THE GAMBIA: BACK ON TRACK WITH IMF

UNCLAS BANJUL 000101 SIPDIS SENSITIVE SIPDIS SECSTATE PASS EXIMBANK, OPIC, AND USTDA E.O. 12958: N/A TAGS: ECON EAID ETRD EFIN PREL IMF GA SUBJECT: THE GAMBIA: BACK ON TRACK WITH IMF REF: 06 BANJUL 722 IMF APPROVES NEW DISBURSING PROGRAM -------------- ¶1. (U) We note, per the IMF's press release, the IMF Executive Board's February 21 approval of a three-year, dols 21 million Poverty Reduction and Growth Facility (PRGF) for The Gambia. According to the IMF's announcement, the Executive Board also approved additional interim assistance of dols 0.5 million under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The IMF's resumption of a disbursing program here represents the culmination of the GOTG's several-year effort to get back on track with the IMF, following its suspension in 2003 of the then-existing PRGF arrangement due to the GOTG's misreporting of its foreign exchange balances. ¶2. (U) Approval of the new PRGF followed a November 2006 visit to The Gambia by IMF officials (reftel),who expressed satisfaction with the GOTG's overall performance under the Staff Monitored Program (SMP) instituted here by the IMF prior to deciding whether to go ahead with a new disbursing program. In their readout to us, the IMF officials indicated that the GOTG was firmly on course for a new PRGF and subsequently, assuming the Gambians' satisfactory performance under the PRGF for at least six months, debt relief under the Multilateral Debt Relief Initiative (MDRI). CHALLENGES AHEAD -------------- ¶3. (U) In announcing the new PRGF, IMF Deputy Managing Director Murilo Portugal commended the GOTG for successful economic stabilization policies over the previous three years, citing, inter alia, tightened monetary policies and prudent macroeconomic policies. However, he also went on mention "formidable economic challenges" to be addressed under the PRGF: "widespread poverty, vulnerability to exogenous shocks, and a heavy public debt burden." The IMF official stated that the GOTG's maintaining "fiscal discipline" would be crucial for the achievement of macroeconomic objectives enshrined in the PRGF and noted, in particular, the need for the GOTG to "contain" domestic borrowing. COMMENT -------------- ¶4. (SBU) The GOTG wasted no time in signalling its satisfaction over the IMF's move, issuing a statement that contained excerpts from the IMF press release and that ran as the lead item in two dailies on February 23. In past discussions with us, the two leading architects of the GOTG's normalization of ties with the IMF -- Finance and Economy Minister Musa Bala Gaye and Central Bank Governor Famara Jatta -- indicated awareness of the need for the GOTG to continue economic reforms following anticipated approval of the PRGF so as to achieve their top priority -- reaching HIPC completion point and qualifying for debt relief under MDRI by mid-2007. At the same time, these two officials acknowledged a key economic "challenge" cited by IMF offical Portugal -- keeping spending and borrowing under control -- that the GOTG had to face in order to help ensure performance under the new PRGF that would earn debt relief. END COMMENT STAFFORD