Gambia Central Bank to reduce money supply in the economy

To control price stability and reduce inflation

The Central Bank of The Gambia (CBG) has issued a directive raising the amount of money that commercial banks in the country have to hold as reserve - amount of cash that they should not loan out to customers. 

Governor Amadou Kolley of the Central Bank

The Monetary Policy Committee (MPC) of the CBG has raised the reserve requirement of commercial banks by two percentage points to 12 per cent, a press release from the Bank on Monday stated.  

 
The higher the reserve requirement is set, the less cash banks will have to loan out, leading to lower money in circulation.

The rationale behind this impromptu decision is to withdraw excess Dalasi liquidity out of the economy and thus help preserve price stability, the release affirmed. 

This is one of the additional measures the CBG has taken to restore stability and transparency in the foreign exchange market.

The decision follows a recent decision of the MPC, early this month, when it increased the policy rate by two percentage points to 14 per cent.

The measure was intended to enhance the attractiveness of Dalasi assets and to dampen inflationary pressures.

 
At that time, the MPC also indicated that it would closely monitor developments as well as take additional measures it deemed absolutely necessary.

According to the press release, the MPC in its monitoring has observed that activities in the foreign exchange market continue to exert pressure on the change rate of the Dalasi. 

Such activities like disorderly market conditions, characterised by high exchange rate volatility and wide bid-offer spreads, create inflationary pressure and stifle economic growth

Inflation increases as Gambian Dalasi loses value

Inflation - the rate at which the prices of goods and services increase, is forecasted to have increased more than the target of 5 per cent in The Gambia. 

This is primarily because the national currency, the Dalasi, continues to weaken in value against all major international currencies, the Central Bank Governor has said.

The Central Bank Governor made this remark on Monday during the opening ceremony of the ‘regional course on fundamentals of macro-economic analysis’. 

The weeklong training course organized by the West African Institute for Financial and Economic Management (WAIFEM) underway in Banjul, is being attended by economists from central banks in the ECOWAS sub-region and other financial institutions. 

The Dalasi has depreciated against the British Pound by 12.62 per cent, the US dollar by 11.87 per cent and the Euro by 12 per cent. 

Governor Amadou Colley said in view of this unforeseen circumstance, the Central Bank of The Gambia (CBG) would therefore continue to implement prudent monetary policy critical to maintaining low, stable and predictable rate of inflation.

Among these prudent monetary policies the Bank is expected to undertake is price stability so as to promote economic growth by reducing uncertainty and preventing arbitrary redistribution of wealth.

The CBG Governor said in view of the uncertain economic environment, policy actions should be indicated by the prevailing economic circumstances of the country.

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

COMMENTARY: Gambia security officers seek fare on the street

Life in The Gambia is growing difficult by the day as economic hardship in the country continues to take its toll on almost everyone in the country.

The hardship in the country has driven many people to adopt various means of battling the harsh economic status quo, no less the national security officers some of whom have resorted to begging for transport fare, against their will.

Most of the security officers, like majority of Gambians, are finding it very difficult to even keep their heads above water as prices of basic commodities continue to skyrocket, the Dalasi continues to lose its value and people’s earning power remains stagnant, with less and less to purchase essentials of life with.

Twice, on different occasions, I have met with a security officer begging transport fare to go home after work.  One of them is an officer of the Police Intervention Unit, and the other a Fire and Rescue Services officer, both are part of the national security apparatus. 

‘Jerre jef bro, nakam, nga def’ (literally meaning thank you my brother, how you doing), the PIU officer told me one morning on my way to work. 

After I have responded to him, the officer begged for a fare to go to his house in Tabokoto. 

Few days after, on my way to work I met again with an officer of Fire and Rescue Services also begging for transport to Brikama.

“My brother, can you please help me with fare to Brikama, I just closed from work but I do not have fare to go back?” the officer appealed.

“Even if you don’t have the full fare to Brikama if I can have any amount, even D10 is good,” he added.

Even though it seemed these officers were asking for fare, the actual fact is that they were looking for some cash to help themselves.

Apart from students, security officers are keener in begging for lift when going and coming from work. Early in the morning and in the evening, security officers usually form line-ups on the roadside seeking lift to their home or going to work.  

A fire service officer has said a full fledge fire fighter – after six months of training at the training school – earns a basic salary of just D1,300.  Though there are some allowances – transport allowance (but those in the provinces get bush allowance instead of transport allowance) and house rent; all these cumulatively are not more than D800.  All the allowances and basic salary put together is just about D2,100.

“From this amount, you have to pay income tax and social security,” the officer said.  “What I am left with is always small, and expectations are high on workers - people expect so much from you - the expectations are higher than the salary you earn.”

Gambia’s currency loses value

As at end-April 2012, the value of The Gambia’s currency, the Dalasi, depreciated against all major international currencies, Central Bank Governor Amadou Colley revealed during the quarterly press conference of the Bank’s Monetary Policy Committee (MPC) on 18 May.

Governor Colley said the value of the Dalasi dropped by 6.86 per cent against the US Dollar, 4.64 per cent against the Pound Sterling.  In nominal effective exchange rate terms, the Dalasi depreciated by 5 per cent.

In the year to end-March 2012, money supply grew by 9.0 per cent but lower than the growth rate of 14.9 per cent in March 2011.

At the same period, the domestic debt increased to D9.2 billion, equivalent to 31.3 per cent of Gross Domestic Product (GDP).  Treasury bills and Sukuk-Al-Salaam combined, and accounting for 78.8 per cent of the debt stock, rose to D7.43 billion compared to D6.0 billion in March 2011. The Gambia’s pays almost 25% of the annual national budget to interest on domestic debt.

GAMBIA’S CURRENCY TAKES DOWNWARD SLOPE

As at end-December 2011, the value of The Gambia’s currency, the Dalasi, depreciated against all major international currencies, Central Bank Governor Amadou Colley revealed on Tuesday at the quarterly press conference of the Bank’s Monetary Policy Committee (MPC).

Governor Colley

Governor Colley said the Dalasi weakened against the US Dollar by 7.7 per cent, the Pound Sterling 6.9 per cent, and the Euro 8.8 per cent. 

Consumer price inflation, which measures changes in the price level of consumer goods and services purchased by households, depreciated to 4.4 per cent in December 2011, lower than the 5.8 per cent in December 2010.

However, according to Governor Colley, average inflation has declined, albeit slightly, to 4.8 per cent from 5.0 per cent in December 2010. 

Dalasi notes

Inflation, he said, is expected to remain in single digit in 2012 predicated on prudent implementation and fiscal policies as well as the easing of the global food prices.

Data from the Gambia Bureau of Statistics indicate that the Gambian economy grew by 5.4 per cent in 2011, slightly lower than the 5.5 per cent and 6.7 per cent in 2010 and 2009 respectively. 

Provisional data indicate an improved government fiscal position in 2011.  The country’s revenue and grants increased from D5.0 billion in 2010 to D5.2 billion in 2011, equivalent to 16.1 per cent of Gross Domestic Product (GDP), which is the total monetary value of all goods and services produced domestically in the country over a specified period. 

Domestic revenue, comprising tax and non-tax revenue, also rose to D4.2 billion representing 6.9 per cent of GDP.