5 February 2013

Gambia: CBG - Banking Industry Remains Fundamentally Sound

The Monetary Policy Committee (MPC) of the Central Bank of The Gambia (CBG) has stated that the banking industry in The Gambia remains fundamentally sound, revealing that the industry's capital and reserves increased to D3.06 billion in December 2012 in comparison to its D2.63 billion in 2011, mainly on account of capital injection amounting to D392.4 million.

Speaking to journalists at a press briefing held at the CBG office in Banjul on Monday, the governor of the CBG, Amodu Colley, also revealed that the average risk-weighted capital of the industry's adequacy ratio was also increased to 33.0% compared to 25.1% in 2011, and the minimum requirement of 10%. "The gearing ratio was only 3.03 times, lower than the 4.0 times in 2011 and the prudential ceiling of 10 times," he underlined.

On the global aspect, the Central Bank governor said that global economic prospects have improved modestly even though global economic growth was estimated to have decelerated to 3.2% in 2012 from 3.9% in 2011, while output is projected to strengthen gradually through 2013, averaging 3.5%. "Further strengthening to 4.1% is expected in 2014. There are, however, downside risks to the outlook including slow recovery in the Euro Area and excessive near term fiscal consolidations in the United States," he remarked.

Commenting on the economic situation of both advanced and developing countries in future, Colley indicated that for advanced economies, economic growth is projected at 1.4% in 2013 from the 1.6% projected earlier. He said that economic activity in emerging and developing economies remain robust due to their supportive policies, while noting that growth is expected to reach 5.5% in 2013 from 5.1% in 2012.

The CBG governor said that the Gambia Bureau of Statistic has revealed that the real Gross Domestic Product (GDP) of the Gambia economy was estimated to have grown by 4.0% in 2012 following a contraction of 4.3% in 2011.

"Preliminary projections indicate that output would expand by 10.0% in 2013 premised on strong growth of agriculture and tourism," he added.

He explained that the pace of monetary expansion moderated inline with expectations, noting that money supply grew by 7.8% in 2012 compared to 11.0% in 2011 and the target of 8.5%.

"The bank's operating target rose by 6.8% compared to 15.6% in 2011. Reserve money was projected to grow by 5.8% in 2012," he noted.

Colley observed that in order to ensure effective transmission of monetary policy, it is essential to continue strengthening the resilience of banks, while outlining that bank soundness is also critical to protect depositors and other creditors as well as ensuring an appropriate provision of credit to the economy. He said the total banking industry assets increased to D20.6 billion, or 10.5% from 2011. "Loans and advances accounting for 26.4% of total assets decreased to D5.3 billion or 2.4% from a year ago," he further remarked.

The Central Bank governor underscored the preliminary estimates of government's fiscal operations in 2012, which showed a lower deficit including grants of 4.4% of the GDP compared to 4.6% of GDP in 2011.

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

He stated that the end-period inflation measured by the National Consumer Price Index (NCPI), increased slightly to 4.9% in December 2012 from 4.4% in December 2011, while average inflation 12-month moving average was 4.5% compared to 5.4% a year ago.

Inflation outbreak

The MPC observed that inflation is forecast to remain in single digits consistent with the pace of monetary expansion. It however, assesses the balance or risk to the inflation outlook to be on the upside given heightened inflationary expectations.

In respect of these, the MPC is of the view that the current monetary policy stance is appropriate and has therefore decided to leave the re-discount rate and the bank's policy rate unchanged at 12.0%, while also continuing to monitor price developments and to take action consistent with its mandate to keep inflation low and non-volatile.

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