Gambia gets $140m debts cancelled

After seven years, Gambia has at last completed the international debt cancellation process, which will see around 140 million dollars of its debts wiped out.

It will now qualify for further debt cancellation under the Multilateral Debt Relief Initiative, the debt deal agreed by the G8 at Gleneagles in 2005, so in total approximately $514 million of the country’s debts will be cancelled.

This debt cancellation will bring urgently needed resources to the West African country, which will be used to help tackle poverty levels through providing investment for health, education and other essential services. Poverty is endemic in Gambia, with almost a third of the population undernourished and 60% of the population living on less than a dollar a day. And yet the country spent 6.3% of its Gross Domestic Product on servicing its debts, some $29 million, in 2005.

The World Bank and International Monetary Fund announced at the end of 2007 that Gambia had “made sufficient progress and taken the necessary steps” to complete the Heavily Indebted Poor Countries (HIPC) Initiative. The country has spent the last seven years meeting a host of onerous conditions imposed by its creditors, before being allowed to receive debt cancellation.

Conditions included, most controversially, liberalising the Gambian groundnut industry, which at certain times of the year employs three-quarters of the workforce. The outright privatisation of the Gambia Groundnut Corporation (GCC) was pushed hard by the IMF but has been resisted. An earlier privatisation of the sector failed abysmally, when the Government undersold the state-owned GCC to a Swiss company, losing the country $2 million, and resulting in the loss of more than 10,000 jobs as well as the Gambia becoming a net importer, rather than exporter, of (groundnut-based) cooking oil. The GCC was renationalised in 1999.

So despite the IMF’s efforts, the Government stood firm against re-privatisation of the groundnut company. Instead Gambia has had to create a new “comprehensive framework” which will involve opening up the operations of the industry to the private sector.

Gambia is the 23rd country to complete the HIPC Initiative, out of 32 which have qualified and a further eight which are eligible for debt relief but have not yet met the entry criteria. The time that a country takes to complete the HIPC process is becoming ever longer, causing more delays in countries accessing vital resources for poverty reduction.