IMF Deputy MD Says Regional Trade Integration Can Strengthen Confidence in Dalasi
The Deputy Managing Director of the International Monetary Fund, Tao Zhang Tuesday gave thumbs up to the Africa Continental Free Trade Area (AfCFTA), suggesting it can strengthen Gambia’s external position and strengthen confidence in the local currency.
The Gambia ratified the agreement in April, becoming the 22nd nation to do so, and effectively giving the African Union the minimum threshold for the agreement to come into force.
The IMF official arrived in The Gambia Sunday for a working visit. He’s expected to visit the recently launched Sene-Gambia Bridge in Farafenni which is widely seen as a symbol of regional integration as it connects two parts of Senegal.
Speaking in Banjul on ‘The Gambia’s pathway to prosperity’, he described the bridge as a prime example of progress and a symbol of The Gambia’s efforts to deepen economic ties to the rest of the region.
“Regional economic integration and cooperation will strengthen The Gambia’s external position. Exports, private capital inflows and remittances from Gambians working abroad are rebounding and are likely to increase further with regional integration. This will help build foreign exchange reserves and strengthen confidence in the dalasi. So there are grounds for optimism about the economic outlook.”
Tao said the Sene-Gambia Bridge is symbolizing the role of enhanced trade and connectivity in building prosperity. He however stressed that domestic policy efforts will be needed to build this pathway.
“Africa is now moving ahead with creating the Continental Free Trade Area, which The Gambia recently endorsed. This initiative has the potential to boost intra-African trade and growth across many dimensions. It can add jobs, foster competition, help increase investment and spur the spread of knowledge and technology. All of these could provide significant benefits to The Gambia.”
However, he warned that to fully benefit from it, the significant nontariff bottlenecks to trade that exist across the region will also need to be tackled. These, according to him, include infrastructure shortcomings, logistical costs, and other hurdles that hinder cross-border trade.
“If these issues are addressed, regional trade integration can help maximize the returns on important public investment, such as the Sene-Gambia Bridge, and consolidate the recent pick-up in private sector activity and lending that is integral to sustainable development in The Gambia,” Tao said.
“On this point, it is important to note that this private sector-led growth needs to be supported through responsible lending by financial institutions to Gambian businesses large and small. Vigilant supervision of banks and other credit institutions will help to ensure financial stability in the face of growing private capital inflows.”
The IMF deputy chief said trade integration will also help frame the reforms of Gambia’s state-owned enterprises – in many cases, the long-term viability of those companies will depend on increasing their regional orientation. Citing the energy sector as an example, he said stabilization of electricity output has contributed to Gambia’s stronger growth.
“So, the ongoing investment in the electricity transmission not only will link the eastern and northern parts of the country, it will also open doors to West Africa’s power networks by enabling cross-border energy trading, including under the flagship OMVG project uniting The Gambia, Guinea Conakry, Senegal and Guinea Bissau.”
Tao said regional integration and cooperation are particularly important for improving the structure of the economy and enhancing competitiveness.