Gambia, mainland Africa's smallest country, is expected to clinch a big debt relief package by the end of 2007 but will remain at "high risk of debt distress", the International Monetary Fund said.
The former British colony, jutting into Senegal from the Atlantic seaboard along the Gambia river, is one of the world's poorest countries and many of its 1.7 million people depend on fishing, tourism, or growing peanuts.
But an IMF review published this week painted a picture of a stable and expanding economy expected to grow at seven percent in 2007, up from an average 6.2 percent over the previous three years, with inflation contained at around five percent this year.
Gambia's dalasi currency has appreciated around 20 percent against the dollar in just over three months, which an IMF official said reflected investor confidence.
The Central Bank of The Gambia raised its benchmark rediscount rate by one percentage point to 15 percent in late June to cool down rising inflation, but the IMF said "a favourable outlook for inflation suggests that there may be no need for further tightening in the second half of the year".