Improving Public Debt Management
In the OIC Member Countries
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4.1 Case Studies
4.1.1 Islamic Republic of The Gambia
A) Public Debt DynamicsBetween 2000 and 2008, the Islamic Republic of The Gambia qualified for debt relief under the
enhanced Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief
Initiative (MDRI) after having made significant progress in implementing its Poverty
Reduction Strategy (AfDB 2001, IMF 2008).12 However, between 2010 and 2014 general
government debt in Gambia steadily increased from 69.6 to 101.1% of GDP (see Figure 41).
Meanwhile, the elevated general government debt level has eroded international reserves. The
gross official reserves’ import coverage has declined from 6 months in 2012 to below 3 months
in 2014 (IMF 2015). Even though the debttoGDP ratio slightly decreased to 91.6% $804.9
million in absolute terms in 2015, projections for the next years indicate an increase in debt.
Explicit liabilities also include loans to public enterprises (World Bank 2003). There is no
further data about contingent liabilities.
Gambia historically experienced low levels of economic growth characterized by repeated
weatherrelated shocks. Real GDP growth over the period 20042014 was on average less than
0.5% per year, which is among the lowest in SubSaharan Africa (IMF 2015). Large fiscal
deficits continue to impose major challenges for policy makers. After having achieved a budget
surplus in 2007, the fiscal balance fell into a deficit exceeding 6% of GDP by 2010 (AfDB et al.
2015). A reform program, which aimed at limiting the government’s domestic borrowing, was
set up at the beginning of 2011. Little commitment to the program and loose fiscal policy,
however, stalled the implementation of the reform program. The government’s continued
efforts to strengthen revenue administration and to eliminate subsidies for domestic fuel
prices helped to raise revenues (IMF 2015). Despite these efforts on the revenue side, sizable
extrabudgetary spending pressures and the fiscal burden arising from financial difficulties of
key public enterprises increased the overall fiscal deficit. The fiscal deficit is largely financed
by domestic borrowing, which increased from 4.4% of GDP in 2012 to around 8.6% of GDP in
2013. Interest payments amounted to 22.5% of government revenues in 2012, out of which
81% was interest on net domestic debt. The regional Ebola outbreak, together with the
delayed summer rains in 2014, widened fiscal imbalances further. Without fiscal reforms the
mediumterm budget deficit is projected to increase to 10.8% of GDP in 2015 and 11.2% in
2016. The net domestic borrowing (NDB) rate is expected to reach 12% of GDP at the end of
2014 against the less than 2.5% projected at the beginning of the year (AfDB et al. 2015).
12 Gambia received debt reliefs of $66.6 million (8.2% of GDP) in 1999 net present value (NPV) terms under the HIPCInitiative (IMF 2008).