The Gambia needs break from stop-go policies

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Since the mid-1980s, The Gambia's economy has performed unevenly owing to external shocks, macroeconomic and structural policy slippages, poor governance, and weak institutions, the IMF said in its annual economic review. Undisciplined fiscal policies have increased the government's recourse to domestic bank financing, which, in turn, has raised real interest rates, increased the domestic debt burden, and crowded out private investment.Weak policy implementation and governance problems also derailed The Gambia's 2002 three-year program under the IMF's Poverty Reduction and Growth Facility.

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A recent turnaround in macroeconomic policy implementation- particularly through end-2004-helped improve the basic primary fiscal surplus, reduce inflation, stabilize the exchange rate, and rebuild international reserves. The relatively high interest rates necessary to reverse the macroeconomic deterioration have, however, placed a heavy burden on domestic debt service and on credit markets. A weakening in policies during the first quarter of 2005 has led to a substantial increase in net government debt and excessive growth in monetary aggregates. Also, a decision to license a monopoly quasipublic enterprise to market and process groundnuts has had a...