Gambia Meets Eligibility Requirement for Debt Relief

Thursday, December 27, 2007

According to a press release made available to The Point, The Gambia has made sufficient progress and taken the necessary steps to reach its completion point under the enhanced Heavily Indebted Poor Countries (HIPC) initiative following an agreement by the World Bank’s International Development Association (IDA) and the International Monetary Fund (IMF).

The 23rd country to reach the completion point, The Gambia is said to become eligible for further debt relief from the IMF, IDA, and the African Development Fund (ADF) under the Multilateral Debt Relief Initiative (MDRI), with total debt service savings under the MDRI expected to reach approximately US $ 373.5 million in nominal terms over the next 43 years.

The World Bank press release indicated that in the efforts to reach the completion point, The Gambia had ensured the meeting of a number of triggers, such as those aimed at maintaining macro-economic stability; ensuring commitment to the national poverty database and monitoring capacity; raising the quality and coverage of education; improving health outcomes and promoting development of the private sector. In addition, the release further outlined, the authorities have taken steps to revitalize the groundnut sector through liberalized reforms.
As a result of reaching the completion point, the release went on, The Gambia is expected to receive in total the equivalent of US$ 514million in nominal debt relief under both the enhanced HIPC initiative and the MDRI, on principal as well as interest payments.

“The World Bank’s IDA committed itself to provide assistance of US$ 35.9 million in nominal terms, of which US$ 9.1million has already been delivered. Under the MDRI, the World Bank’s IDA will cancel a debt stock of approximately US$ 183 million of debt disbursed before end -2003 and still outstanding on 31, 2007, corresponding to a total of approximately US$ 202 million in debt savings,” the release added.

Debt relief to The Gambia under the enhanced HIPC initiative, the release stated, amounts to US$ 66.6million in net present value terms, equivalent to a 27.2 percent reduction of The Gambia’s debt after traditional debt relief. The US $ 66.6 million in reduced debt is attributable to all creditors, while total assistance under the enhanced HIPC initiative is estimated to correspond to approximately US$ 140 million in nominal terms.

Madani Tall, World Bank Country Director for The Gambia, noted: “ In achieving the completion point, The Gambia significantly lowers its debt burden and effectively frees up resources to redeploy towards growth and poverty reduction.” In order to achieve optimum results, he opined, The Gambia had to take this opportunity to ensure that future borrowing is prudently managed in order to prevent a recurrence of debt distress, and to continue implementing reforms outlined in the government’s groundnut sector roadmap.

“The Gambia has made good progress towards securing macroeconomic stability and has established a good track record of policy implementation in 2007,” said Tsidi Tsikata , IMF Mission Chief for The Gambia.”

He postulated that a key challenge emerging from the development would be to maintain a sustainable external and domestic debt position through careful borrowing and prudent fiscal policy. “Debt relief at the completion point under the enhanced HIPC initiative and MDRI is an important milestone for The Gambia towards debt sustainability while providing more resources for poverty reduction and the attainment of the Millennium Development Goals,” Mr. Tsikata concluded.

Source: The Point