By Sanna Camara
The International Monetary Fund (IMF) has said that interest on Gambia’s debt burden has consumed a rising share of government resources in recent years, reaching over 22 percent of government revenues in 2012.
“Most of this was paid on domestic debts,” the Funs stated, adding that large fiscal deficits – financed mostly by domestic borrowing – have added to the government’s heavy debt burden.
In a media dispatch issued over the weekend, the executive board of the IMF said they came on an ‘Article IV Consultation in The Gambia’, which they held on the 11th September.
Depreciation of the Dalasi
Although growth has been picking up, weaknesses in the balance of payments have persisted. According to the IMF, this has led to the depreciation pressures on the Gambian Dalasi.
“Most recently, inconsistent economic policies have intensified these pressures,” the released said.
Foreign exchange ratings
On the foreign exchange ratings, IMF directors noted that recent exchange rate directives have disrupted the foreign exchange market. It has also encouraged capital flight and dampened remittances from abroad.
A prolonged over-valued exchange rate would risk damaging The Gambia’s international competitiveness, the release argued.
Directors therefore urged the authorities to maintain a flexible exchange rate policy, which has served The Gambia well. It also urged the government to tighten monetary and fiscal policies to ensure stability and preserve adequate levels.
Value Added Tax (VAT)
The mission commended the ‘successful implementation’ of the VAT, “and the progress made in phasing out fuel subsidies.
However, it added that “further tax reforms will be needed over the medium term to strengthen revenues and address costly tax expenditures, while improving international competitiveness”.