An International Monetary Fund (IMF) mission led by Mr. David Dunn visited The Gambia during December 3-7, 2012, to assess the impact of the recent directive on exchange rate policy and operations of the foreign exchange market. The team met with the Secretary General and Minister of Presidential Affairs Njogu Bah, Minister of Finance and Economic Affairs Abdou Kolley, Governor of the Central Bank of The Gambia (CBG) Amadou Colley, and other senior officials. It also met with representatives of commercial banks, foreign exchange bureaux, and the business community.
At the conclusion of the visit, Mr. Dunn made the following statement in Banjul:
"Economic activity in The Gambia has picked up in recent months with the beginning of the harvest and tourism seasons. Based on preliminary indicators, crop production is expected to increase by roughly 20â€'30 percent this year, while tourism continues to expand at a strong pace.
Although the increase in crop production is weaker than was previously estimated, owing to damage caused by prolonged heavy rains, the harvest marks a solid initial rebound from last year's severe crop failure. The IMF mission estimates that economic growth in The Gambia could reach about 2â€'3 percent in 2012, rising to 8-9 percent in 2013 as the agricultural sector recovers further. These estimates will be revisited in the coming months with a broader analysis of economic developments.
Inflation is projected to remain relatively modest at around 5 percent (year-on-year).
"The recent directive by the Office of the President on the exchange rate and shipments of U.S. dollars led to some disruptions in the foreign exchange market and created uncertainty about The Gambia's exchange rate policy. The mission welcomes the recent lifting of the restrictions imposed by the directive and the renewed commitment to a flexible, market-determined exchange rate policy, which has helped the foreign exchange market to largely return to normal conditions.
Nevertheless, full confidence will return to the market only as the Central Bank of The Gambia (CBG), which is responsible for exchange rate policy, continues to implement this policy framework. At the same time, it will be important that the CBG resume its gradual accumulation of international reserves, which is key to maintaining economic stability.
To help strengthen and further develop the foreign exchange market, the IMF stands ready to provide technical assistance.
"The mission welcomes continued progress in gradually reducing government borrowing needs. The 2013 budget submitted to the National Assembly would reduce new domestic borrowing to about 1 percent of GDP next year, which is expected to ease pressure on interest rates and eventually generate fiscal savings. The imminent introduction of the new VAT in January 2013 is a key step toward modernizing The Gambia's tax system and rebuilding the revenue base. In the banking sector, the upcoming increase in the minimum capital requirement will enhance stability. The mission commends the CBG for managing this important measure in a transparent manner.
"The mission looks forward to continued good progress by the Gambian authorities on implementing a sound macroeconomic policy framework, which will facilitate concluding discussions under the first review of The Gambia's arrangement under the IMF's Extended Credit Facility (see Press Release 12/191)
"The IMF team thanks the authorities for candid and constructive discussions and expresses its appreciation for the excellent cooperation during our visit."