to the IMF “The external auditors rendered a “qualified opinion” on the CBG’s 2003 accounts based on limitations in the scope of available information on certain balance sheet items. The limitations included inadequate documentary evidence which made it impossible for the auditors to confirm the accuracy of some accounts. Work has started on auditing the 2004 accounts, which the CBG expects to be completed by end-December 2005. The CBG also expects that audited accounts for 2005 will be ready around end-March 2006.”
  Finally “directors expressed disappointment with the continued weaknesses in internal controls at the Central Bank, and stressed the need for the prompt and effective implementation of appropriate remedial measures.”
  The Freedom Newspaper will publish other  IMF documents it received pertaining to Gambia’s economic situation. Read our subsequent publications. 
  The editor can be reached at this address: [log in to unmask] if you know that it is happening or is about to happen, please contact us. It is easy, just click our contact file. The Freedom Newspaper is your most trusted source of news. 
    
Posted on Wednesday, May 17, 2006 (Archive on Tuesday, May 30, 2006)
Posted by PANDERRYMBAI  Contributed by PANDERRYMBAI
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