Gambia Monthly Economic Bulletin January 2010

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The Gambia Monthly Economic Bulletin- January 2010

THE GAMBIA MONTHLYECONOMIC BULLETIN 1

January 2010

Institutional Support Project for Economic and Financial Governance (ISPEFG)Ministry of Finance and Economic Affairs (MOFEA)

The Republic of GambiaThe Quadrangle, Banjul, the Gambia

1 The Gambia Monthly Economic Bulletin provides an update on the recent economic developments and policies in the Republic of the Gambia. The Bulletin is prepared, under the overall guidance of theHonorable Permanent Secretary Mr. Serign Cham, by a research team comprising Tamsir Cham,Director; Momodou Taal, Principal Economist; Amie Khan, Senior Economist and Ceesay Chiel,Economist in the Economic Management and Planning Unit (EMPU) and Tarun Das, MacroeconomicAdviser (ISPEFG); with key inputs from the Ministry of Finance and Economic Affairs (MOFEA), theCentral Bank of Gambia (CBG), the Gambian Bureau of Statistics (GBOS), and the Gambian RevenueAuthority (GRA).

It is needless to point out that the views expressed in this Bulletin solely indicate the views of theResearch Team, which do not necessarily imply the views of the MOFEA, the budgetary agencies or theorganizations they are associated with.

Any questions and feedback can be addressed to: Either Tamsir Cham ( [email protected] ) or Tarun Das ( [email protected] )

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mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Source: http://www.nationmaster.com

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http://www.nationmaster.com/http://www.nationmaster.com/


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Concluding Paragraphs of the Budget 2010 Speech byHonorable Abdou Kolley,

Minister of Finance and Economic Affairs,The Republic of the Gambia

117. The zero-rating of sales tax on rice in 2008 to minimize the impact of thefood crisis on the poor people and the implicit subsidy on the price of oil byleaving the pump price unchanged, when international oil prices were rising,were policy measures that resulted in revenue losses equivalent to 2 percentof GDP. These developments, coupled with the financial and economiccrises that ensued, have made 2008 a very difficult year. In 2009 however,the Gambian economy performed better than expected because of stronggrowth in agriculture.

118. In spite of the positive growth registered in 2009, the Gambia still faces aheavy debt burden. Interest on government debt is expected to consumenearly 20% of government revenues in 2009, mostly in interest on domesticdebt. This is why in the 2010 budget, Government intends to lower thedomestic debt, ease pressure on Treasury bill yields, generate savings fromlower interest payments and strengthen public financial management.

119. Achieving these goals call for strict discipline in budget execution. This is

a challenge that we face as a country with limited resources but together,with our dynamic leaders guidance, Sheikh Professor Dr. Alhaji Yahya A.J.J.Jammeh, we will thrive and demonstrate that we have the people, the willand commitment, and with Allahs Blessing, to navigate through difficulttimes.

120. As we confront these formidable challenges, I call on our developmentpartners, bilateral and multilateral, whose efforts in support of our development we so cherish, to continue to accompany us with renewedvigour and a common sense of purpose.

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Contents

Items Page

Basic Facts about the Gambia 2Concluding paragraphs of the Budget 2010 Speech by Honorable AbdouKolley, Minister for Finance and Economic Affairs

3

Contents 4

ISPEFG Project/ Research Team and Document History 5

Highlights 6-7

At a Glance 8

1. Global Economic Outlook1.1 Global recovery is uneven, weak, slow and painful1.2 Global Commodity Prices and Inflation

9-15914

2. Current State of the Gambian Economy2.1 Overall and Sectoral GDP Growth Rates2.2 Consumer Price Index (CPI) and Inflation2.3 Projection of CPI inflation for the year 2009

16-36161820

2.4 Government Fiscal Performance in 2009 and Budget 20102.5 Salient features of the Budget 20102.6 Taxation Measures Announced in 2010 Budget2.7 Domestic Debt and Outstanding Treasury Bills2.8 Treasury Bills Yields2.9 Money Supply2.10 Performance of Commercial Banks2.11 Commercial Banks Assets2.12 Commercial Banks Liabilities2.13 Interest Rates and Central Banks Policy Rates2.14 BOP, Foreign Exchange Reserves and Exchange Rates2.15 Exchange Rates

212324252627282930313236

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ISPEFG Project and Monthly Bulletin Research Team

Project Supervisor Honorable Mr. Serign Cham,Permanent Secretary

Project Coordinator Mr. Momodou Cham

Director (EMPU)Principal EconomistSenior EconomistEconomistTechnical Assistant (Macroeconomic)

Dr. Tamsir ChamMr. Momodou TaalMs. Amie KhanMs. Ceesay ChilelDr. Tarun Das

Document History:

This report is an update of the following reports prepared by the Research Team:

1. The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009.2. The Gambia Monthly Economic Abstract, pp.1-16, 31 March 2009.3. The Gambia Monthly Economic Bulletin, pp.1-40, 30 April 2009.4. The Gambia Monthly Economic Abstract, pp.1-16, 30 April 2009.

5. The Gambia Monthly Economic Bulletin, pp.1-39, 31 May 2009.6. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009.7. The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, June 2009.8. The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, June 2009.9. The Gambia Monthly Economic Abstract, pp.1-16, June 2009.10.The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, July 2009.11.The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, July 2009.12.The Gambia Monthly Economic Abstract, pp.1-16, July 2009.13.The Gambia Monthly Economic Abstract, pp.1-16, August 2009.14.The Gambia Monthly Economic Abstract, pp.1-16, September 2009.15.The Gambia Monthly Economic Bulletin, pp.1-25, October 2009.

16.The Gambia Monthly Economic Bulletin, pp.1-37, November 2009.17.The Gambia Monthly Economic Bulletin, pp.1-37, December 2009.18.The Gambia Monthly Economic Bulletin, pp.1-36, January 2010.

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HIGHLIGHTS

Impact of Global Financial Crisis and Economic Slowdown

As per the IMF projections made in the WEO October 2009, global output is expected tocontract by about 1% in 2009 followed by a positive growth of 3% in 2010 . IMF concludes that

although the global economy has started to pull out of the unprecedented recession witnessedsince the World War-II, recovery is uneven, slow, and jobless. In African developing economies,growth is projected to slow down significantly from 5.2 percent in 2008 to 2 percent in 2009.

Global Food and Oil Prices

Due to sluggish demand and economic slowdown, there were significant decline of worldcommodity prices including food and petroleum since August 2008. However, since March 2009commodity prices have started rising again in response to some increase in global demand, butcommodity prices still rule much below the peaks reached in 2008.

At the beginning of 2009, given weakness in the Chinese demand and negative growth in the USand EU and OPECs decision to have no supply cuts, global crude oil prices were projected to

remain soft and rule around $51 per barrel in 2009. However, since April 2009 petroleum pricesstarted rising and increased to US$74.67 per barrel in December 2009. Recent forward marketsproject oil prices around $75 for 2010, which is not much above current price.

Impact on the Gambian Economy

A global crisis of this magnitude is bound to have adverse impact on any country. The Gambianeconomy was not an exception and witnessed a decline in exports, remittances, foreigninvestment, tourist arrivals, manufacturing production and wholesale and retail trade in 2008.

However, thanks to bumper crops contributed by favorable monsoon at home and very goodperformance by electricity, telecom and financial sectors, the real GDP growth at constant marketprices improved from 6% in 2007 to 6.3% in 2008, supported by a spectacular growth of 26.6% in

agriculture GDP and a growth of 4.2% in services GDP despite decline by 1.2% in industrial GDP. Even though the Gambian economy was relatively insulated from the first round effects of the

global financial crisis, its spread to the real sectors of the global economy had adverse impact onthe Gambian manufacturing production, selected services and trade sectors. In particular,exports, retail trade, tourism and foreign direct investment (FDI) declined since the second half of 2008 due to weak global demand.

Due to fall in tourists income and foreign investment and deceleration of agricultural growth, real GDP growth rate in 2009 is expected to decelerate to 5%, aided by a growth of 5.5% inagriculture production, 3.5% in industry and 5.7% in services production.

CPI Inflation

As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflation deceleratedsignificantly from 6.8% (Food 8.5% and Non-Food 4.7%) in December 2008 to 2.8% (Food 2.6%and Non-Food 2.7%) in December 2009. On the contrary, the 12-month average inflation rateaccelerated marginally from 4.5% in December 2008 to 4.6% in December 2009.

Among other groups in December 2009, housing and utilities recorded an annual inflation of 2%,transport 2.4%, restaurants and hotels 3.8% and miscellaneous goods and services 11.1%.

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Government Fiscal Performance

Governments fiscal performance was mixed in 2009 compared with 2008. Revenue collectionswere significantly higher in 2009 than 2008. During 2009, total domestic revenue increased by12.2% over 2008 aided by 11.3% increase in taxes and 21.9% increase in non-tax revenues;while total expenditures and net lending increased by 36.2% aided by 20.4% increase in current

expenditure and 78.6% increase of capital expenditure and net lending. Overall, there was a fiscal deficit of D739 million (amounting to 3% of GDP) in 2009, up from

D492 million (amounting to 2.2% of GDP) in 2008. The Budget for 2010 aims at raising thedomestic revenues by 13% while raising the expenditure and net lending by only 2.5% resulting inthe reduction of fiscal deficit to D299 million amounting to 1.1% of GDP.

Domestic Debt and Treasury Bills Yields

At the end of Dec 2009, outstanding domestic debt stood at D6.1 billion (24.5% of GDP),compared to D5.9 billion (26.1% of GDP) a year ago. The share of Treasury bills increased from79.7% at end-Dec 2008 to 84.4% at end-Dec 2009 and the share of Sukuk Al-Salam increasedfrom 1.3% to 2.6%, while that of Govt. bonds declined marginally from 4.2% to 4.1%, and that of

NIB treasury bills declined from 14.8% to 8.9% over the period. Yields on treasury bills fluctuated widely in recent months. As expected, the higher the maturity

of treasury bills, the higher is the yield. However, despite stability in deposit rates and significantdecline of annual point-to-point CPI inflation rate from 7% in Jan 2009 to 2.8% in Dec 2009,average yields on the 91-day bills increased from 10.5% in Jan 2009 to 11% in Dec 2009 andyield on 182-day bills from 12.1% in Jan 2009 to 12.9% in Dec 2009, while yield on 364 day billsdeclined marginally from 14.4% in Jan 2009 to 14.3% in Dec 2009. This implies that the marginsof yields over inflation rates/ deposit rates increased over time. In view of the declining trend of inflation rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to14% with effect from December 2009.

Money Supply and Bank Credits

Annual growth rate of money supply (M2) accelerated from 18.4% in Dec 2008 to 19.4% in Dec2009, aided by 9.4% growth in currency, 9.4% growth in demand deposits, 19.8% growth insavings deposits and 45.1% growth in time deposits. On the demand side, growth was due to12.3% growth in net foreign assets and 23.3% growth in net domestic assets.

Domestic credit increased by 16.4% from D6.4 billion in Dec 2008 to D7.5 billion in Dec 2009,supported by 14% growth in government borrowing, 78.5% growth in credits to public entitiesand 16.7% growth in credits to the private sector, over a year ago.

Balance of Payments, Foreign Exchange Reserves and Exchange Rate

Preliminary BOP estimates the CBG for Jan-Sep 2009 indicated a higher overall deficit at

D1066.6 million than D721.6 million in Jan-Sep 2008. The current account recorded a surplus of D751 million in Jan-Sep 2009 compared to a deficit of D650.8 million in Jan-Sep 2008. But, thecapital and financial account balance worsened significantly to a deficit of D1817.5 million in Jan-Sep 2009 from a deficit of only D70.8 million in Jan-Sep 2008.

Gross official reserves, including SDR allocation from the International Monetary Fund (IMF), asat end-September stood at US$141.3 million, equivalent to 6.0 months of import cover.

At end-Dec 2009, Dalasi has depreciated by 7.2% against British Pound, by 1.5% against US$,by 12.5% against CHF, by 11.8% against Euro and by 11.2% against CFA over end-Dec 2008.

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At a Glance- January 2010EconomicIndicators

LatestReference

Period in 2009

Status in thelatest reference

period

Status in theCorrespondingperiod in 2008

Outlook for 2010

Real GDP (MP)Growth rate (%)

Calendar year 2009

Overall 5.0 Agriculture 5.5Industry 3.5Services 5.7

Overall 6.3 Agriculture 26.6Industry (-) 1.2Services 4.2

Overall 5.4 Agriculture 4.2Industry 4.5Services 6.2

CPI inflation (%) Dec 2009 Overall 2.7Food 2.8Non-food 2.6

Overall 6.8Food 8.5Non-food 4.7

Expected to remainmoderate in the range of 2.7 to 4.7 percent.

Brent crude oilprice (US$/ brl)

Dec 2009 AverageUS$74.67

Average US$50 May stabilize aroundUS$75 in 2010

Growth rate (%) of Revenue & grants

2009 34.3 (-) 0.5 Overall fiscal performancein 2010 is expected to bebetter than in 2009 due togood performance byrevenue, while significantbudgeted deceleration inexpenditure. Overall fiscaldeficit is budgeted at 1.1%of GDP in 2010.

Growth rate (%) of Exp & Net Lending

2009 36.2 13.8

Revenue & grantsas % of GDP

2009 19.6 16.1

Exp & Net Lendingas % of GDP

2009 22.5 18..3

Overall fiscal bal.as % of GDP

2009 (-) 3.0 (-) 2.2

Domestic debtas % of GDP

Dec 2009 24.5 26.1 Likely to decline in 2010.

Yield on 91-daysTBs (%)

Dec 2009 11.0 9.9 Yields may come downas CPI inflation hasstarted decelerating.Yield on 182-

days TBs (%)Dec 2009 12.9 12.5

Yield on 364-days TBs (%)

Dec 2009 14.3 14.0

GR of Moneysupply (M2) (%) Dec 2009 19.4 18.4 Money growth rate islikely to remain high.Banks assets(Billion Dalasi)

End-Nov 2009 14.7 20.8 Likely to increase

CBG policy rate(%)

Dec 2009 14 16 MPC reduced policyrate to 14% in Dec 2009.

Overall BOPBalance (Mln D)

Jan-Sep 2009 (-) 1066.6 (-) 721.6 BOP is likely to improvein the last quarter of 2009 and in 2010 due torevival of exports, touristincome, remittances andforeign investment.

Current A/CBalance (Mln D)

Jan-Sep 2009 751.0

(-) 650.8

Capital-Fin. A/CBalance (Mln D)

Jan-Sep 2009 (-) 1817.5 (-) 70.8

Rate of change-Overall NominalExch. Rate (%)

Dec 2009 9.7 6.1 Dalasi is expected todepreciate against major currencies in 2010.However, the rate of depreciation is likely tobe lower in 2010 than in2009.

Dalasi/ UK End-Dec 2009 43.04 40.14Dalasi/ US$ End-Dec 2009 26.94 26.54Dalasi/ CHF End-Dec 2009 25.81 22.93Dalasi/ CFA5000 End-Dec 2009 288.26 259.15Dalasi/ Euro End-Dec 2009 39.87 35.67

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Box 1.1

IMF Outlook for Sub-Saharan AfricaPublished on October 3, 2009 Expresses Cautious Optimism

The International Monetary Fund (IMF) released the Regional Economic Outlook:Sub-Saharan Africa on October 3, 2009. Ms. Antoinette Monsio Sayeh, Director of the IMF's African Department summarized the report's main findings as follows:

The global economic crisis has hit sub-Saharan Africa hard, reducing economicgrowth to just 1 percent in 2009 after a period of sustained high economic growth.Oil exporters and middle income countries in the region have been particularlybadly affected and most low-income countries somewhat less so. In all SSAcountries, however, the crisis will likely slow, if not reverse, progress on povertyreduction. Unemployment and under-employment, already endemic, have likelyrisen across the region. But playing-off the global economic recovery, we expectgrowth in sub-Saharan Africa to rise to 4 percent in 2010 and 5 percent in 2011.

In many countries the prudent macroeconomic policies pursued in recent yearshave provided some policy space to counter the effects of the slowdown.Accordingly, most countries have been able to maintain or even raise publicspending, allowing fiscal deficits to widen temporarily. Where possible, monetarypolicy has also played a supportive role.

There are significant downside risks, however. Therefore, wherever possible, IMFstaff recommends that fiscal and monetary policies remain supportive until theeconomic recovery is well-established. As the recovery gains strength, the

emphasis of fiscal policy will need to shift from stabilization to medium-termconsiderations, including debt sustainability. In countries with binding financingconstraints, the room for fiscal policy is more limited and the primary focus willneed to remain on reducing macroeconomic imbalances. Financial sectors havebeen for the most part resilient, but prudential supervision will need to remainvigilant in the face of the impact of the economic slowdown on the quality of banksportfolios.

Scaled-up financial support from the IMF has buttressed countries policy response. The doubling of lending limits and more flexible policies have facilitated a rapidresponse to countries needs, and new IMF commitments to sub-Saharan Africahave reached over US$3 billion so far this year, compared to some US$1.1 billionfor the whole of 2008 and only US$0.1 billion in 2007. Looking ahead, it will becritical that other development partners support this effort and those of otherinternational financial institutions.

The full text of the October 2009 Regional Economic Outlook: Sub-SaharanAfrica can be found on the IMF's website, www.imf.org .


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Figure 1.1 Sub-Saharan Africa: Projected GDP Growth, 200811

Source: IMF, African Department database. Note: The country borders or names in this map do not necessarily reflect the IMFs official position.

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Box 1.2 IMF-World Bank Debt Sustainability Analysis for African Economies

The objective of the IMF-World Bank debt sustainability framework, which was introduced in2005, is to support low-income countries in their efforts to achieve their development goalswithout creating future debt problems (see The Debt Sustainability Framework for Low-IncomeCountries , Occasional Paper 266, IMF (2008) . A debt sustainability analysis using the DSF looks atfive debt burden indicators to evaluate the risk of external debt distress: the ratios of (i)

present value (PV) of debt-to-GDP; (ii) PV of debt-to-exports; (iii) PV of debt-to-revenues;(iv) debt service-to-revenues; and (v) debt service-to-exports. The risk of debt distress isderived by reviewing the evolution of debt burden indicators compared to their indicative

policy-dependent debt-burden thresholds using a baseline scenario, alternative scenarios, andstress tests. The thresholds depend on the quality of a countrys policies and institutions asmeasured by the three-year average of the World Banks Country Policy and InstitutionalAssessment (CPIA) index.


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Table-1.2 Trends of World Commodity PricesQuarterly averages Monthly averages

Oct-Dec

Jan-Mar Apr-Jun Jul-Sep Oct-Dec Oct Nov Dec

Commodity Unit 2008 2009 2009 2009 2009 2009 2009 2009EnergyCrude oil, Brent $/bbl 55.89 44.98 59.13 68.37 74.97 73.19 77.04 74.67

Crude oil, Dubai $/bbl 53.67 44.56 58.93 68.07 75.46 73.28 77.63 75.49Natural gas, Europe $/mmbtu 15.75 11.94 8.18 6.91 7.81 7.60 7.81 8.01Natural gas, US $/mmbtu 6.40 4.57 3.70 3.17 4.36 4.02 3.70 5.35Beverages & FoodCocoa /kg 224.1 259.4 257.9 296.4 342.0 336.0 338.5 351.4Coffee, robusta /kg 192.6 175.8 165.3 160.1 156.4 162.1 153.2 154.1Tea, Kolkata auctions /kg 220.2 177.4 271.3 273.0 286.2 294.4 291.2 273.0Tea, Mombasa auction /kg 190.8 214.9 228.0 281.7 283.2 261.3 290.6 297.7Coconut oil $/mt 772 677 779 711 734 706 729 767Copra $/mt 520 447 513 469 491 470 493 509Groundnut oil $/mt 1,773 1,283 1,166 1,133 1,150 1,148 1,116 1,187Palm oil $/mt 512 577 743 679 732 680 725 791Palmkernel oil $/mt 609 577 763 700 737 728 726 758Soybean oil $/mt 830 755 863 856 920 897 931 933Soybeans $/mt 377 394 461 454 439 427 440 451Barley $/mt 129.5 116.3 129.5 122.0 145.5 130.7 155.3 150.6

Maize $/mt 168.4 166.9 176.0 151.3 167.8 167.3 171.6 164.6Rice, Thailand, 5% $/mt 564.4 586.3 552.4 539.0 542.3 493.0 542.8 591.0Rice, Thailand, 25% $/mt 449.9 469.4 458.7 441.4 462.8 412.8 460.3 515.3Wheat, US, HRW $/mt 228.1 231.6 250.5 208.8 205.4 198.8 211.0 206.3Wheat, US SRW $/mt 182.7 187.4 195.6 165.2 195.6 175.6 204.7 206.5Fishmeal $/mt 1,023 1,013 1,097 1,276 1,535 1,427 1,526 1,651Meat, beef /kg 268.0 245.2 262.8 273.2 273.5 264.8 275.6 280.0Meat, chicken /kg 174.7 173.5 174.1 173.9 165.1 166.1 164.6 164.7Meat, sheep /kg 410.0 378.5 428.7 453.3 450.1 445.8 457.0 447.5Oranges $/mt 842 799 870 861 1,107 1,153 1,154 1,014Shrimp, Mexico /kg 1,014 976 970 970 864 937 863 794Sugar EU /kg 51.97 51.44 53.76 55.43 49.11 48.78 49.63 48.92Raw MaterialsLogs, Cameroon $/cum 473.8 426.8 394.8 414.9 449.5 444.5 451.1 452.7Plywood /sheet 645.5 572.8 565.8 561.5 558.4 559.3 558.6 557.2Sawnwood, Cameroon $/cum 770.8 689.2 721.2 779.0 806.3 790.0 821.0 807.7Cotton Memphis /kg 129.4 122.4 137.5 148.8 168.1 163.7 171.5 169.2Rubber RSS1, US /kg 202.8 165.8 187.0 221.0 284.7 264.8 279.3 310.0FertilizersDAP $/mt 663.3 362.2 303.6 309.6 316.9 300.1 290.3 360.4Phosphate rock $/mt 371.3 193.3 113.3 90.0 90.0 90.0 90.0 90.0Potassium chloride $/mt 766.7 865.2 726.7 506.8 423.0 435.0 435.0 399.0Urea $/mt 292.2 267.3 241.1 241.6 248.3 239.0 244.8 261.1Metals and Minerals

Aluminum $/mt 1,821 1,360 1,485 1,812 2,003 1,879 1,949 2,180Copper $/mt 3,905 3,428 4,663 5,859 6,648 6,288 6,676 6,982Gold $/toz 795 909 922 960 1,102 1,043 1,127 1,135Iron ore /dmtu 140.6 101.0 101.0 101.0 101.0 101.0 101.0 101.0Lead /kg 124.5 115.7 149.9 192.8 229.3 224.1 230.9 232.9Nickel $/mt 10,843 10,471 12,920 17,700 17,528 18,525 16,991 17,066Silver /toz 1,020 1,265 1,376 1,477 1,760 1,726 1,788 1,764Steel cr coilsheet $/mt 1,100 1,033 700 700 700 700 700 700Steel hr coilsheet $/mt 1,000 933 600 600 600 600 600 600Steel rebar $/mt 630 473 450 500 522 580 495 490Steel wire rod $/mt 1,200 1,200 1,007 857 816 850 825 773Tin /kg 1,310 1,103 1,351 1,459 1,517 1,501 1,494 1,555Zinc /kg 118.5 117.2 147.3 176.1 221.4 207.2 219.3 237.6

Source: World Bank Pink Sheet January 2010

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2. Current State of the Gambian Economy2.1 Overall and Sectoral GDP Growth Rates

The sharp decline in global economic activity had adverse impact on the Gambianeconomy in 2008 leading to decline of exports and remittances and decline of manufacturing production and wholesale and retail trade.

However, thanks to bumper crops contributed by favorable monsoon at home and highinternational prices of food grains, and very good performance by electricity, telecomand financial sectors, the real GDP growth at constant 2004 market prices improvedfrom 6% in 2007 to 6.3% in 2008 (Table-2.1 and Figure-2.1).

As per the Preliminary Estimates of the GBOS, real GDP growth in 2009 at constantmarket prices is expected to be 5% supported by a growth of 5.5% in agriculturalproduction, 3.5% by industrial production and 5.7% in services production.

Share of agriculture increased from 21.6% in 2007 to 25.3% in 2009, while share of

industry declined from 14.7% to 13.2% and that of services declined from 63.7% to61.5% during the same period. Increase of agricultural share was contributed byincrease in share of crops, while decline of services share was mainly due to decline of share of wholesale and retail trade, and transport and communications.

Agriculture26%

Mining2% Manufacturing

6%Utilities

2%Construction4%

Trade26%

Hotels4%

Transport12%

Business

11%

Others7%

GDP Composition (%) in 2009

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Figure-2.1: Trends of sectoral growth rates during 2000-2009 (in percentage)

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDPMP Agriculture Industry Services

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2005-2009 (in %)Sectoral GDP Growth Rates

(in percentage)Sectoral Shares in GDP

(in percentage)Items 2006

Actual2007

Actual2008

Actual2009Estd.

2010Proj

2006Actual

2007Actual

2008Actual

2009Estd.

GDP at 2004 basic price 3.1 6.0 6.3 5.0 5.4 100.0 100.0 100.0 100Agriculture and allied -14.3 -1.9 26.6 5.5 4.2 23.1 21.6 25.3 25.3

-- Crops -26.3 -15.2 55.2 5.5 4.5 11.8 9.5 13.6 13.7-- Livestock 2.4 11.9 4.3 4.5 3.9 8.8 9.4 9.0 9.0

-- Forestry 3.0 -4.0 1.0 0.7 2.0 0.7 0.6 0.6 0.5-- Fishing 7.8 18.0 3.5 11.3 3.9 1.9 2.1 2.0 2.1

Industry 4.5 2.5 -1.2 3.5 4.5 15.1 14.7 13.4 13.2-- Mining and quarrying 1.2 -14.1 8.8 8.8 10.0 2.4 1.9 1.9 2.0

-- Manufacturing 4.1 3.9 -8.3 0.4 3.3 7.0 7.0 5.9 5.6-- Electricity, gas, water 8.7 59.1 1.7 10.0 10.7 1.1 1.6 1.5 1.6-- Construction 6.0 -4.3 5.0 3.0 1.0 4.6 4.2 4.1 4.0

Services 10.0 8.3 4.2 5.7 6.2 61.8 63.7 61.3 61.5-- Wholesale/retail trade 16.1 9.7 -2.3 1.0 1.0 28.2 29.5 26.6 25.5-- Hotels/ restaurants 15.7 14.3 2.9 3.0 3.8 3.6 3.9 3.7 3.6-- Transport / telecom 2.7 7.0 -8.0 8.0 8.8 12.8 13.0 11.0 11.3-- Financial 5.7 -0.9 28.2 3.0 8.0 7.5 7.0 8.3 8.2-- Real est., business -3.9 1.4 0.0 2.5 3.4 3.4 3.3 3.0 3.0-- Public administration 11.1 12.9 42.1 2.0 3.4 2.6 2.8 3.7 3.6

-- Other service 11.0 17.8 27.0 37.1 24.8 3.7 4.1 4.9 6.3

Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2009 and projections for 2010 aremade by the Research Team .

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Sub-group wise inflation in Dec 2009 (%)

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Overall

Tobacco

Utilities

Health

Telecom

Education

Misc.

Contribution to Inflation in Dec 2009 (%)

Food56%

Clothing8%

Utilities2%

Furnishing4%

Recreation3%

Others27%

FoodClothing

Utilities

Furnishing

Recreation

Others

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0 7 - J a M a

r M a

y J u l S p N v 0 8 -

J a M a r

M a y J u l S p N v

0 9 - J a M a

r M a

y J u l S p N v

Food Non-Food All

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2.3 Projection of CPI inflation for the year 2010

We have made three alternative projections of inflation rates for the year 2010, on the basis of the following assumptions:

(1) Alternative-1: It is assumed that the CPI variation for a month over the previous monthin 2010 will be the average CPI variation for the month over the previous month in lasttwo years (2009 and 2008). Thus, Jan 2010 CPI is estimated by the following formula:

Projected CPI for Jan 2010 = Dec 2009 CPI + [Jan 2009 CPI + Jan 2008 CPI Dec 2008 CPI Dec 2007 CPI]/ 2.Similarly, Projected CPI for Feb 2010 = Jan 2010 CPI + [Feb 2009 CPI + Feb 2008 CPI Jan2009 CPI Jan 2008 CPI]/ 2. For subsequent months, CPI is projected by the similar formula.

(2) Alternative-2: It is assumed that the variation of CPI for a month over the previousmonth in 2010 will be the same as that for the respective month over the previous monthin 2009. For example, CPI for Jan 2010 is estimated by the following formula:

Projected CPI for Jan 2010 = Dec 2009 CPI+ (Jan 2009 CPI Jan 2008 CPI). For thesubsequent months, CPI is projected by the similar formula.

(3) Alternative-3: Average of inflation rates under Alternatives 1 and 2.

Results are presented in Table 2.3 which indicates that inflation rate is expected to remainmoderate in the range of 2.7% to 4.7% during 2010, and the year-end 12-month averageinflation rate is expected to be around 3.5%.

Table-2.3: Projections of CPI inflation for the year 2010 (in percentage)2007Index

2008Index

2009Index

2010-Alt1

2010-Alt2

2008Inf.rate

2009Inf.rate

2010-Alt1

2010-Alt2

2010Alt3

Jan 106.86 112.31 120.13 123.32 123.39 5.1 7.0 2.7 2.7 2.7Feb 107.01 112.34 120.25 123.39 123.51 5.0 7.0 2.6 2.7 2.7Mar 109.36 112.73 120.30 123.61 123.56 3.1 6.7 2.8 2.7 2.7

Apr 111.64 113.21 120.36 123.88 123.62 1.4 6.3 2.9 2.7 2.8May 112.05 113.83 120.51 124.27 123.77 1.6 5.9 3.1 2.7 2.9Jun 111.98 114.48 120.61 124.64 123.87 2.2 5.4 3.3 2.7 3.0July 111.95 116.21 120.84 125.62 124.10 3.8 4.0 4.0 2.7 3.3

Aug 112.09 117.65 121.15 126.50 124.41 5.0 3.0 4.4 2.7 3.6Sep 111.86 118.96 121.75 127.45 125.01 6.3 2.3 4.7 2.7 3.7Oct 111.95 119.29 121.99 127.74 125.25 6.6 2.3 4.7 2.7 3.7Nov 112.13 119.54 122.7 128.22 125.96 6.6 2.6 4.5 2.7 3.6Dec 112.26 119.93 123.19 128.66 126.45 6.8 2.7 4.4 2.6 3.5

Q1 107.7 112.5 120.2 123.4 123.5 4.4 6.9 2.7 2.7 2.7Q2 111.9 113.8 120.5 124.3 123.8 1.7 5.8 3.1 2.7 2.9Q3 112.0 117.6 121.2 126.5 124.5 5.0 3.1 4.4 2.7 3.5Q4 112.1 119.6 122.6 128.2 125.9 6.7 2.5 4.5 2.7 3.6Ave 110.9 115.9 121.1 125.6 124.4 4.5 4.6 3.7 2.7 3.2

Note: Shaded numbers indicate projections made by the research team.

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Column (2) to (6) of Table-2.4.2 indicates the item-wise actual fiscal performance of thegovernment, as percentage of GDP, for the 2009-Budget, 2007-Outturn, 2008-Outturn,2009-Outturn and 2010-Budget respectively.

It is observed from the table that the fiscal year 2009 performed better than in 2008 for both revenue realization and expenditure in terms of percentages of GDP. However, overallfiscal deficit at 3.7% of GDP for 2009 turned out to be higher than fiscal deficit at 2.8% of GDP recorded in 2008.

The Budget for 2010 has targeted at total revenue and grants amounting to 25.5% of GDP (compared to 24.4% of GDP in 2009-Outturn) and total expenditure and net lendingamounting to 26.9% of GDP (compared to 28.2% of GDO in 2009-Outturn) resulting in anoverall fiscal deficit amounting to 1.4% of GDP, significantly lower than 3.7% of GDPrecorded in 2009-Outturn. Significant reduction in total expenditure is sought to be achievedthrough drastic cut in capital expenditure from 9.4% of GDP in 2009-Outturn to 5.8% of GDPin 2010 Budget.

Table-2.4.2 Govt Financial Performance in 2007-2009 and Budget for 2010(As % of GDP at current market prices)

Items 2009 2007 2008 2009 2010Budget Actual Actual Actual Budget

(1) (2) (3) (4) (5) (6)

Revenue and grants 22.8 22.6 21.1 24.4 25.5Domestic Revenue 18.8 21.4 20.2 19.5 20.5

Tax Revenue 16.9 18.9 18.3 17.5 18.6Nontax Revenue 1.9 2.6 1.8 1.9 2.0

Grants 4.0 1.2 1.0 4.9 4.9Exp & Net Lending 26.7 22.4 24.0 28.1 26.9

Current Expenditure 19.1 16.0 17.5 18.1 20.7Personnel Emoluments 5.2 4.2 5.2 5.9 7.0Other Charges 9.8 6.7 8.1 8.4 10.2Interest 4.2 5.0 4.1 3.7 3.5

External 0.7 1.4 0.9 0.8 0.8Domestic 3.5 3.6 3.2 2.9 2.7

Cap Exp & Net Lending 7.6 6.5 6.5 10.0 6.1Capital Expenditure 7.3 6.0 5.9 9.4 5.8Net Lending 0.3 0.5 0.6 0.6 0.3

Overall Bal Inc. grants -3.9 0.2 -2.8 -3.7 -1.4

Primary Balance 0.3 5.2 1.3 0.0 2.2

Source: Economic Planning and Management Unit (EMPU), DODFEA.Notes: (1) Overall balance= (Revenue and grants) minus (expenditure and net lending).(2) Basic balance= Domestic revenue minus (expenditure and net lending) plus externallyfinanced capital expenditure; (3) Basic primary balance= Basic balance plus interestpayments (4) Primary Balance = Overall Balance plus interest payments

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2.5 Salient Features of the Budget-2010-Excerpts from the Finance Ministers Budget Speech

The Budget is based on sound macroeconomic policy framework to support inclusive growth, to

maintain low inflation and improve debt sustainability .

102. The 2010 Budget represents a decisive step by Government to tackle The Gambias

heavy debt burden, in particular interest payments on domestic debt. This budget aims

to reduce debt and create savings that could become an important resource for other

non-interest expenditures. Working closely with the Central Bank of The Gambia,

Government believes that with sound budget implementation, T-bill yields can be

significantly reduced in the months ahead.

103. Total revenue and grants is expected to increase from its budget of D4.582 billion in2009 to D5.474 billion in 2010. This increase is driven mainly by increases in tax

revenues, project grants and budget support. Tax revenue is projected to increase from

its budget figure of D3.39 billion in 2009 to D3.991 billion in 2010, representing 18.58%

of GDP. The overall increase in grants from a budget of D811 million in 2009 to D1.061

billion in 2010 is mainly due to expected increases in project disbursements from D513

million to D636 million and additional HIPC and EU budget support of D425 million.

104. Expenditure and Net Lending is projected to increase from D5.363 billion in 2009 toD5.772 billion in 2010. Interest payments on debt are projected to decline from a budget

of D845 million in 2009 to D762 million in 2010. Other current expenditures, including

externally financed, are projected to rise from D4.461 billion in 2009 D4.948 billion in

2010, of which Personnel Emoluments is expected to increase from D1.035 billion to

D1.499 billion in 2009 to D1.499 billion in 2010.

105. The budget deficit for 2010 is projected at D298.7 million representing 1.39% of GDP.

This deficit will be fully financed through domestic and external resources. The net-external financing is estimated at D354.7 million while net domestic financing, which

includes repayment of arrears and domestic loans is in the sum of D120 million.

Proceeds from capital revenue is equivalent to D64 million.

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2.6 Taxation Measures Announced in the Budget for 2010

109. The corporate tax will be gradually reduced, starting with a 2 percent reductionfrom 35 percent to 33 percent for 2010. Similarly, the turnover tax will be reducedby 0.5 percent. .... Meanwhile, the implementation of the tax on interest income hasbeen differed.

110. Furthermore, following the completion of a nationwide Rental Property Survey,GRA will embark on a more rigorous collection of taxes on rented properties withinthe taxable threshold.

111. In 2008, Government zero-rated the sales tax on rice as a policy measure tominimize the impact of the food crisis, thus foregoing significant revenues. Now thatwe have passed the episode of high food prices and in a bid to encourage localagricultural production, Government would restore the sales tax on imported rice tothe 5% level.

112. Excise tax on alcoholic products and unmanufactured tobacco will be increased

in the following order: Unmanufactured tobacco from D26.04/kilo to D75/kilo; Winefrom D100/litre to D150/litre; Spirits from D150/litre to D175/litre; and Beer fromD75/litre to D100/litre.

113. Significant investment is being made to enhance the security features of our national identification documents by going biometric, and as a result, the cost of these documents will be increased as follows: Drivers License from D300 to D500;Provisional Learners License from D50 to D100; International Drivers License fromD500 to D1000; Passport from D500 to D1000. Furthermore, Personalised Number Plates will also be increased from D2500 to D5000.

114. The Road Tax Private and the Motor Vehicle Yearly License Private were lastreviewed fifteen years ago. Consequently, Road Tax Private will be increased asfollows: Less than 1 ton from D163 to D300; 1 to 2.5 tons from D205 to D400; and2.5 tons and above from D251 to D500. The Motor Vehicle Yearly License Privatewill be increased as follows: Less than 1 ton from D221 to D400; 1 to 2.5 tons fromD342 to D600; and 2.5 tons and above from D506 to D1000.

115. Although the Police will still be responsible for the technical aspects of issuingvehicle number plates and motor vehicle licences, all payments for road tax, vehiclelicenses and number plates will henceforth be made with the Gambia Revenue

Authority. The licence and the plates will only be issued by the Police uponpresentation of a GRA payment receipt. This will enhance revenue administration,while allowing the Police to concentrate on their core functions.

116. The personal income tax structure is being reviewed to bring it in line with theprevailing economic conditions and to make it more progressive, fairer and revenueproductive. Also, the audit and enforcement capacity of the Department of DomesticTaxes of GRA is being strengthened in anticipation of the planned introduction of avalue added tax (VAT) system in place of sales tax on or before January 2013.These reform measures are aimed at ensuring that our tax system remains efficientand equitable.

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2.7 Domestic Debt and Treasury Bills Outstanding

At the end of December 2009, outstanding domestic debt stood at D6.1 billion(amounting to 24.5% of GDP), compared to the outstanding domestic debt at D5.9 billion(amounting to 26.1% of GDP) a year ago.

The share of Treasury bills increased from 79.7% at the end of December 2008 to84.4% at the end of December 2009 and the share of Sukuk Al-Salam increased from1.3% to 2.6%, while the share of Government bonds declined marginally from 4.2% to4.1%, and the share of NIB treasury bills declined from 14.8% to 8.9% over the period.

Table-2.7-A Outstanding Domestic Public Debt as on 31 December 2009

Type of debt Million Dalasi % change inDec 2009

over Dec 2008

Composition(in percentage)

31 Dec2008

31 Dec2009

31 Dec2008

31 Dec2009

Treasury bills 4,697 5,185 10.4 79.7 84.4Sukuk Al-Salam 76 160 110.1 1.3 2.6Government Bonds 250 250 0.0 4.2 4.1NIB Treasury Notes 873 547 -37.4 14.8 8.9Total 5,896 6,142 4.2 100 100Nominal GDP(GBOS)

22590 25023

As % of nominalGDP

26.1 24.5

Domestic Debt Sustainability

As per the analysis made by the CBG, the current level of Gambias domestic debt is notsustainable. Out of three sustainability indicators given in Table-2.6.B, one indicator viz. debtservice to revenue ratio is not satisfied.

Table-2.7-B Primary Benchmarks for Domestic Debt Sustainability Ratios (%)Item Threshold 2006 2007 2008 2009

Projected1. Debt service torevenue ratio

28-63 142 124 118 91

2. Debt to GDP ratio 20-25 33 30 27 24.53. Debt to revenueratio

92-167 180 158 166 147

Note: (1) Debt service is the sum of interest payments plus the amortization (i.e. repayment of principal)including the rollover of treasury Bills. (2) There are no internationally agreed levels of thresholds. Thethresholds used here are those used by the Debt Relief International (DRI) for many HIPC countries.

Source: Central Bank of Gambia

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2.8 Treasury Bills Yields

Yields on treasury bills fluctuated widely in recent months. As expected, the higher thematurity of treasury bills, the higher is the yield. However, despite stability in depositrates and significant decline of annual point-to-point CPI inflation rate from 7% in Jan2009 to 2.8% in Dec 2009, average yields on the 91-day bills increased from 10.5% inJan 2009 to 11% in Dec 2009 and yield on 182-day bills from 12.1% in Jan 2009 to12.9% in Dec 2009, while yield on 364 day bills declined marginally from 14.4% in Jan2009 to 14.3% in Dec 2009.

This implies that the margins of yields over inflation rates/ deposit rates increased over time. In view of the declining trend of inflation rates, the Monetary Policy Committeereduced the policy rate by 2 percentage points to 14% with effect from December 2009.

Table-2.8 Average yields on treasury bills (in percentage per annum)2007 2008 2009

91-D 162-D 364-D 91-D 162-D 364-D 91-D 182-D 364-DJan 10.5 12.7 13.6 10.6 11.4 13.6 10.5 12.1 14.4Feb 12.0 13.4 13.8 10.9 11.9 13.7 11.1 12.8 14.4Mar 12.6 13.4 13.7 11.0 12.1 13.6 11.4 12.7 14.4

Apr 13.0 13.4 13.8 10.9 11.9 13.3 12.0 13.0 14.6May 12.8 13.3 13.8 10.2 11.3 13.0 12.5 13.8 15.3Jun 12.6 13.1 13.9 10.0 11.2 13.3 13.0 13.8 15.6Jul 12.5 13.2 13.9 9.6 10.6 12.6 11.5 12.0 14.4

Aug 12.6 12.9 13.6 8.8 10.2 12.1 10.2 11.2 13.3Sep 11.6 12.2 12.9 8.9 11.0 13.1 10.4 11.7 14.3Oct 10.6 11.7 12.5 10.3 11.4 13.6 10.8 12.1 14.2Nov 10.5 11.5 12.5 10.1 13.4 13.7 10.8 12.3 14.0Dec 10.4 11.6 13.6 9.9 12.5 14.0 11.0 12.9 14.3

Trends of Yields of Treasury Bills during 2007-2009

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2.9. Money Supply

Broad money supply (M2) recorded an annual growth of 19.4% in December 2009,compared to 18.4% a year ago. While quasi money increased by a faster pace of 30.3%,narrow money increased by 9.4 percent. Reserve money grew by 9.3 percent, higher than an increase of 5.7 percent recorded a year ago.

On the supply side, 19.4% growth in broad money supply in December 2009 wassupported by 9.4% growth in currency, 9.4% growth in demand deposits, 19.8% growthin savings deposits and 45.1% growth in time deposits.

On the demand side, growth was due to 12.3% growth in net foreign assets and 23.3%growth in net domestic assets over a year ago.

Domestic credit increased by 14.4% from D6.4 billion in Dec 2008 to D7.5 billion in Dec2009, supported by 14% growth in government borrowing, 78.5% growth in credits topublic entities and 16.7% growth in credits to the private sector, over a year ago.

Table-2.9 Money Supply and Demand in December 2009

Components Dec2007

MillionDalasi

Dec2008

MillionDalasi

Dec2009

MillionDalasi

Dec2008

%share

Dec2009

%share

Dec-08% ch.

over Dec2007

Dec-09% ch.

over Dec2008

1.Money Supply (M3) (2+3) 8274 9796 11695 100 100 18.4 19.42.Narrow Money (2.1+2.2) 4209 5120 5600 52 48 21.6 9.42.1 Currency 1689 1,833 2,005 19 17 8.5 9.42.2 Demand deposits 2519 3287 3,595 34 31 30.5 9.43.Quasi money (3.1+3.2) 4065 4677 6095 48 52 15.0 30.3

3.1 Savings deposits 2612 2,738 3,281 28 28 4.8 19.83.2 Time deposits 1453 1,939 2,814 20 24 33.4 45.1Demands for money (1+2) 8274 9796 11695 100 100 18.4 19.41.Net foreign assets (1.1+1.2) 4042 3476 3902 35 33 -14.0 12.31.1 Monetary Authorities 3069 2,715 3232 28 28 -11.6 19.01.2 Commercial banks 973 762 671 8 6 -21.7 -11.92.Net Dom. Assets (2.1+2.2) 4232 6320 7793 65 67 49.4 23.32.1 Domestic credit 4200 6436 7491 66 64 53.2 16.4

(a) Credits to government 1189 2,661 3033 27 26 123.9 14.0(b) Credits to public entities 229 428 765 4 7 87.4 78.5(c) Credits to private sector 2600 3164 3694 32 32 21.7 16.7

(d) Credits to forex bureau 183 183 0 2 0 0.0 -100.02.2 Other items, net 31 -116 301 -1 3 -473.3 -359.3Reserve Money 2745 2902 3171 5.7 9.3


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2.10 Performance by Commercial Banks

The Gambian banking industry consists of 13 banks with highly skewed distribution of assets. The industry continues to be dominated by three large banks which accountedfor 64.4% of the total assets at the end of September 2009, although their share hasdeclined from 67% a year ago.

The banking industry remains sound. Total industry assets increased by 14.7% on year-on-year basis from D12.1 billion at end-Dec 2008 to D13.9 billion at end-Dec 2009.

The Banking sector continues to function efficiently with sufficient capital and liquidity.The industrys risk-weighted capital adequacy ratio stood at 34.84% in March 2009, and33.22% in Sept 2009 significantly above the statutory requirement of 8%.

Non-performing loans rose from 7.3% in Sep 2008 to 9.5% in Dec 2008, but declined to7% in Sept 2009 compared to 9.95 percent a year ago, and were adequately provisionedin compliance with the statutory norms and requirements.

However, commercial banks Return on Assets (ROA) declined from 2.10% in March2008 to 0.9% in Sep 2008. ROA declined further to 0.49% at the end of Sep 2009.

In September 2009, distribution and trade sector accounted for 22 percent of total loansgiven by the commercial banks, followed by building accounting for 12 percent, transport8 percent, tourism 7 percent, manufacturing 5 percent, and agriculture 3 percent.However, the notable sectoral increases of bank loans in September 2009 were for manufacturing, construction, tourism and fishing, while loans to agriculture recordeddecline over last years lending.

As regards non-performing loans as a percentage of bank loans given to the sector, in

September 2009 the fishing sector accounted for the highest non-performing loans (42%of total sector loans), followed by building (12.3%), distribution and trade (11.1%),financial sector (10.2%) and agriculture 4.3%. The manufacturing sector was the bestperformer as it had the least defaults.

Table-2.10 Banks total loans and non-performing loans (NPL) by sectors in Sept 2009Sectors Total Loans

Sep 2008Million Dalasi

Total loansSep 2009

Million Dalasi

Sep2008

% share

Sep2009

% share

Sep 2009% changeover Sep

2008

NPLMl. D.

NPLas %

of sectorloans

1. Agriculture 148 136 5 3 -8.4 5.9 4.32. Fishing 17 25 1 1 43.0 10.4 42.03. Manufacturing 117 195 4 5 67.4 3.1 1.64. Building 342 512 11 12 49.6 62.8 12.35. Transport 281 355 9 8 26.3 21.4 6.06. Distribution 831 931 26 22 12.0 103.1 11.17. Tourism 195 293 6 7 50.5 22.2 7.68. Financial sector 125 126 4 3 0.8 12.9 10.29. Others 1140 1624 36 39 42.5 71.8 4.410. Total 3196 4197 100 100 31.3 313.5 7.5


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2.11 Commercial Banks Assets

Total assets of the commercial banks increased by 14.7% on year-on-year basis fromD12.1 billion at end-Nov 2008 to D13.9 billion at end-Nov 2009.

Gambian banks do not have large exposure to foreign assets or foreign liabilities. Atend-Nov 2009, foreign assets constituted only 9.9% of total assets (foreign exchange1.8%, balances abroad 6.9% and foreign investment 1.2%), up from 7.5% a year ago(foreign exchange 1.9%, balances abroad 4.8% and foreign investment 0.8%).

Gambian banks also do not have large contingent liabilities. At end-Nov 2009 contingentliabilities constituted only 10.5% of total liabilities, compared to 12% a year ago.

At end-Nov 2009, loans and advances constituted 29.4% of total assets and the ratioremained fairly stable during 2009.

At end-Nov 2009, investments in government Treasury Bills by the banks increased by

11.4% and constituted 25.2% of their total assets. As expected, three large banks hadthe dominant share.

At end-Nov 2009, loans and advances to the public sector increased by 38.1%, whilethose to the private sector increased by only 19% over end-Nov 2008.

Table-2.11: Commercial Banks Assets at the end-November 2009 (MillionDalasi)

Nov-2008 Nov-20091. Notes and coins 136.9 152.1 265.9 1.3 1.9 11.1 74.82. Foreign exchange 101.6 236.2 256.3 1.9 1.8 132.6 8.5

3. Local Bank balance 1,008.5 891.0 1,037.0 7.3 7.5 -11.6 16.4ii. CBG 999.3 888.6 867.9 7.3 6.2 -11.1 -2.3

iii. Banks locally 9.1 2.5 169.1 0.0 1.2 -73.1 6785.44. Balances abroad 914.9 583.3 966.3 4.8 6.9 -36.3 65.75. Bills purchased 7.8 107.2 70.5 0.9 0.5 1268.4 -34.36. Loans and advances 2,452.1 3,377.3 4,094.9 27.8 29.4 37.7 21.2

i. Public sector 215.4 392.9 542.5 3.2 3.9 82.4 38.1ii. Private sector 2,236.8 2,984.4 3,552.3 24.6 25.5 33.4 19.0

7. Investments 2,991.8 3,420.5 3,739.8 28.2 26.9 14.3 9.3i. Govt Treas ury Bills 2,671.2 3,151.9 3,511.3 26.0 25.2 18.0 11.4

ii. Others 215.3 175.8 67.5 1.4 0.5 -18.3 -61.6iii Foreign Invest. 105.3 92.8 161.0 0.8 1.2 -11.9 73.5

8. Fixed assets 523.8 922.1 1,119.7 7.6 8.0 76.1 21.49. Guarantees 1,086.2 1,455.2 1,467.0 12.0 10.5 34.0 0.810. Other assets 824.9 991.3 901.0 8.2 6.5 20.2 -9.111. Total assets (1 to 1 10,048.4 12,136.2 13,918.2 100.0 100.0 20.8 14.712. Net Balance (11-9) 8,962.2 10,681.0 12,451.3 88.0 89.5 19.2 16.6Mem o: Foreign As sets 1,121.8 912.3 1,383.6 7.5 9.9 -18.7 51.7

% ch. Nv09over Nv08

Assets (MillionDalasi)

Nov-2007 Nov-2008 Nov-2009 Composition (%) % ch. Nv08over Nv07

Source: Central Bank of Gambia.

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2.13 Interest Rates and Central Bank Policy Rates

Interest rate on government treasury bills declined from 31% in 2003 to 14.9% in 2006 andfurther to 13.7 per cent in 2007. It ranged in between 13.1% to 14.7% during 2008. The bankrate of the CBG declined from 29% in 2003 to 9% in 2007, but was raised to 10% at the end of

2007 to check effective demand and inflationary pressures on the economy.In response to tight monetary conditions and against a backdrop of falling inflation, the CBGreduced the statutory minimum reserve requirement of banks from 16% to 14% in March 2008.The CBG rediscount rate declined from 34% in 2003 to 14% in 2004. In order to counter emerging inflationary pressures, the CBG raised its rediscount rate by one percentage pointfrom 14% to 15% in June 2007, and further to 16.0% in October 2008. The rediscount rate hasremained unchanged at 16% since then until November 2009. In view of the declining trend of inflation rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to14% with effect from December 2009.

Despite significant fall of the yields on treasury bills in recent years, maximum short-termdeposit rates and commercial banks lending rates remain very high, and there exist wideinterest rate spreads. Successful disinflation allowed the weighted yield on treasury bills to fallfrom over 25% in early 2005 to 12.1% in October 2009. By contrast, commercial banks lendingrates remained sticky above 20% due to high operating costs and risks of bank credits.

Table-2.13: Trends of Nominal Interest rates (per cent per annum, end period)Items 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Bank lending rare- min 18 18 17 21 21 21 18 18 18 18Bank lending rare- max 24 24 24 36.5 36.5 30 28 27 27 27Deposit rate (SB) min 8 8 8 8 10 5 5 5 4 4Deposit rate (SB) max 10 10 10 17 17 10 7 7 7 7Time dep (3 months) min 9.5 9.5 6 7 8 5 5 5 5 5Time dep (3 months) max 12.5 12.5 13 22 22 14 8.5 12.9 13.6 15.5

Time dep (6 months) min 10 10 6 8 8 7 6 6 6 6Time dep (6 months) max 12.5 12.5 13 22 22 15 13 12.9 13.6 15.5Time dep (12 month) min 11 11 7 10 12 7 6 7 7 6Time dep (12 month) max 12.5 12.5 13 22 23 13 13 12.9 13.6 15.5Govt. treasury bills 12 15 20 31 30 16 12.8 13.7 13.6 14.2CBG Bank Rate 10 13 18 29 28 14 9 10 10 10CBG Rediscount Rate 15 18 23 34 33 19 14 15 16 16

Range = Maximum-MinimumBank lending rate 6 6 7 15.5 15.5 9 10 9 9 9Deposit rate (SB) 2 2 2 9 7 5 2 2 3 3Time deposits (3 months) 3 3 7 15 14 9 3.5 7.9 8.6 9.5Time deposits (6 months) 2.5 2.5 7 14 14 8 7 6.9 7.6 9.5Time deposits (12 month) 1.5 1.5 6 12 11 6 7 5.9 6.6 9.5

Factors Influencing Interest Rates

Inflation (GDP-Deflator) 3.6 14.9 15.0 22.9 13.6 3.9 0.0 2.0 8.0 4.7CPI-Inflation 0.9 4.5 8.6 17.0 14.3 5.0 2.1 5.4 4.9 4.5Real GDP-Growth Rate 5.5 5.7 0.7 2.4 2.1 -0.1 3.1 6.3 6.3 5.0Exch. Rate change (%) 12.2 22.7 27.0 43.2 5.3 -4.8 -1.8 -11.4 -9.8 15.9

Source: Central Bank of Gambia (CBG)

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2 .14 BOP, Foreign Exchange Reserves and Exchange Rates

(a) BOP Situation in 2008

(a) Overall BOP outcome in 2008 was not as bad as they were anticipated earlier. Year endforeign exchange reserves at US$125.2 million were still equal to 5.7 months of c.i.f. imports

compared to US159.4 million equal to 6.2 months at end-2007

(b) BOP estimates indicate an overall deficit of D767.3 billion (- $34.2 million), amounting to (-)3.4 percent of GDP in 2008 compared to a surplus of D741.7 million ($29.8 million),amounting to 3.6 percent of GDP in 2007, reflecting the deterioration in both the current andthe capital and financial accounts. The Net Usable Reserve of the CBG stood at US$95.6million at end-March 2009 and was above the IMF Program target (floor) by US$3.6 million.

(c) The goods account deficit improved from a deficit of D3.52 billion, amounting to 17.2 percentof GDP in 2007 to a deficit of D2.92 billion, amounting to 12.8 percent of GDP in 2008, or adecline by 17.14%.

(b) BOP Situation in the first three Quarters of 2009

Preliminary BOP estimates by the CBG for Jan-Sep 2009 indicated a higher overalldeficit at D1066.6 million than D721.6 million in Jan-Sep 2008.

The current account recorded a surplus of D751 million in Jan-Sep 2009 compared to adeficit of D650.8 million in Jan-Sep 2008. But, the capital and financial account balanceworsened significantly to a deficit of D1817.5 million in Jan-Sep 2009 from a deficit of only D70.8 million in Jan-Sep 2008.

The goods account balance improved from a deficit of D2.0 billion in Jan-Sep 2008 toD1.65 billion in Jan-Sep 2009 attributed to the surge in exports which more than offsetthe increase in imports. Exports, including re-exports increased from D2.3 billion Jan-Sep 2008 to D3.6 billion in Jan-Sep 2009, while imports increased from D4.3 billion toD5.2 billion over the period, resulting in narrowing down the trade deficit.

Net factor income deficit decreased from D585 million in Jan-Sep 2008 to D200 million inJan-Sep 2009, while non-factor services surplus deteriorated from D530 million to D317million and net transfers improved from D1.4 billion to D2.3 billion over the period.

.(c) Foreign Exchange Reserves

Gross official reserves, including Special Drawing Rights (SDR) allocation from theInternational Monetary Fund (IMF), as at end-September stood at US$141.3 million,equivalent to 6.0 months of import cover.

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Table-2.14-A Balance of Payments during the First three Quarters of 2009 (Million Dalasi)

(Million Dalasi) 2008 2009-Q1 2009-Q2

2009-Q3

2008Q1-Q3

2009Q1-Q3

1 Goods balance (1.1-1.2) -2919.2 -683.9 -399 -565.0 -2001.0 -1647.91.1 Exports of goods (a+b+c) 3175.7 934.5 1331.6 1294.8 2292.5 3560.9

a. Exports of goods in trade stat 330.4 239.1 597.8 503.1 274.4 1340.0b. Re-exports 2489.1 660.9 706.8 759.5 1753.4 2127.2c. Other goods 356.2 34.5 27 32.2 264.7 93.7

1.2 Imports of goods fob 6094.9 1618.4 1730.6 1859.8 4293.5 5208.82 Services, net (2.1 to 2.7) 757.5 370.3 34.7 -87.7 529.8 317.3

2.1 Transport -434.1 -123.6 -93.25 -186.1 -305.2 -402.92.2 Travel 1624.1 615.7 190.1 151.8 1141.1 957.62.3 Communications 214.4 52.4 82.9 80.6 173.4 215.92.4 Insurance -146 -38 -42.8 -45.3 -105.1 -126.12.5 Construction 120 12.9 14.8 45.6 61.6 73.32.6 Information technology -70.9 -23.6 7.45 -9.8 -23.5 -26.02.7 Others business -550 -125.5

-124.5-124.5 -412.5

-374.53 Income -757.4 -74.9 -57.5 -67.8 -585.9 -200.23.1 Investment income -931.4 -115.2 -101.2 -106.2 -719.2 -322.53.2 Compensation to labor 174 40.3 43.65 38.4 133.3 122.4

4 Transfers, net (4.1+4.2+4.3) 1809.4 154.1 834.6 1292.9 1406.3 2281.64.1 Official transfer 137.2 108.3 151.9 289.6 112.2 549.84.2 Remittances 1195.8 290.2 434.2 333.9 839 1058.34.3 Other transfer 476.4 -244.4 248.5 669.4 455.1 673.5

5 Current account balance -1109.7 -234.4 412.8 572.6 -650.8 751.06 Capital Account 24.4 0 0 236.4 22.3 236.47 Financial Account (7.1+7.2) 317.9 -234.6 -277.4 -1541.9 -93.1 -2053.9

7.1 Foreign direct investment 1555.7 262.7 262.7 262.7 1189.3 788.17.2 Other investment -1429.6 -311.1 -484.2 -439.1 -1156 -1234.47.3 Reserve change 191.8 -186.2 -55.9 -1365.5 -126.4 -1607.6

8 Capital and Financial A/C(6+7)

342.3 -234.6 -277.4 -1305.5 -70.8 -1817.5

9 Overall BOP Balance (5+8) -767.4 -469 135.4 -733.0 -721.6 -1066.6Foreign Exchange Reserve 4370.6 4184.4 4128.5 2762.97

Equi to months of imports 2.0 7.1 6.5 4.1

Ave.Exch.rate(D/$) 22.35 26.19 26.8 26.8GDP at cmp (Million Dalasi) 18240 19529 19529 19529.0 18240 19529


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Table-2.14-B Balance of Payments in the First Three Quarters of 2010 (As% of GDP)

BOP as % of GDP 2008 2009-Q1 2009-Q2

2009-Q3

2008Q1-Q3

2009Q1-Q3

1 Goods balance (1.1-1.2) -16.0 -3.5 -2.0 -2.9 -11.0 -8.41.1 Exports of goods (a+b+c) 17.4 4.8 6.8 6.6 12.6 18.2

a. Exports of goods in trade stat 1.8 1.2 3.1 2.6 1.5 6.9b. Re-exports 13.6 3.4 3.6 3.9 9.6 10.9c. Other goods 2.0 0.2 0.1 0.2 1.5 0.5

1.2 Imports of goods fob 33.4 8.3 8.9 9.5 23.5 26.72 Services, net (2.1 to 2.7) 4.2 1.9 0.2 -0.4 2.9 1.6

2.1 Transport -2.4 -0.6 -0.5 -1.0 -1.7 -2.12.2 Travel 8.9 3.2 1.0 0.8 6.3 4.92.3 Communications 1.2 0.3 0.4 0.4 1.0 1.12.4 Insurance -0.8 -0.2 -0.2 -0.2 -0.6 -0.62.5 Construction 0.7 0.1 0.1 0.2 0.3 0.42.6 Information technology -0.4 -0.1 0.0 -0.1

-0.1 -0.12.7 Others business -3.0 -0.6 -0.6 -0.6 -2.3 -1.93 Income -4.2 -0.4 -0.3 -0.3 -3.2 -1.0

3.1 Investment income -5.1 -0.6 -0.5 -0.5 -3.9 -1.73.2 Compensation to labor 1.0 0.2 0.2 0.2 0.7 0.6

4 Transfers, net (4.1+4.2+4.3) 9.9 0.8 4.3 6.6 7.7 11.74.1 Official transfer 0.8 0.6 0.8 1.5 0.6 2.84.2 Remittances 6.6 1.5 2.2 1.7 4.6 5.44.3 Other transfer 2.6 -1.3 1.3 3.4 2.5 3.4

5 Current account balance -6.1 -1.2 2.1 2.9 -3.6 3.86 Capital Account 0.1 0.0 0.0 1.2 0.1 1.27 Financial Account (7.1+7.2) 1.7 -1.2 -1.4 -7.9 -0.5 -10.5

7.1 Foreign direct investment 8.5 1.3 1.3 1.3 6.5 4.07.2 Other investment -7.8 -1.6 -2.5 -2.2 -6.3 -6.37.3 Reserve change 1.1 -1.0 -0.3 -7.0 -0.7 -8.2


1.9 -1.2 -1.4 -6.7 -0.4 -9.3

9 Overall BOP Balance (5+8) -4.2 -2.4 0.7 -3.8 -4.0 -5.5Foreign Exchange Reserve 24.0 21.4 21.1 14.1


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Table-2.14-C: Quarterly BOP Summary Table 2008-200Q3Percentage change (in terms of Dalasi BOP) over same quarter of previous year

(%)Items 2009-Q1 2009-Q2 2009-Q3 2009-

Q1-Q31 Goods balance (1.1-1.2) -10.2 -34.8 -10.0 -17.6

1.1 Exports of goods (a+b+c) 16.1 68.9 85.1 55.3a. Exports of goods in trade stat 246.5 377.9 526.5 388.3

b. Re-exports 3.3 23.6 40.1 21.3c. Other goods -64.2 -70.4 -58.2 -64.6

1.2 Imports of goods fob 3.3 23.6 40.1 21.32 Services, net (2.1 to 2.7) -31.7 -39.1 26.1 -40.1

2.1 Transport -10.0 -3.2 160.3 32.02.2 Travel -23.1 -3.2 5.5 -16.12.3 Communications 6.5 4.4 79.9 24.5

2.4 Insurance 5.3 10.3 49.8 19.92.5 Construction 303.1 -73.5 1725.6 19.12.6 Information technology #DIV/0! -472.5 -54.2 10.62.7 Others business -8.7 -9.5 -9.5 -9.2

3 Income -67.9 -67.3 -61.7 -65.83.1 Investment income -58.2 -53.9 -52.6 -55.23.2 Compensation to labor -5.6 0.1 -18.3 -8.2

4 Transfers, net (4.1+4.2+4.3) -66.3 85.5 158.9 62.24.1 Official transfer 153.6 275.1 898.7 390.04.2 Remittances 32.4 74.3 -9.9 26.14.3 Other transfer -225.3 54.9 571.4 48.0

5 Current account balance -4883.7 -246.9 -252.8 -215.46 Capital Account -100.0 7287.5 960.17 Financial Account (7.1+7.2) 1791.9 158.8 -5918.6 2106.2

7.1 Foreign direct investment -36.1 -36.1 -28.3 -33.77.2 Other investment -64.0 37.8 -825.8 6.87.3 Reserve change -142.2 -66.5 241.0 1171.9


1791.9 214.9 -4495.7 2467.1

9 Overall BOP Balance (5+8) 6153.3 -136.7 112.5 47.8Foreign Exchange Reserve -5.5 -3.1 -28.4

Equi to months of imports -8.6 -21.6 -48.9Ave.Exch.rate(D/$) 23.4 30.9 22.8

GDP at cmp 7.1 7.1 7.1 7.1

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2.15 Exchange Rate

During Jan-April 2009, every month the Dalasi depreciated against major international currencies(viz. US$, CHF, EURO and CFA) except the UK, reflecting the adverse impact of the globalfinancial crisis on remittances and tourism and increased demand for foreign exchange to meetthe high cost of imports. Since May 2009 Dalasi also started depreciating against UK. At end-

Dec 2009, Dalasi has depreciated by 7.2% against British Pound, by 1.5% against US$, by12.5% against CHF, by 11.8% against Euro and by 11.2% against CFA over end-Dec 2008.

Table-2.14 End-period mid-market exchange rates (Dalasi per unit of foreign currency)

Year Month UK US$ CHF Euro CFA (5000)2008 Jan 53.84 27.97 22.36 36.20 276.30

Feb 53.67 27.90 21.95 36.17 271.70Mar 53.47 27.70 22.49 36.16 273.52Apr 53.68 27.55 22.42 36.39 274.62May 53.41 27.34 22.11 36.42 278.92

June 52.47 26.81 21.99 36.03 273.42 July 52.47 25.90 22.19 35.56 269.64Aug 49.27 24.16 20.41 33.52 255.72Sept 41.62 20.81 17.72 29.27 215.56Oct 39.02 19.15 15.98 27.38 215.46Nov 42.42 20.95 18.01 29.99 238.30Dec 44.28 22.24 19.81 31.60 256.78

2009 Jan 44.27 22.34 19.91 32.89 252.85 Feb 42.58 21.88 19.57 32.28 243.98

Mar 40.87 19.46 19.15 30.83 239.16Apr 39.52 20.12 19.16 31.43 235.95May 40.25 20.64 19.46 32.1 245.84

June 40.77 20.65 19.27 32.07 245.51 July 41.65 20.94 19.9 32.21 251.05Aug 40.73 21.37 20.08 32.23 249.47Sept 41.65 23.12 19.86 33.02 249.30Oct 40.49 24.89 20.15 32.89 258.09Nov 40.56 26.26 20.07 33.28 258.31Dec 40.14 26.54 22.94 35.67 259.15

Annual Rate of appreciation (-) / depreciation (+) of Dalasi (in % over same month in 2008)2009 Jan -15.9 16.7 4.7 1.9 3.9

Feb -12.2 19.3 12.6 4.1 5.7 Mar -6.6 35.6 21.7 14.2 8.4

Apr -1.2 33.2 20.1 12.4 11.1May 2.9 29.5 15.1 15.3 8.2

June 5.8 30.1 14.0 15.5 11.1

July 4.0 27.9 22.7 18.2 10.6Aug 7.5 24.6 21.3 16.9 12.8Sept 3.2 16.6 28.2 16.9 13.7Oct 7.4 8.1 29.4 20.4 15.1Nov 8.2 2.5 32.8 20.6 14.4Dec 7.2 1.5 12.5 11.8 11.2

Source: Central Bank of Gambia (CBG)

Gambia Monthly Economic Bulletin January 2010

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Transcript of Gambia Monthly Economic Bulletin January 2010