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Reason for jammeh in france is The classified letter from the government aeeiving at my desk this afrternoon.

Letter of Intent

Banjul, The Gambia
May 7, 2013
Madame Christine Lagarde
Managing Director
International Monetary Fund
Washington, DC 20431

Dear Madame Lagarde:

1. The year 2012 marked the beginning of implementation of the Programme for Accelerated Growth and Employment (PAGE), which is The Gambia’s development strategy and investment programme for 2012-2015. The PAGE aims to accelerate and sustain economic growth and development while creating employment opportunities for Gambians in order to improve their socio-economic conditions. The Government of The Gambia aims to achieve this objective through strategic investments in infrastructure, education, agriculture, tourism, health, and energy. The PAGE also calls for a sound macroeconomic policy framework that reduces the risks to economic stability and provides a strong foundation for growth and employment. More specifically, this policy framework, which is supported by an arrangement under the Extended Credit Facility (ECF) approved by the IMF Executive Board in May2012, seeks to reduce Government’s domestic borrowing needs, gradually build up international reserves,and ensure a sound financial system.

2. The Gambian economy has begun to recover from the severe drought and crop failure of 2011.By providing food, seeds, and fertilizer, relief efforts by the Government, aid agencies, and donors helped to mitigate the impact of the drought on the most vulnerable farmers and families. In 2012 real GDP is estimated to have grown by about 4 percent, driven by a partial rebound in agriculture and strength in the tourism sector. In 2013, non-agricultural GDP is projected to grow by 5-5½ percent, while overall GDP growth could climb to about 8-9 percent, depending on the expected continuation of the recovery in agriculture. Despite the ongoing agricultural recovery and good performance in the tourism sector, the
balance of payments has weakened, contributing to depreciation pressures on the Gambian dalasi.
3. Almost all performance criteria (PCs) for the 1st review of the ECF arrangement were met (end- June 2012 test date). During the first half of 2012, progress was achieved on containing government’s borrowing and building up international reserves. However, one continuous PC was not observed in late 2012, when external payments arrears were incurred on external debt service obligations due on a Government-guaranteed loan to the National Water and Electricity Company. The Government cleared the past-due balances in December 2012. Good progress has also been achieved on our structural
agenda, including the successful introduction of a value-added tax on January 1, 2013, as planned.

4. In light of this performance, we request a waiver for the nonobservance of the continuous PC that sets a zero limit on external arrears. We also request the completion of the 1st review under the ECF arrangement and a disbursement in the amount of SDR 1,555,000 (5 percent of quota).

5. Although the 1st review of the programme has been delayed and three of the original PCs for the 2nd review (end-December 2012 test date) were missed, we have set our sights on targets for 2013 that are largely in line with the original objectives of the ECF-supported programme. Given these, we request a re-phasing of the second and subsequent semi-annual reviews by six months. That is, we request that the test dates for the second and third reviews of the programme be pushed back to end-June 2013 and end-December 2013, respectively. As discussed in the attached Memorandum of Economic and Financial Policies (MEFP), the Government of The Gambia will limit its net domestic borrowing (NDB) to about 1½ percent in 2013, moderately higher than originally planned (1 percent of GDP). In addition, the Central Bank of The Gambia (CBG) will rebuild its international reserves over the course of the year, after experiencing an unseasonable loss in early 2013. The Gambian authorities remain committed to the medium-term objectives of the ECF-supported programme, including reducing the Government’s net domestic borrowing (NDB) to ½ percent of GDP a year by 2014 and gradually building up international reserves to 5 months of import coverage.

6. Finally, we also request a modification of the PC restricting the Government’s contracting of nonconcessional loans to allow financing from the Islamic Development Bank to rehabilitate the groundnut sector—a key sector for poverty reduction. Although the loan will only have a grant element of about 20 percent, we have consulted with World Bank and IMF staffs to verify that debt sustainability would be maintained.

7. The Government believes that the policies set forth in the attached MEFP and Technical
Memorandum of Understanding will achieve the objectives of the programme, but stands ready to take further measures that might become necessary for this purpose. The Government will continue to provide the information required to accurately monitor the programme. Furthermore, the Government will consult with the IMF in advance of any revisions to the policies contained in the MEFP, in accordance with the IMF’s policies on such consultations, at the initiative of the Government or the IMF.
8. The Government intends to make available to the public this letter and its attachments, the IMF staff’s report, and all other documents related to the programme. We authorize the IMF to arrange for these documents to be posted on its website following the Executive Board’s conclusion of the review.

Sincerely yours,
/s/ /s/
Abdou Kolley Amadou Colley Amadou Colley
Minister Governor 
Ministry of Finance and Economic Affairs Central Bank Central Bank of The Gambia

Attachments:
- Memorandum on Economic and Financial Policies (MEFP)
- Technical Memorandum of Understanding (TMU)


........... OUTCOME

Press Release No. 12/191 International Monetary Fund
Washington, D.C. 20431 USA FOR IMMEDIATE RELEASE
May 25, 2012
IMF Executive Board Approves Three-Year, US$28.3 Million Extended Credit Facility
Arrangement and US$14.2 Million Disbursement for The Gambia
The Executive Board of the International Monetary Fund (IMF) today approved a new
arrangement for The Gambia under the Extended Credit Facility (ECF) in an amount
equivalent to SDR 18.66 million (about US$28.3 million). The Board’s decision will enable an immediate disbursement equivalent to SDR 9.33million (about US$14.2 million).
The authorities’ program is aimed at meeting an acute balance of payments need arising from the recent crop failure due to drought, and helping to catalyze support from development partners for The Gambia’s new poverty reduction strategy, the Programme for Accelerated Growth and Employment (PAGE). Over the medium term, the authorities seek to ease the government’s heavy debt burden through fiscal adjustment, while implementing a strong economic reform agenda in support of the PAGE.
Following the Board’s discussion of The Gambia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:
“The Gambian economy has made good progress in achieving strong growth and making a substantial reduction in poverty. However, major crop failure due to the drought has created hardship and calls for effective and timely delivery of assistance for the most vulnerable households.
“The Gambia’s heavy debt burden poses high costs for the government and risks for the
economy. To address this problem, the authorities' new ECF-supported program rightly
focuses on fiscal adjustment to curb government's domestic borrowing. Limiting external
borrowing to concessional loans is also necessary to reduce the risk of debt distress. The
authorities’ planned fiscal adjustment will require consistent strong implementation to build “Progress toward eliminating fiscal dominance has enhanced the independence of the Central Bank of The Gambia and its capacity to conduct sound monetary policy. The central bank will continue to build capacity for effective financial sector supervision, particularly for stress testing.
“Financing the government’s new poverty reduction strategy, the Programme for Accelerated Growth and Employment, under tight budget constraints will be a challenge. In this regard, fiscal savings from lower interest on domestic debt and private sector participation in infrastructure investment could be helpful. To ensure that such investments are productive and to guard against potentially large contingent liabilities for the government, robust institutions and regulatory frameworks are critical. To support growth, reforms are needed in key sectors such as energy and telecommunications.”
Recent economic developments
The Gambian economy performed well during the previous ECF arrangement, which expired at the end of March 2011. During that period (2007–10), real GDP growth was robust and inflation was low-to-moderate, despite the global financial crisis and sharp food and fuel price shocks. Moreover, growth was inclusive and the incidence of poverty fell considerably.
However, the fiscal deficit widened substantially in the latter years of the program, due to a steady erosion of revenues and large extra-budgetary spending, leading to a sharp increase in costly domestic debt.
In the 2011–12 agricultural season, a severe drought resulted in a major crop failure, putting about one-fourth of the population at risk. Initially, the government will bear much of the cost of relief efforts, notably imports of food, seeds, and fertilizer. Despite this severe shock, the authorities have been able to maintain macroeconomic stability, thanks largely to an ample stock of official international reserves.
The crop failure will affect economic growth over the near and medium term. Real GDP is projected to contract by 1½–2 percent in 2012, reflecting effects of the crop failure carrying over into the first half of 2012. With a recovery in agriculture spread over 2–3 years, real GDP is projected at about 8–10 percent a year in 2013–14, provided there is an effective response to the drought by the government, aid agencies, and development partners.
However, this outlook depends on sound macroeconomic policies and is subject to a number of downside risks, mainly the heavy debt burden, a potentially prolonged weakness in the global economy, particularly in Europe, and possible terms of trade shocks, especially on food and fuel prices, and weather-related shocks.
Statement by Mr. Saho on The Gambia
Executive Board Meeting
May 25, 2012
Introduction
My Gambian authorities are appreciative of the Fund Executive Board and Management for their continued engagement and support. They are grateful for the productive policy dialogue and advice proffered by the Fund Mission during the negotiations for a new ECF arrangement. My Gambian authorities agree broadly with the staff report as it presents a generally balanced assessment of recent macroeconomic developments, and challenges and opportunities. It is in this regard that my authorities solicit the support and approval of the Executive Board for a new three-year ECF arrangement.
Recent economic developments
Aided by strong growth in agriculture and the service sector, economic performance during 2007-2010 was impressive, with real GDP growth averaging 5.5 percent. This robust economic expansion, especially in the rural communities contributed to a substantial decline in poverty. According to the 2010 household income survey, the headcount poverty index, based on a poverty threshold of US$ 1.25 per day, decreased from 58.0 percent in 2003 to 48.5 percent in 2010. However, real GDP growth in 2011 declined to 3.3 percent, from 5.5 percent in 2010 and 6.7 percent in 2009. The slowdown in growth in 2011 was due largely to a severe drought that affected crop production. The authorities’ relative success in restraining monetary growth has helped to reduce inflation to 3.9 percent at end-March 2012 from 4.4 percent at the end of 2011. The external current account deficit narrowed from 15.7 percent of GDP in 2010 to 14.1 percent in 2011, while gross international reserves stood above 5 months of imports cover at the end of 2011. The Gambian economy faced considerable policy challenges coming into 2011. First, the fiscal expansion in the last quarter of 2009 and in 2010 contributed to a rise in interest rates on treasury bills in early 2011, raising interest costs in excess of budget allocations. Second, expenditure overruns emerged during the year, including from an increase in fuel subsidies, to cushion the impact of rising global energy prices, and additional pressures from the wage bill. Third, the fiscal dominance in 2009 and 2010, coupled with the increase in food and fuel prices made it difficult to reduce inflation to below the 5 percent target in the first half of 2011 as envisaged. Annual inflation was 5.4 percent in June 2011. In response to these challenges, the government implemented corrective measures. Fiscal tightening, especially in the second half of 2011, reduced bank and non-bank financing to 2.3 percent of GDP compared to 3.8 percent of GDP in 2010. This was achieved through cuts in spending, which fell below target by 21 percent, and increased revenue collection, which rose by 6.9 percent. Monetary policy was also tightened during the first six months of 2011 and into the third quarter, including by mopping up liquidity through net sales of treasury bills.
As a result of the improved fiscal position, interest rates on 91-day treasury bills declined to about 8.07 percent at end 2011.2
Outlook and policies
My authorities’ medium-term agenda will be defined by priorities set out in the Program for Accelerated Growth and Employment (PAGE) that emphasize increased budgetary
allocations to the development of basic infrastructure and the efficient provision of social
services, within a stable macroeconomic environment. In this regard, maintenance of prudent fiscal policies and consolidation of recent gains in macroeconomic stability will remain at the top of the authorities’ economic agenda. Furthermore, fiscal policy will be aimed at containing public debt and related interest payments to sustainable levels as well as avoiding inflationary pressures that might be associated with excessively high aggregate demand.
The next cropping season is likely to be affected by the crop failure of 2011/12 which will impact economic activity over the near term. Accordingly, real GDP is forecast to contract by 1.7 percent in 2012. However, agriculture is expected to recover and real GDP to rebound to 8-10 percent in 2013-14. The CBG’s monetary policy will continue to focus on containing inflation below 5 percent during the same period. The current account deficit is estimated to narrow to 13-14 percent of GDP in the medium-term, reflecting the prospective rebound in agricultural exports, tourism and continued buoyancy in remittances. During the same period, gross international reserves are expected to stabilize at about 5 months of imports cover.
Fiscal policy
My authorities will continue to pursue prudent fiscal policy aimed at safeguarding medium to long-term debt sustainability while, at the same time, creating the required fiscal space for investment in infrastructure and the social sectors. To this end, they intend to continue instituting a number of revenue-enhancing measures that includes the introduction of VAT in 2013, monthly implementation of the fuel price adjustments and strengthening of tax legislation to broaden the tax base and enforce compliance. Accordingly, the draft VAT law is in the process of being ratified by the National Assembly and sensitization of VAT has been stepped up as well as capacity building on VAT administration. As part of their revenue mobilization strategy, my authorities will work with the IMF to conduct a comprehensive tax assessment for further tax reform, with a view to determine the impact of eliminating subsidies and exemptions on revenue.
On the expenditure side, the prudence demonstrated thus far by the authorities in containing non-statutory spending through the strict implementation of the cash budget system will continue over the medium term. In this regard, transparent budget procedures with medium term focus would be central in increasing the efficiency of public expenditure in the future.
To this end, my authorities intend to introduce medium term expenditure framework (MTEF) on a pilot basis at two ministries in 2013. This is being preceded by the preparation of a budget framework paper that has a medium-term dimension. In addition, a draft of the guidelines or manual for the MTEF has been prepared and discussed at a validation workshop in Banjul last week.
Monetary and exchange rate policies
3.
To anchor inflationary expectations, monetary policy in 2012 will continue to be consistent with the level of economic activities. The policy stance will be supported by fiscal consolidation and reduced access by government to direct credit from the central bank.
Moreover, the Ministry of Finance and Economic Affairs and the CBG will strengthen their close collaboration to improve liquidity forecasting, both by participation in the regular meetings of the interagency committee and by improving its weekly forecast of the public sector borrowing requirement.
At the last Monetary Policy Committee (MPC) meeting on May 10, 2012, the MPC decidedto leave the policy rate unchanged at 14 percent. However, it reduced the reserve requirement by 2 percentage points to 10 percent as a result of, among others, the slowdown in growth.
The Committee also noted the high lending rates in the country and expected that a lower
reserve requirement will result in a reduction in commercial banks interest rates to boost
private sector credit and growth.
The central bank will continue to maintain the current floating exchange rate regime, which has served the country well, and intervene in the market only to preserve orderly market conditions. While mostly abstaining from the foreign exchange market, the CBG will, however, continue to carry out limited foreign exchange interventions to mop up liquidity generated by donor financed spending.
Financial sector policy
To strengthen financial sector stability, the first phase of the Capital augmentation to D150 million was successfully completed in December, 2010. The second phase of augmentation to D200 million is scheduled for December 2012. As at end April, 2012, four banks out of thirteen have met the D200 million requirement and the remaining banks are expected to meet it by the due date. The CBG has resolved not to grant requests for forbearance in case of non-compliance.
Despite having experienced slight delays along the way, the planned implementation of the new electronic data reporting system for commercial banks, known as Valtech regulatory compliance surveillance system (V-RegCOSS) is scheduled to commence in earnest. Staff of the Financial Supervision Department recently successfully participated in a User Acceptance Test (UAT), opening the way for the system developers to deploy equipment and staff on the ground, for the commencement of implementation. As part of preparations towards full automation, commercial banks are finalizing arrangements for the interface of their core banking applications with the V-RegCOSS. It is hoped that the new system will make bank supervision assessment of financial stability more efficient and reliable. Furthermore, to fully operationalise the CBG’s new national payment system, the securities settlement system is expected to go live before end-June 2012. Work has also progressed on the national switch, which is expected to be operational by the end of 2012.
Regarding the teething problems faced by the Credit Reference Bureau (CRB), a contract
has been signed with the system developers (Valtech) for the implementation of corrective
4.
measures. Valtech will perform this role in tandem with the V-RegCOSS project and
henceforth, both systems (CRB and V-RegCOSS) will share the same server and VNP
platforms.
Currently, the CBG is operating a hybrid model of Risk Based Supervision (RBS). This is amixture of the Risk and Compliance based supervision. To this end, an RBS manual has
been developed. However, full implementation is contingent on the implementation of the V-RegCOSS Software. The CBG will provide adequate staffing levels and training to
improve its macro-prudential analysis capacity with a view to more accurately assess
financial stability risks originating from the macroeconomic environment and from within the financial sector.
Debt management policy My authorities concur with staff’s assessment that The Gambia remains at a high risk of debt distress. They are cognizant of the threat to debt sustainability in the event of shocks to the economy. It is in this regard that my authorities remain unwaveringly committed to the careful management of both external and domestic debt to enhance external stability and increase fiscal savings. To this end, they plan to promote a strategy of donor engagement and cautious borrowing to finance the PAGE priorities as well as address the large infrastructural gap without compromising debt sustainability. Accordingly, my authorities will source new borrowing from highly concessional windows and create the enabling environment to attract non-debt creating resource inflows. In addition, my authorities will continue to conduct debt sustainability analysis on the basis of the Fund-Bank framework to ensure that all debt indicators fall and remain within their corresponding thresholds. Furthermore, to maintain the continued prudent management of public debt, debt management capacity is being enhanced
while the new debt management strategy is finalized.
Conclusion
My authorities remain mindful of the importance of prudent fiscal and monetary policies to achieve and maintain macroeconomic stability. In this regard, they regret the fiscal slippages that resulted to the non completion of the last ECF arrangement and have accordingly implemented appropriate revenue and expenditure measures that will help achieve substantial fiscal savings as the key to reduce the domestic debt burden and related interest expenses.
Accordingly, given the large resource requirement to finance the PAGE and provision of
emergency food, seeds and fertilizer, my authorities consider the assistance of the Fund and other development partners critical to achieving their development objectives. Against this backdrop, my authorities seek the Executive Board’s approval of their request for a new three-year ECF arrangement.

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