The Point (Banjul)

Gambia: Central Bank On Developments in Gambian Economy

Real Gross Domestic Product (GDP) of the Gambian economy is estimated to have grown by 4.0 percent in 2012 following a contraction of 4.3 percent in 2011, a press release from the Monetary Policy Committee of the Central Bank of The Gambia has said.

The release, issued Monday at a press conference held at the Central Bank in Banjul, said preliminary projections indicate that output would expand by 10.0 percent in 2013 premised on strong growth of agriculture and tourism.

The Monetary Policy Committee however said that the Dalasi weakened against all major international currencies traded in the foreign exchange market.

"Year-on-year to end-December 2012, the Dalasi depreciated against the US Dollar by 11.6 percent, Pound Sterling by 18.0 percent and Euro by 11.5 percent," the CBG stated.

According to the Committee, preliminary estimates of government fiscal operations in 2012 showed a lower deficit (including grants) of 4.4 percent of GDP compared to 4.6 percent of GDP in 2011.

"Total revenue and grants increased to D6.5 billion (22.5 percent of GDP) or 15.7 percent from 2011. Government expenditure and net lending also rose to D7.7 billion (26.9 percent of GDP), or 13.6 percent from 2011," it added.

The CBG Monetary Policy Committee said further that end-period inflation, measured by the National Consumer Price Index (NCPI), increased slightly to 4.9 percent in December 2012 from 4.4 percent in December 2011. Average inflation (12-month moving average) was 4.5 percent compared to 5.4 percent a year earlier, it stated.

The pace of monetary expansion, the CBG added, moderated in line with expectations, while monetary supply grew by 7.8 percent in 2012 compared to 11.0 percent in 2011 and the target of 8.5 percent.

It further stated that reserve money, the Bank's operating target, rose by 6.8 percent compared to 15.6 percent in 2011. Reserve money was projected to grow by 5.8 percent in 2012.

The Committee further indicated that in order to ensure effective transmission of monetary policy, it is essential to continue strengthening the resilience of banks.

Bank soundness, it went on, is also critical to protect depositors and other creditors, as well as ensuring an appropriate provision of credit to the economy.

"The banking industry remains fundamentally sound. The industry's capital and reserves increased to D3.06 billion in December 2012 compared to D2.63 billion in 2011 mainly an account of capital injection totaling D392.4 million," it said.

The Central Bank Monetary Policy Committee also revealed that the average risk-weighted capital adequacy ratio also increased to 33.0 percent compared to 25.1 percent in 2011 and the minimum requirement of 10 percent.

Inflation Outlook

The Monetary Policy Committee further stated that inflation is forecast to remain in single digit consistent with the pace of monetary expansion.

"The MPC, however, assesses the balance of risks to the inflation outlook to be on the upside given heightened inflationary expectations," it added.

Decision

In light of these developments, the MPC is of the view that the current monetary policy stance is appropriate and has therefore decided to leave the Rediscount rate, the Bank's policy rate, unchanged at 12.0 percent.

However, the Committee said it would continue to monitor price developments and to take action consistent with its mandate to keep inflation low and non-volatile.

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