Debt vulnerabilities increased due to fiscal position-IMF Country Rep

The International Monetary fund (IMF) representative in the Gambia MamadouDioulde Barry on Friday informed the UN System and the Gambia government that fiscal positions have deteriorated in response to the pandemic, causing debt vulnerabilities to increase, and that 19out of the region’s 35 low-income countries are in debt distress or at high risk of distress.

That the Sub-Saharan Africa (SSA) has reached about 60 percent of Growth Domestic Product (GDP) doubling in the last ten years while approaching record levels.

Barry was delivering through a precise PowerPoint presentation at the launching of the Joint IMF In-Country for the October 2022 Regional Economic Outlook for Sub-Saharan Africa, and UNCT outreach on the Rising Cost of Living in the Gambia, in collaboration with the UN Country Team, held at the SDKJ International Conference Center in Bijilo which converged various personnel from the Gambia government and the UN System.

The themes were “living on the edge” and “managing the high cost of living and food insecurity in the Gambia.”

In his presentation, Barry noted that the composition of debt has shifted to higher-cost and short-term private debt, and that debt-service level has more doubled in the last ten years. That activity bounced back in 2021 from the pandemic lifting GDP growth to 4.7 percent.

He added that the recovery was interrupted due to the unfavorable global environment and increasing macroeconomic unbalances, while growth in 2022 was expected to slow sharply by more than one percentage point to 3.6 percent and remain subdued in 2023 at 3.7 percent.

However, he said the growth revisions in SSA are relatively moderate compared to advanced economies, and non-resource intensive countries continue to grow at a faster pace than the resource intensive countries and oil exporters.

“Growth in The Gambiais projected toincrease from 4.3 percent in 2021 to 4.5 percent in 2022. This is a much-muted recoverythan the 5.6 percent projections from six month ago. Growth will accelerate to 6 percent in 2023.With growing needs, rising imbalances, and elevated risks, the recent crisis has pushed many SSA countries even closer to the edge. Policymakers must strike a delicate balance across competing objectives,” Barry stated.

According to him, fighting fires need to address the socio-economic needs as they emerge with precedence given to protecting lives, whilerebuilding buffers, insuring economies against future shocks, strengthening policy frameworks, and improving governance.

He further revealed that the region’s safety and prosperity will require high quality growth over the medium term, thus, there is a huge premium for structural reforms and policies required to set the stage for a sustainable recovery.

He confirmed that the monetary authorities should address the rise in inflation and resist exchange rate pressures, without undermining the recovery. That gradual tightening for many countriesgiven still-fragile recovery and external causes of the inflation.

Adding that fasterormore decisive tightening for countries with a very high inflation, less credible monetary frameworks, large capital outflows or rapid currency depreciation that affects inflation.

He continued that the high quality growth will require investing in resilient green infrastructure to capitalize on the region’s sizable endowment of renewable energy resources, and potentially leapfrog fossil-fuel based models.And leveraging private-sector innovation, activity, and finance, for countries with limited fiscal space pivot away from government led growth.

He noted that international support will be critical to financing climate adaptation needed for resilient growth as well as respond to the region’s emergency food security and pandemic needs.

“IMF has 22 disbursing programs, 5 programs without disbursement, and about 12 countries with ongoing program discussions. IMF financial support to the region including the SDR allocations has reached US$50 billion during 2020-22. This is more than all the financing provided to the region in the previous 30 years,” he advanced.

He concluded that the Gambia’s financing from the IMF during 2020-2022 was about US$ 208 million of which US$85 million is the SRD allocations and that the IMF is closely working with WB, UN and other partners to provide more support to the region. Adding that they have been agile and adapted their funding toolkit with the creation of a long-term financing tool (the Resilience and Sustainability Trust) and an emergency Food Security Window.