Audit of The Gambia"s economic policy reform program, project nos. 635-0228 and 635-0231

The audit covers the period 9/87-7/90. The GOG conformed with policy conditionality and used all dollar funds from the first two tranches of the cash transfer to repay IMF debts, as agreed, and has initiated actions required for the third tranche, which was disbursed subsequent to the audit. The third tranche was delayed, however, when problems arose in the TA component. This component was refocused in 1988 to emphasize reviving and ultimately privatizing the Gambian Commercial and Development Bank (GCDB), which was undergoing severe financial problems due to past lending policies (e.g., making loans to GOG officials at preferred rates). A.I.D. was to provide three banking experts to support an expatriate Managing Director installed by the World Bank. A dispute broke out between the two donors and the GOG when the GOG reneged on a key provision -- that the World Bank manager would be allowed to select and groom his Gambian successor -- and instead installed a political appointee with little banking experience as chief executive. This appointee openly challenged the authority of the expatriate manager, refused to submit to training, and actively undermined reforms already underway. As a result, GCDB employees were sometimes ambivalent or hostile to the reforms, preferring to wait until the Gambian appointee assumed full responsibility. This problem -- which was partially due to a lack of a clearly stated definition of the powers of the Managing Director -- threw the World Bank and USAID/G into a state of turmoil. A.I.D. refused to provide the promised TA and the final $2 million tranche, while the World Bank threatened to cut off all aid to The Gambia. Subsequent to the audit, the GOG yielded to pressure removed the political appointee and accorded the Managing Director the authority to manage the project as agreed.