Friday, May 10, 2013

Gambia gov’t in cash shortfall

By Lamin Jahateh
Gambia national flag
The Gambia government is currently in financial shortfall as its revenue and grants have decreased by D4 billion in one year, from March 2012 to March 2013, a data from the Central Bank of The Gambia (CBG) has indicated.
According to the quarterly report of the Monetary Policy Committee (MPC) of the CBG – released on Tuesday, provisional data on government’s fiscal operations in the first quarter of 2013 indicates that revenue and grants amounted to D1.5 billion, lower than D1.9 billion in the same period in 2012. 
Expenditure and net lending amounted to D1.9 billion, a contraction of 14.5 per cent when compared to the amount registered in 2012. 
As a result of the shortfall in revenue and a need for more expenditure, the government has increased its borrowing from local sources, such as the commercial banks in the country, to balance the difference.  
In this vein, the MPC’s quarterly report of the state of the country’s economy has it that the domestic debt of the government increased to D11.3 billion, as at end-March 2013.
Even with the increased local borrowing, the government’s overall fiscal deficit, including grants, increased by over D130 million – from D200 million registered in the first three months of 2012 to D330.4 million deficit in the first quarter of 2013.
However, though the overall revenue of the government decreased, domestic revenue has increased from D1.2 billion recorded in the first quarter of 2012 to D1.4 billion in the first quarter of 2013.
Treasury bills, through which governments borrow money, account for 77.2 per cent of The Gambia government’s debt stock.  It has increased to D8.7 billion, an increment of 23.5 per cent.   
Dalasi continues to lose value 
The national currency of the country, the Dalasi, continues to weaken in value against all major international currencies.
The MPC report said the Dalasi depreciates against the British Pound by 12.62 per cent, the US dollar by 11.87 per cent and the Euro by 12 per cent. 
“In Nominal Effective Exchange Rate terms, the domestic currency depreciated by 2.6 per cent in March 2013 compared with an appreciation of 0.4 per cent a year earlier,” the MPC said. 
However, the depreciated exchange rate provides an opportunity for the export sector to become more competitive in a challenging global environment.
Inflation projected to further increase
Latest inflation data from the Gambia Bureau of Statistics, as measured by changes in the price level of a consumer goods and services purchased by households over a period, indicate acceleration in inflationary pressures. Inflation is a rise in general level of prices of goods and services in an economy over a period of time.     
After declining slightly in September 2012, inflation rose to a twelve-month high of 5.3 per cent in March 2013.
Average inflation, 12-month moving average, also accelerated, although slightly, from 4.5 per cent in March 2012 to 4.6 per cent in March 2013.
The MPC report forecast that inflation will further accelerate but will remain in single digit in the short-term. 
However, there are upside risks to the forecast including further depreciation of the Dalasi.
Interest rates expected to increase
Taking the risks to the inflation outlook into consideration, the MPC has, therefore, decided to increase the policy rate, the rediscount rate, by 2 percentage points to 14 per cent.
This is expected to follow an increment in the interest rates in the country.  Already, interest rates in the country range from 18 to 22 per cent.
Banking industry remains strong
“The banking industry remains sound,” the MRC said.  “The average risk-weighted capital adequacy ratio (CAR) was 27.7 per cent in March 2013, higher than the minimum requirement of 10.0 per cent.”
Total industry assets increased to D21.2 billion, or 13.0 per cent from a year ago.  Loans and advances, accounting for 27.4 per cent of total assets, increased to D5.8 billion, or 10.3 per cent. 
Non-performing loans as a ratio of gross loans decreased to 11.0 per cent in March 2013 from 12.7 per cent a year earlier.
Reduction in balance of payment surplus
Preliminary balance of payment - which is the difference between the export and import of goods and services – estimates for 2012 indicates an overall surplus of US$62.3 million compared to the larger surplus of US$98.7 million in 2011.   
Exports are estimated to have increased by 14.7 per cent to US$176.5 million. Imports also rose but at a stronger pace of 21.7 per cent to US$359.0 million.

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