The Gambia tackles poor governance

• Author: Robin Kibuka/Meshack Tjirongo
• Position: IMF African Department
• Pages: 225-232

Page 225

Although the price of poor governance is difficult to quantify, the toll it takes on a country's progress can be substantial. In The Gambia over the past decade, a property seizure and a coup, among other events, led to major setbacks in overall economic performance and contributed to worsening poverty.

But the country has persevered in its reforms and has taken relatively timely steps to address governance issues and win back donor support. In early July, the IMF approved a three-year Poverty Reduction and Growth Facility Arrangement for $27 million to help The Gambia make further progress on the economic front and improve its fiscal performance.

Page 229

The Gambia moves to revive economy

Throughout the mid-1980s and early 1990s, The Gambia successfully implemented a wide range of financial and structural reforms. The country turned its economic fortunes around (see table, this page) on the strength of its Economic Recovery Program, launched in 1985 and designed to restore financial stability and lay the foundation for sustained economic growth, and its Program for Sustained Development, begun in 1990, to stimulate private sector development. These back-to-back adjustment efforts benefited from sustained financial support and technical assistance from the IMF and other multilateral and bilateral creditors and donors.

These early adjustment efforts reversed declines in GDP, and the economy recorded modest real growth, increasing imports to address supply constraints, lifting virtually all controls on interest rates, and eliminating external arrears while building up international reserves by the end of 1991/92. The country also made strides in improving its resource allocation, reducing price and other government controls; introducing a market-determined exchange rate, and liberalizing marketing arrangements for groundnuts-its principal cash crop.

Privatization efforts, however, met with mixed results. The sale of The Gambia's Oilseeds Processing and Marketing Company (one of the largest public enterprises) to The Gambia Groundnut Corporation (a marketing monopoly owned by the Swiss firm Alimenta) lacked transparency and a support mechanism for farmers. These problems created an uneasy relationship between the government and Alimenta that later erupted into a major conflict between them.

Shocks and reversals

Generally favorable developments came to an abrupt halt in 1993, when The Gambia was buffeted by a series of external shocks and internal turmoil that would increase poverty and undo some of the progress made in developing a sound macroeconomic environment.

The Gambia, a major regional trading center, saw its reexport activities-which accounted for about 80 percent of its exports and 35 percent of its...