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IMF: 'Gambia is classified as being high risk of debt distress'
GAMBIA NEWS ONLINE- The
International Monetary Fund (IMF) and the World Bank (WB) diligently
carried out a ‘Debt Sustainability Analyses (DSA)’ that has cautioned
the trend in which the economy and financial system of the country is
DSA is a formal framework developed by the IMF for conducting public
and external debt sustainability analysis as a tool to better detect,
prevent, and resolve potential crises. It looks at the evolutions of
government debt over the next twenty years and it is based on
long-ranged projections of government borrowing needs.
to David Dunn, Chief of IMF mission to The Gambia, “The Gambia is
classified as being high risk of debt distress at the moment based on a
debt sustainability analyses by the IMF and WB.”
IMF chief was backing a PowerPoint presentation made by his institution
at the final validation of the Programme for Accelerated Growth and
Employment (PAGE) held at the Kairaba Beach Hotel conference room.
is The Gambia’s next blueprint that is expected to accelerate growth
and employment to sustain the country’s recent socio-economic
the DSA identifies various hypothetical shocks in order to ascertain
vulnerabilities, it also highlights that the present debt threshold has
been contravened by the country – sending a serious alarming risk of
[Gambia’s] debt sustainability indicators breach a threshold that
signals risk of debt distress – [the] country may face difficulty in
servicing its debt.”
Hon Njie, Finance Minister
The Gambia’s Minister of Finance, Mamburay Njie, has said that the country is not in any way at debt distress level.
Dunn pointed that the year 2006 was better in terms of stability than
this year and preceding years. The status quo of the country as regards
financial stability is vinegary, saying, “There is revenue crisis in The
on the scope of domestic borrowing and whether it is an option for the
country; Mr Dunn warns that domestic borrowing is risky and expensive,
because the interest rate attached to it is high. He said this year
alone there is a tendency that interest rate alone would consume nearly
23% of government’s revenue.
he said interest rate has been rising since 2009, he observed that
short term T-bills pose a larger risk and that majority are less than a
in order to move on the right track, IMF warns that the country should
reduce the cost of domestic debt by gradually reducing government
borrowing. It went on to advise that government should “Test the market
for long-term securities. Eventually, domestic borrowing could be a
is revenue crisis in The Gambia. Tax revenue (relative to GDP) has been
falling since 2007. The basis is getting narrower and narrower, so tax
rates must remain to generate revenue – A vicious circle,” the IMF
report went further to highlight the importance of tax reform for the
country, saying “simplification [of taxes], broad base, and low rate”
should be taken into consideration.
Dunn puts forthright key recommendations for the year 2012, saying that
tax base should be broaden, whilst general sales tax be extended to
electricity, and the threshold of income tax be raised.
tax rate should be kept as low as possible. The simpler the tax, the
better authorities are able to execute their duties. “Simplification of
taxes would be helpful,” he said.
a private sector-led economy, the report by IMF and the World Bank did
not fail to highlight the importance of the private sector’s
participation in easing government’s social reforms burdens. It urges
that apposite institutional arrangement should be considered, as the
system may help to avoid huge government liabilities. “Proper
institutional arrangements are essential to avoid large government
liabilities,” Mr Dunn explained, citing the report.
must be restructured so that it stands as a financially viable partner.
The regulatory body, PURA, should also be strengthened, he observed.
said that whilst there are “numbers of reforms in the
telecommunications sector”, there is still the need to strengthen
“competition among service providers”.