10 February 2016

Gambia: Limping Signs in the Economy

Although The Gambia's economy has managed to maintain some good tread in inflationary trend, such as in the consumer price inflation of mainly food items, there are signs indicating that the economy is limping.

According to the latest monetary policy committee report on the state of The Gambia's economy published at the weekend, in the year to end-December 2015, the country's domestic debt shot up to D22.6 billion (59.1 percent of GDP) from D18.8 billion (53.0 percent of GDP) in 2014.

The report stated that Treasury bills and Sukuk Al Salaam accounted for 67.7 per cent and 2.63 per cent of the debt stock, realizing an increase of 4.3 per cent and 0.02 per cent respectively, although yields on all Government securities increased during 2015.

The report also indicated that preliminary balance of payments estimates for 2015 indicated a lowering overall surplus of US$62.1 million compared to US$112.9 million in 2014.

The current account deficit widened to US$115.2 million compared to the deficit of US$81.8 million in 2014. Of the components of the current account, the goods account recorded a deficit of US$250.3 million, higher than the deficit of US$217.8 million last year.

On the other hand, the services account surplus decreased "slightly" to US$37.2 million from US$41.7 million in 2014, while the capital and financial account recorded a surplus of US$177.3 million, lower than the surplus of US$194.7 million in 2014.

As at end-December 2015, the MPC report stated, the country's gross international reserves amounted to US$76.0 million, equivalent to 2.5 months of import cover, lower than the US$111.6 million, or 4.5 months of import cover in December 2014.

The report further stated that volume of transactions in the domestic foreign exchange market decreased to US$0.75 billion in 2015 compared to US$1.42 billion in 2014.

These are real signs indicating that the economy is limping and, therefore, needs redress "to fix the current macroeconomic imbalances and restore growth and stability" in the economy.

Although in the year to end-December 2015, the Dalasi appreciated against the U.S. Dollar by 12.2 per cent, Pounds Sterling (12.6 per cent) and Euro (23.0 per cent), serious fiscal adjustment is needed to reverse the ailing signs in the economy.

"These developments, coupled with the recent reduction in petroleum prices as well as the increase in agricultural output should provide the impetus for disinflation," the Central Bank report stated.

"However," it says, "to create the conditions for long-term sustainable growth and to attain the inflation target of 5 per cent, fiscal adjustment is absolutely essential to support the monetary policy stance."

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