Introduction:
 The Gambian economy is mainly agricultural with groundnut
production contributing about 15% of the GDP. Other major
agricultural
produce are rice, maize, cotton, vegetable and fruit which
collectively account for about (10%) of the GDP. The current
contributions of Agriculture to GDP, shows a declined as compared in
the mid-70s which attributed about 40% of the GDP, thus, reflecting
the strategies and action plans incorporated in the national sectoral
policy framework. In view of the foregoing, government has laid down
programmes aim at diversifying agricultural production and to develop
other non-farm activities which started to yield gains, particularly,
the performance of livestock and
fisheries.
The Gambian economy is based almost entirely on the production of
peanuts. Other significant exports are fish, cotton lint, and palm
kernels. Annual per capita income is only about US$330. Although the
country has the Gambia River and an ample water supply, much of the
soil is unsuitable for farming, and only one-sixth of the land can be
farmed. Peanuts are the only crop that can be easily grown. The
country
also lacks valuable natural resources like the minerals and timber
found in abundance in countries nearby.
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Central Bank of The Gambia:
Monetary Policy Committee's Press Release (11 July, 2008).
Inflationary Outlook:
Economic activity in The Gambia remains strong. Growth in money supply
moderated and the exchange rate is stable. However, the food and fuel
price surges could place serious strains on inflation and
macroeconomic stability.
According to the National Consumer
Price Index, headline inflation in
Gambia decelerated to
1.6 percent in
May
2008, lower than the 6.6 percent in May 2007. However,
average
inflation rate (12 months moving average) accelerated to
4.9 percent
compared to 2.5 percent a year ago. Although food price inflation
declined to 1.9 percent in May 2008 from 10.0 percent in May 2007,
there is the likelihood of the sharp rise in global food and fuel
prices spilling over to increased inflationary pressures in The
Gambia.
In 2008, growth in GDP of The Gambian economy is projected at 6.5
percent premised on continued growth in tourism, telecommunications
and construction. However, the uncertainties in the global economy
could slow economic output.
Monetary policy is focused primarily on containing inflation to below
6.0 percent. In the year to end-May 2008, money supply grew by 7.5
percent relative to 18.4 percent a year earlier.
Reserve money, on the
other hand, contracted by 5.9 percent compared to 5.5 percent growth a
year earlier.
Preliminarily data on Government fiscal operations showed that in the
five months to end-May 2008, revenue and grants totaled D1.58 billion,
lower than the D1.66 billion in the corresponding period of the
previous year. Total expenditure and net lending amounted to D1.51
billion, compared to D1.48 billion in the same period last year. The
overall budget surplus (including grants) on commitment basis was
D102.5 million, but lower than the D159.6 million during the same
period in the previous year. The budget surplus (excluding grants) on
commitment basis declined to D51.4 million during the period under
review from D119.7 million in the corresponding period a year earlier.
Balance of payments (BOP) projections indicate an overall surplus of
US $15.74 million in 2008, lower than the revised estimate of US
$29.82 million in 2007. The Gambia's current account deficit including official
transfers is projected to widen to US $70.2 million from US $65.8
million in 2007 while the capital and financial account surplus is
expected to narrow to US $85.9 million compared to US $99.1 million in
2007.
As at end-June 2008, gross international reserves totaled D2.9 billion
or US $142.8 million equivalent to 5.1 months of import cover.
Developments in the foreign exchange market continued to be
characterized by increased transaction volumes. Volume of transactions
in the inter-bank market increased to US $1.6 billion in the year to
end June 2008 compared to US $1.4 billion a year ago. Between December
2007 and June 2008, the Dalasi appreciated against all major
currencies traded in the inter-bank foreign exchange market except the
Swedish Kroner. The Dalasi strengthened against the British Pound, US
Dollar, Euro and CFA by 8.5 percent, 8.4 percent, 2.3 percent and 3.7
percent respectively while depreciating by 3.0 percent against the
Swedish Kroner.
The banking industry remains sound and increasingly competitive. The
industry’s average risk-weighted capital adequacy ratio was 23.8
percent at end-March 2008, higher than the minimum requirement of 8.0
percent. All the banks observed the prudential requirement.
Total assets of the industry increased to D11.1 billion in May 2008,
or 5.4 percent from March 2008. Loans and advances totaled D2.98
billion from D2.77 billion in March 2008. The ratio of non-performing
loans to gross loans was 10.0 percent in March 2008 compared to 13.0
percent in December 2007. Deposit liabilities rose to D7.1 billion, or
6.0 percent from end-March 2008.
As at end-June 2008, the stock of domestic debt increased to D6.0
billion (33.5 percent of GDP), or 6.0 percent from a year ago.
Outstanding Treasury bills, which accounted for 80.0 percent of the
total domestic debt stock, increased marginally by 0.23 percent to
D4.83 billion. The yield on the 91-day, 182-day and 360-day bills fell
to 9.78 percent, 10.94 percent and 13.09 percent in June 2008 from
12.3 percent, 13.03 percent and 13.91 percent respectively in June
2007.
Taking the above mentioned factors into consideration, including the
risk to the inflation outlook, the MPC has decided to maintain the
Rediscount Rate, the policy rate, at
15.0 per cent. The MPC would
continue to monitor changes in economic conditions and respond
appropriately in order to discharge its mandate to maintain price
stability.
Source: CBG
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