IMF: Reducing government’s domestic borrowing critical to inflation, interest rates

By Sanna Camara

The just-concluded IMF mission to The Gambia has observed that reducing government’s domestic borrowing in 2013 will be critical to the current pressure on inflation and interest rates.

David Dun, the International Monetary Fund Mission chief to The Gambia, said reducing Gambia government’s domestic borrowing to 1½ percent of GDP in 2013, “as previously planned, will be critical to eventually ease the current pressure on inflation and interest rates.”

He noted that the mission endorses the authorities’ tight monetary stance and decision to refrain from the Central Bank’s financing of the fiscal deficit.

This will likely lead to higher treasury bill yields, which should also help stabilise the dalasi, Mr. Dun added.  

Economic and financial stability

The IMF official said the mission is encouraged by the government’s immediate actions to achieve the necessary fiscal discipline.

He noted that over the medium term, the main challenges for The Gambia are to strengthen economic and financial stability, enhance growth prospects, and reduce poverty, which are in line with the authorities’ Programme for Accelerated Growth and Employment (PAGE). 

Improving the business environment

The mission believes that tax reforms with a view to broadening the base and simplifying the tax system could play an important role in creating room for growth-enhancing expenditures.

This would also improve “the business environment by allowing for lower tax rates over time”.

Strategic plans for the energy and telecom sectors

Large commitments of support by development partners for investments in the agriculture and transportation sectors, he said, offer the promise of higher and more inclusive growth going forward.

With assistance from development partners, Dun said his mission encourages the authorities to act expeditiously to formulate strategic plans for the energy and telecom sectors to ensure that infrastructure supports high growth and employment, especially for the youth.

 

 

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