The Gambia Monthly Economic Bulletin- June 2010

THE GAMBIA MONTHLY ECONOMIC BULLETIN1

June 2010

Institutional Support Project for Economic and Financial Governance (ISPEFG) Ministry of Finance (MOF) The Republic of Gambia The Quadrangle, Banjul, the Gambia

The Gambia Monthly Economic Bulletin provides an update on the recent economic developments and policies in the Republic of the Gambia. This Bulletin has been prepared, under the overall guidance of the Honorable Permanent Secretary Mr. Serign Cham, by a research team comprising Tarun Das, Macroeconomic Adviser (ISPEFG), Momodou Taal, Acting Director and Ms. Ceesay Chiel, Economist in the Statistics and Special Studies Division, Ministry of Finance; with key inputs from the Central Bank of Gambia (CBG), the Gambian Bureau of Statistics (GBOS), and the Gambian Revenue Authority (GRA). It is needless to point out that the views expressed in this Bulletin solely indicate the views of the Research Team, which need not necessarily imply the views of the MOF, the other budgetary agencies or the organizations they are associated with. Any questions and feedback can be addressed to: Tarun Das (das.tarun@hotmail.com)

The Gambia Monthly Economic Bulletin- June 2010

Political and Administrative Structure The Gambia is divided into seven regions comprising two Municipalities namely, Banjul City Council (BCC) and the Kanifing Municipal Council (KMC) and five provincial administrative regions namely, Western Region (WR), North Bank Region (NBR), Lower River Region (LRR), Central River Region (CRR) and Upper River Region (URR). Politically, the relevant units are Local Government Areas (urban), Districts, Wards and Villages. The Gambia has 35 districts and about 1870 villages with an average of 13 compounds. Basic Facts about Gambia: Fiscal year: 1st January to 31st December Items (Year) Units Value Rank in the World from top in descending order Area (2009) Sq. km. 11,300 171 out of 248 countries Population (2008) Million 1.735 148 out of 241 countries GDP PPP (2006) Million US$ 2061 184 out of 229 countries GDP Nominal (2006) Million US$ 511 199 out of 229 countries GDP PPP per capita (2006) US$ 1921 140 out of 169 countries GDP per capita (2006) US$ 329 192 out of 207 countries Poverty Ratio (% of people Percent 59 7 out of 95 countries below One-US$ per day) (2004)

The Gambia Monthly Economic Bulletin- June 2010 Source: http://www.nationmaster.com

The Gambia Monthly Economic Bulletin- June 2010

Contents Items
Basic Facts about the Gambia Contents ISPEFG Project/ Research Team and Document History Highlights At a Glance 1. Global Economic Outlook 1.1Global recovery is stronger than expected but speed is uneven 1.2Global iflation pressures are generally subdued but diverge 2. Current State of the Gambian Economy 2.1 Overall and Sectoral GDP Growth Rates 2.2 Consumer Price Index (CPI) and Inflation 2.3 Projection of CPI inflation for the year 2010 2.4 Government Fiscal Performance 2.5 Domestic Debt and Outstanding Treasury Bills 2.6 Treasury Bills Yields 2.7 Money Supply 2.8 Performance of Commercial Banks 2.9 Commercial Banks Assets 2.10 Commercial Banks Liabilities 2.11 Interest Rates and Central Banks Policy Rates 2.12 BOP, Foreign Exchange Reserves and Exchange Rates 2.13 Exchange Rates 3. Recent Policy Developments and Development Issues 3.1 IMF Executive Board Completes Sixth Review of PRGF 3.2 Assessment of Quantitative Targets agreed with IMF under PRGF

Page
2 3 4 5-6 7 8-12 8 10 13-29 13 15 17 18 20 21 22 23 24 25 26 27 29 30-31 30 31

The Gambia Monthly Economic Bulletin- June 2010

ISPEFG Project and Monthly Economic Bulletin Research Team

Project Supervisor Project Coordinator Macroeconomic Adviser Acting Director (SSSD) Economist (SSSD)

Honorable Mr. Serign Cham, Permanent Secretary Mr. Momodou Cham Dr. Tarun Das Momodou Taal Ms. Ceesay Chilel

Document History: This report is an update of the following reports prepared by the Research Team: The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009. The Gambia Monthly Economic Abstract, pp.1-16, 31 March 2009. The Gambia Monthly Economic Bulletin, pp.1-40, 30 April 2009. The Gambia Monthly Economic Abstract, pp.1-16, 30 April 2009. The Gambia Monthly Economic Bulletin, pp.1-39, 31 May 2009. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009. The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, June 2009. 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. 19. The Gambia Monthly Economic Bulletin, pp.1-40, February 2010. 20. The Gambia Monthly Economic Bulletin, pp.1-40, March 2010. 21. The Gambia Monthly Economic Bulletin, pp.1-31, June 2010.
1. 2. 3. 4. 5. 6. 7. 8.

The Gambia Monthly Economic Bulletin- June 2010

HIGHLIGHTS Global Economic Recovery Is Stronger than Expected, but Speed Varies

The global economic recovery is stronger than expected, but the speed of recovery is uneven across

regions. As per the IMF World Economic Outlook (WEO) April 2010, world output is expected to rise by 4 percent in 2010. Economies with a strong start are likely to remain in the lead, as growth in other countries is constrained by lasting damage to financial sectors and household balance sheets.

Sub-Saharan Africa has weathered the global crisis well and is expected to recover rapidly from the slowdown in 2009. Although some middle-income and oil-exporting economies were hit hard by the collapse in export and commodity markets, the region managed to grow by 2% in 2009. Its growth is projected to accelerate to 4.7% in 2010 and to 5.9% in 2011. Global Inflation Pressures are Subdued and Oil Prices are Moderate

The global recession caused a large drop in inflation. The still-low levels of capacity utilization and
well-anchored inflation expectations are expected to keep inflation low in 2010.

Average Brent crude oil prices declined to $76.25 per barrel in May 2010 from $84.08 per barrel in April 2010, and are expected to range around $76 a barrel in 2010 and $82 a barrel in 2011. Impact on the Gambian Economy

The sharp decline in global economic activity had adverse impact on the Gambian economy in 2008
leading to decline of exports and remittances and decline of manufacturing production, wholesale and retail trade, transport and telecom. However, thanks to bumper crops and very good performance by electricity, telecom and financial sectors, the real GDP growth at constant 2004 market prices improved from 6% in 2007 to 6.3% in 2008.

Real GDP growth in 2009 is estimated to be 5.6% supported by a growth of 9.8% in agricultural
production, 2.1% by industrial production and 4.3% in services production.

With expected normal monsoons, real GDP growth in 2010 is projected to be 5% aided by a growth
of 4.6% in agriculture, 5.1% by industrial production and 4.9% in services production. CPI Inflation

Annual point-to-point CPI inflation decelerated significantly from 5.9% (food 7.1% and non-food

4.7%) in May 2009 to 4.1% (food 5.4% and non-food 2.4%) in May 2010. The 12-month average inflation rate also decelerated from 5.9% in May 2009 to 3.5% in May 2010.

Among other groups, transport recorded an inflation of 2.5%, clothing 2%, utilities 1.8%, restaurants and hotels 4.2% and miscellaneous goods and services 7.3% in May 2010. Government Fiscal Performance

Governments fiscal performance was not satisfactory in Jan-May 2010 compared with Jan-May 2009. Tax revenues declined by 2.2% in Jan-May 2010 over Jan-May 2009 compared with a growth of 13.8% in Jan-May 2009 over Jan-May 2008. However, there was better performance of non-tax revenues in Jan-May 2010 than in Jan-May 2009. Basic deficit at 0.3% of GDP in Jan-May 2010 was significantly higher than 0.1% of GDP in Jan-May 2009.

The Gambia Monthly Economic Bulletin- June 2010

Domestic Debt and Treasury Bills Yields

Including CBG support, the total outstanding domestic debt increased to D7.5 billion (26.5% of GDP)
at end-May 2010, from D6.6 billion (26.1% of GDP) a year ago. Outstanding TBs increased by 8.2% to D5.2 billion and accounted for 68.2% of the stock (including TMA overdraft).

Yields on treasury bills fluctuated widely in recent months. In view of the declining trend of inflation rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, average yields of the 91-day, 182-day and 364-day bills had declining trend since then and fell from 11%, 12.9% and 14.3% respectively in December 2009 to 9.8%, 10.8% and 13.3% respectively in May 2010. Money Supply and Commercial Banks Performance Broad money supply (M2) recorded an annual growth of 23.6% in April 2010, compared to 18.8% a year ago. While quasi money increased by a faster pace of 29.3%, narrow money increased by 17.6 percent. On the supply side, 23.6% growth of broad money in April 2010 was supported by 9.6% growth in currency in circulation outside banks, 22.5% growth in demand deposits, 17% growth in savings deposits and significant growth of 44.8% in time deposits.

On the demand side, growth was due to 1.8% growth in net foreign assets and 34.1% growth in net

domestic assets over a year. Domestic credit increased by 22.3% from D6.7 billion in April 2009 to D8.2 billion in April 2010, supported by 25% growth in government borrowing, 23.3% growth in credits to public entities and 20% growth in credits to the private sector, over a year.

The banking industry continues to show increasing signs of resilience with growth in assets, capital

and reserves. The industrys total assets increased to D15.5 billion in April 2010, up by 22.8% over a year, and the asset quality is satisfactory.

The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to 18.7% in
March 2010 and was well above the statutory norm at 8%. However, nonperforming loans as a ratio of gross loans deteriorated from 12.0% in December 2009 to 16.9% in March 2010.

Balance of Payments, Foreign Exchange Reserves and Exchange Rate Revised BOP estimates for 2009 indicate a decline in the overall balance from a surplus of US$23.35 million in 2008 to a deficit of US$6.79 million. While the current account improved to a surplus of US$63.29 million relative to a deficit of US$12.35 million in 2008, the capital and financial account balance recorded a deficit over the period relative to the surplus recorded a year ago. The year 2010 has started with a significant improvement in the overall BOP situation as compared with that in the first quarter of 2009. Current account recorded a surplus of D642 million in 2010-Q1 compared to a deficit of (-) D108 million in 2009-Q1, and the overall balance of payments showed a surplus of D746 million in 2010-Q1 compared with a deficit at (-)D859 in 2009Q1. At end-April 2010, gross international reserves, including the SDR allocations, stood at US$178.63 million, equivalent to 7.0 months of import cover.

Over one year, in May 2010 Dalasi depreciated against US$ by 7.4%, against SEK by 8.3%, against
CHF by 14.6% and against CFA by 5.6%, while it appreciated against the UK by 5.5% and against Euro marginally by 0.7%.

The Gambia Monthly Economic Bulletin- June 2010

At a Glance- June 2010

Economic Indicators Real GDP (MP) Growth rate (%) CPI inflation (%) Brent crude oil price (US$/ brl)
Growth rate (%) of Revenue & grants Growth rate (%) of Exp & Net Lending Revenue & grants as % of GDP Exp & Net Lending as % of GDP Overall fiscal bal. as % of GDP Basic balance as % of GDP Basic Primary bal. as % of GDP

Latest Reference Period 2009

May 2010 May 2010 Jan-May 2010 Jan-May 2010 Jan-May 2010 Jan-May 2010 Jan-May 2010 Jan-May 2010 Jan-May 2010
End-May 2010

Status in the latest reference period Overall 5.6 Agriculture 9.8 Industry 2.1 Services 4.3 Overall 4.1 Food 5.4 Non-food 2.4 Average US$76.25
(-) 0.9 (-) 0.7 6.7 7.5 (-) 0.8 (-) 0.3 1.0

Status in the Corresponding period a year ago Overall 6.3 Agriculture 26.6 Industry (-) 1.2 Services 4.2 Overall 5.9 Food 7.1 Non-food 4.7 Average US$57.94
18.0 37.1 7.6 8.5 (-) 0.9 (-) 0.1 1.3

Outlook for 2010 Overall 5.0 Agriculture 4.6 Industry 5.1 Services 4.9 Expected to remain moderate in the range of 4 to 5.5 percent. May stabilize around US$76 in 2010
The budget for 2010 has targeted overall fiscal deficit at (-) 1.1% of GDP and basic balance at zero. However, fiscal performance in Jan-May 2010 was not better than Jan-May 2009. Zero basic balance may not be achieved unless revenue realization improves significantly in the subsequent months.

Domestic debt as % of GDP Yield on 91-days TBs (%) Yield on 182days TBs (%) Yield on 364days TBs (%) GR of Money supply (M2) (%) Banks assets (Billion Dalasi) CBG policy rate (%) Overall BOP Balance (Mln D) Current A/C Balance (Mln D) Capital-Fin. A/C Balance (Mln D) Dalasi/ UK Dalasi/ US$ Dalasi/ Euro

26.5

26.1 12.5 13.8 15.3 18.8 12.62 16 23.35 (-) 12.35 35.70

Likely to decline in 2010. Yields may come down further as CPI inflation is moderate.

May 2010 May 2010 May 2010 April 2010 End-April 2010 June 2010 2009 2009 2009 End-May 2010 End-May 2010 End-May 2010

9.8 10.8 13.3

23.6 15.50 14 (-) 6.8 63.29 (-) 70.1

Money growth rate is likely to remain high. Likely to increase MPC reduced policy rate to 14% in Dec 2009. BOP situation is likely to remain comfortable in 2010 due to revival of exports, tourist income, remittances and foreign investment. Dalasi is expected to depreciate against major currencies in 2010.

39.11 28.73 36.72

41.40 26.74 37.00

The Gambia Monthly Economic Bulletin- June 2010 1. Global Economic Outlook 1.1 Global Economic Recovery Is Stronger than Expected, but Speed Varies Global economic recovery is stronger than expected, but the speed is uneven across countries and regions. As per the IMF World Economic Outlook (WEO2), April 2010, world output is expected to grow by 4.2% in 2010 followed by 4.3% in 2011. Economies with a strong start are likely to remain in the lead, while growth in other countries is constrained by lasting damage to financial sectors and household balance sheets. Global activity has rebounded, as evidenced by accelerating world trade, industrial production, and retail sales. Employment continues to contract in advanced economies but is expanding again in emerging economies, helped by strong potential growth. Industrial confidence has returned to pre-crisis levels, but household confidence in advanced economies continues to lag due to subdued employment. Economic activities still depend on highly accommodative macro-economic policies and are subject to downside risks due to sharp declines in the countercyclical fiscal measures. IMF advises that the monetary, fiscal, and financial policymakers will need to ensure a smooth transition of demand from the government to the private sector and from economies with excessive external deficits to those with excessive surpluses. In most advanced economies, fiscal and monetary policies should maintain a supportive thrust this year to further sustain growth and employment. But many of these economies also need to urgently adopt credible strategies to contain public debt and later bring it down to more prudent levels. Financial sector repair and reform are also high-priority requirements. Emerging and Developing Economies: Activity in emerging and developing economies is leading the global recovery. In key emerging Asian economies, particularly in China and India, output already exceeds pre-crisis levels by a wide margin, and the output growth in these countries, averaging about 10% in Q2Q4 of 2009, is outpacing estimates of full-capacity (potential) output growth. Sub-Saharan Africa: Sub-Saharan Africa has weathered the global crisis well and is expected to recover rapidly from the slowdown in 2009. Although some middle-income and oil-exporting economies were hit hard by the collapse in export and commodity markets, the region managed to grow by 2% in 2009. Its growth is projected to accelerate to 4.7% in 2010 and to 5.9% in 2011. The regions quick recovery is due to the relatively limited integration of the most low-income economies into the global economy and the limited impact on their terms of trade, the rapid normalization in global trade and commodity prices, and the use of countercyclical fiscal policies. Remittances and official aid flows have also been less adversely affected than anticipated by the recessions in advanced economies. Banking sectors, in general, remained resilient, and private capital inflows resumed into the regions more integrated economies. Shocks from the global crisis hit sub-Saharan Africa mainly through the trade channel. Reflecting their greater openness to trade, the regions middle-income economies like the South Africa were among the hardest hit.

World Economic Outlook: Rebalancing Growth, IMF, Washington D.C., April 2010.

The Gambia Monthly Economic Bulletin- June 2010

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The Gambia Monthly Economic Bulletin- June 2010

1.2 Inflation Pressures Are Generally Subdued but Diverge

The global recession caused a large drop in inflation and rising concern about mild deflation. The still-low levels of capacity utilization and well-anchored inflation expectations are expected to keep inflation low in 2010. The decline in inflation in many advanced economies is puzzling given the exceptionally large falls in output. Core inflation in the United States is running around 1 percent, down from 2 percent; and in the United Kingdom it appears to have moved sideways. In Japan, price dynamics led to very low to negative inflation, which slightly exceeded 1 percent in February 2010. In general, the correlation between the drop in core inflation from its 2008 peaks and the increase in unemployment rates is weaker than that in 2001 recession. Inflation pressures are projected to remain low, held down by high unemployment rates and excess capacity. Inflation has been higher and more volatile in emerging economies, and inflation pressures could resurface more easily there than in advanced economies.

Commodity prices are rebounding Commodity prices have rebounded ahead of the recovery (Table 1.2). Average Brent crude oil prices declined to $76.25 per barrel in May 2010 from $84.08 per barrel in April 2010. Looking ahead, commodity prices are expected to rise a bit further supported by the strength of global demand, especially from emerging economies. However, this upward pressure is expected to be modest, given the above-average inventory levels and substantial spare capacity in many commodity sectors. Accordingly, the IMFs baseline petroleum price projection is unchanged at $76 a barrel for 2010 and revised up to $82 a barrel in 2011. Other non-fuel commodity prices have also been marked up modestly by the IMF WEO April 2010.

Table-1.2 Trends of World Commodity Prices

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The Gambia Monthly Economic Bulletin- June 2010

Source: World Bank Pink Sheet June 2010

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The Gambia Monthly Economic Bulletin- June 2010

Source: World Bank Pink Sheet June 2010

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The Gambia Monthly Economic Bulletin- June 2010 2. Current State of the Gambian Economy 2.1 Overall and Sectoral GDP Growth Rates The sharp decline in global economic activity had adverse impact on the Gambian economy in 2008 leading to decline of exports and remittances and decline of manufacturing production, wholesale and retail trade, transport and telecom (Table-2.1). However, thanks to bumper crops contributed by favorable monsoon at home and high international prices of food grains, and very good performance by electricity, telecom and financial sectors, the real GDP growth at constant 2004 market prices improved from 6% in 2007 to 6.3% in 2008 (Table-2.1 and Figure-2.1). As per the Revised Estimates of the GBOS, real GDP growth in 2009 at constant market prices is estimated to be 5.6% supported by a growth of 9.8% in agricultural production, 2.1% by industrial production and 4.3% in services production. With expected normal monsoons, agricultural production is expected to perform well in 2010. However, given the high base already achieved, the agricultural growth is likely to decelerate. Consequently, real GDP growth in 2010 at constant market prices is projected to be 5% supported by a growth of 4.6% in agricultural production, 5.1% by industrial production and 4.9% in services production. Share of agriculture in GDP at constant factor cost increased from 21.6% in 2007 to 26.2% in 2010, while share of industry declined from 14.7% to 13% and that of services declined from 63.7% to 60.7% during the same period. Increase of agricultural share was contributed by increase in share of crops, while decline in industrial share was due to decline in shares of manufacturing and construction, and decline of services share was mainly due to decline of share of wholesale and retail trade, hotels and restaurants, and transport and communications.

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The Gambia Monthly Economic Bulletin- June 2010 Figure-2.1: Trends of sectoral growth rates during 2001-2010 (in percentage)

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2007-2010 (in %)
Items GDP at 2004 basic price Agriculture and allied

Sectoral Growth Rates (in percentage) 2007 2008 2009 2010 Actual Actual Actual Proj.

Sectoral Shares in GDP-FC (in percentage) 2007 2008 2009 2010 Actual Actual Actual Proj.

6.0 6.3 5.6 5.0 107.5 105.6 105.7 105.9 -1.9 26.6 9.8 4.6 21.6 25.3 26.3 26.2 -- Crops -15.2 55.2 14.3 4.6 9.5 13.6 14.8 14.8 -- Livestock 11.9 4.3 4.5 4.5 9.4 9.0 8.9 8.9 -- Forestry -4.0 1.0 0.7 2.0 0.6 0.6 0.5 0.5 -- Fishing 18.0 3.5 5.1 5.5 2.1 2.0 2.0 2.0 Industry 2.5 -1.2 2.1 5.1 14.7 13.4 13.0 13.0 -- Mining and quarrying -14.1 8.8 12.0 10.0 1.9 1.9 2.1 2.2 -- Manufacturing 3.9 -8.3 -2.8 3.2 7.0 5.9 5.4 5.4 -- Electricity, gas, water 59.1 1.7 6.2 10.0 1.6 1.5 1.5 1.6 -- Construction -4.3 5.0 3.0 1.0 4.2 4.1 4.0 3.8 Services 8.3 4.2 4.3 4.9 63.7 61.3 60.7 60.7 -- Wholesale/retail trade 9.7 -2.3 6.0 1.0 29.5 26.6 26.7 25.7 -- Hotels/ restaurants 14.3 2.9 -26.8 3.7 3.9 3.7 2.6 2.6 -- Transport / telecom 7.0 -8.0 5.0 7.6 13.0 11.0 11.0 11.3 -- Financial -0.9 28.2 13.2 8.0 7.0 8.3 9.0 9.2 -- Real est., business 1.4 0.0 2.5 0.1 3.3 3.0 3.0 2.8 -- Public administration 12.9 42.1 2.0 8.5 2.8 3.7 3.6 3.7 -- Education -6.4 38.2 2.7 16.7 1.4 1.8 1.8 2.0 -- Health 28.3 25.4 8.0 15.7 2.0 2.3 2.4 2.6 -- Other services 67.4 8.9 2.8 11.0 0.7 0.7 0.7 0.7 GDP at FC 5.1 8.3 5.4 4.8 100.0 100.0 100.0 100.0 GDP at Basic Price 5.6 8.4 5.1 5.0 96.6 96.7 96.4 96.6 Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2009 and projections for 2010 are made by the Research Team.

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The Gambia Monthly Economic Bulletin- June 2010 2.2 Consumer Price Index and Inflation As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflation decelerated significantly from 5.9% in May 2009 to 4.1% in May 2010. The 12-month average inflation rate also decelerated from 5.9% in May 2009 to 3.5% in May 2010. Food and drinks (with weights of 55.1% in overall CPI) recorded an annual point-to-point inflation rate of 5.4% in May 2010, down from 7.1% a year ago, and contributed 75.3% to overall inflation in May 2010. Non-food items (with weights of 44.9% in overall CPI) recorded annual inflation rate of 2.4% in May 2010, down from 4.7% a year ago and contributed 24.7% to total inflation. Among other groups, transport recorded an inflation of 2.5%, clothing 2%, utilities 1.8%, restaurants and hotels 4.2% and miscellaneous goods and services 7.3% in May 2010.
Weights Wi (%) 100.0 55.1 0.7 11.2 3.4 5.2 1.2 4.4 3.0 8.1 1.5 0.4 5.9 44.9

Table-2.2 CPI Inflation Rates in May 2010 (in percentage) May 2009 May 2010 Inflation Contributio Wi (CPIi1 Index Index (%) CPIi0) n3 (%) Overall 120.51 125.50 4.1 492.5 100.0 Food 125.75 132.49 5.4 371.1 75.3 Tobacco 106.13 106.76 0.6 0.4 0.1 Clothing 111.20 113.38 2.0 24.5 5.0 Utilities 122.11 124.33 1.8 7.5 1.5 Furnishing 114.97 116.45 1.3 7.7 1.6 Health 101.77 101.82 0.0 0.1 0.0 Transport 119.95 122.89 2.5 12.9 2.6 Telecom 101.98 102.5 0.5 1.5 0.3 Recreation 104.67 105.88 1.2 9.8 2.0 Education 102.25 102.99 0.7 1.1 0.2 Hotels 116.30 121.13 4.2 1.7 0.4 Misc. 125.79 134.92 7.3 54.1 11.0 Non-food 114.16 116.9 2.4 123.1 24.7 Source of basic data: Gambian Bureau of Statistics (GBOS). http://www.gbos.gm
Items

Contribution of an item to overall inflation is estimated by the following formula: Contribution of Item (i) = Wi (CPIi1 CPIi0) / Wi (CPIi1 CPIi0) expressed as a percentage. where CPIi1 = Consumer Price Index for Item (i) in the current period CPIi0 = Consumer Price Index for Item (i) in the previous period Wi = Weights for Item (i) and W = Total weights = Wi For example, contribution of food to overall inflation is estimated as 100 X 371.1 / 492.5 = 75.3%.

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The Gambia Monthly Economic Bulletin- June 2010

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The Gambia Monthly Economic Bulletin- June 2010 2.3 Projection of CPI inflation for the year 2010 On the basis of CPI trends until May 2010 and monthly seasonality, we have made three alternative projections of inflation rates for the year 2010, under the following assumptions: (1) Alternative-1: It is assumed that the CPI variation for a month over the previous month in 2010 will be the average CPI variation for the month over the previous month in last two years (2009 and 2008). Thus, June 2010 CPI is estimated by the following formula: Projected CPI for June 2010 = May 2010 CPI + [June 2009 CPI May 2009 CPI + June 2008 CPI May 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 previous month in 2010 will be the same as that for the respective month over the previous month in 2009. For example, CPI for June 2010 is estimated by the following formula: Projected CPI for June 2010 = May 2010 CPI+ (June 2009 CPI May 2009 CPI). For the subsequent 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 remain moderate in the range of 4.1% to 5.7% during 2010, and the year-end 12-month average inflation rate is expected to be around 4.5%. Table-2.3: Projections of CPI inflation for the year 2010 (in percentage)
2007 Index Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 2008 Index 2009 Index 2010Alt1 2010Alt2 2008 Inf.rate 5.1 5.0 3.1 1.4 1.6 2.2 3.8 5.0 6.3 6.6 6.6 6.8 2009 Inf.rate 7.0 7.0 6.7 6.3 5.9 5.4 4.0 3.0 2.3 2.3 2.6 2.7 2010Alt1 3.6 3.8 4.0 4.1 4.1 4.4 5.0 5.4 5.7 5.7 5.5 5.4 2010Alt2 2010 Alt3

106.8 6 107.0 1 109.3 6 111.6 4 112.0 5 111.9 8 111.9 5 112.0 9 111.8 6 111.9 5 112.1 3 112.2

112.3 1 112.3 4 112.7 3 113.2 1 113.8 3 114.4 8 116.2 1 117.6 5 118.9 6 119.2 9 119.5 4 119.9

120.1 3 120.2 5 120.3 0

120.36 120.51 120.61 120.84 121.15 121.75 121.99

124.4 2 124.7 8 125.0 8 125.3 0 125.5 0

125.88 126.86 127.73 128.69 128.97

124.4 2 124.7 8 125.0 8 125.3 0 125.5 0

125.60 125.83 126.14 126.74 126.98 127.69 128.18

3.6 3.8 4.0 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1

3.6 3.8 4.0 4.1 4.1 4.3 4.6 4.8 4.9 4.9 4.8 4.7

122.7 123.1

129.4 5 129.8

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The Gambia Monthly Economic Bulletin- June 2010 6 107.7 111.9 112.0 112.1 110.9 3 112.5 113.8 117.6 119.6 115.9 9 120.2 120.5 121.2 122.6 121.1 9 124.8 125.6 127.8 129.4 126.9

Q1 Q2 Q3 Q4
Ave

124.8 125.5 126.2 127.6 126.0

4.4 1.7 5.0 6.7 4.5

6.9 5.8 3.1 2.5

3.8 4.2 5.4 5.6

4.6

4.7

3.8 4.1 4.1 4.1 4.0

3.8 4.2 4.7 4.8 4.4

Note: Projections are made by the Research Team. Alternative projections 1, 2 and 3 are defined in the text above.

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The Gambia Monthly Economic Bulletin- June 2010 2.4 Government Fiscal Performance in January-May 2010 Columns (4), (5) and (6) of Table-2.4.1 present major item-wise revenue realization and expenditure of the government in the first five months (i.e. Jan-May) of 2008, 2009 and 2010 respectively. Columns (7) and (8) indicate annual percentage changes of major items of revenues and expenditure in Jan-May 2009 and Jan-May 2010 respectively over those in the corresponding period of the previous year. Governments fiscal performance was not satisfactory in Jan-May 2010 compared with Jan-May 2009. Tax revenues declined by 2.2% in Jan-May 2010 over Jan-May 2009 compared with a growth of 13.8% in Jan-May 2009 over Jan-May 2008. However, there was better performance of non-tax revenues in Jan-May 2010 than in Jan-May 2009. In Jan-May 2010, total expenditures & net lending declined marginally by 0.7% over JanMay 2009 due to 24.1% decline of capital expenditure and net lending, while current expenditure increased by only 10% over Jan-May 2009. Overall there was a fiscal deficit of (-) D233.2 million in Jan-May 2010, marginally higher than a fiscal deficit of (-) D231.6 million in Jan-May 2009. Despite contraction of expenditure, Basic Balance was in deficit at (-)D80.7 million while Basic Primary Surplus amounted to D280.1 million in Jan-May 2010, lower than Basic Primary Surplus of D324.5 million in Jan-May 2009. Table-2.4.1 Govt Financial Performance in Jan-May 2010 (Million Dalasi)
Items 2009 Actual 2010 Budget 2008 Jan-May 2009 Jan-May 2010 Jan-May
Ja-May-09 % ch over Ja-May 08 Ja-May-10 % ch over Ja-May-09

(1) (2) (3) (4) (5) (6) (7) (8) Revenue and grants 4893.0 5474.1 1624.5 1916.4 1899.8 18.0 -0.9 Domestic Revenue 3904.9 4413.2 1555.6 1755.1 1765.4 12.8 0.6 Tax Revenue 3517.5 3991.3 1386.7 1578.0 1543.8 13.8 -2.2 Nontax Revenue 387.4 421.9 169.0 177.1 221.6 4.8 25.1 Grants 988.1 1061.0 68.8 161.3 134.4 134.3 -16.7 Exp & Net Lending 5631.9 5772.9 1566.4 2148.0 2133.0 37.1 -0.7 Current Expenditure 3625.1 4455.6 1229.6 1472.4 1620.0 19.7 10.0 Personnel Emoluments 1191.8 1499.3 373.9 455.8 592.0 21.9 29.9 Other Charges 1691.9 2193.9 513.2 655.1 667.2 27.6 1.9 Interest 741.4 762.4 342.4 361.6 360.8 5.6 -0.2 External 153.2 176.3 72.7 83.3 72.6 14.7 -12.8 Domestic 588.3 586.1 269.7 278.3 288.2 3.2 3.6 Cap Exp & Net Lending 2006.8 1317.3 336.8 675.7 513.0 100.6 -24.1 Capital Expenditure 1889.1 1255.3 288.7 638.5 513.0 121.2 -19.7 Externally financed 1300.1 1360.0 172.2 355.8 286.9 106.7 -19.4 Net Lending 117.7 62.0 48.2 37.1 0.0 -22.9 -100.0 Overall Fiscal Balance -739.0 -298.7 58.1 -231.6 -233.2 -498.7 0.7 Basic Balance -427.0 0.3 161.4 -37.1 -80.7 -123.0 117.4 Basic Primary Balance 314.5 762.7 503.8 324.5 280.1 -35.6 -13.7 Nominal GDP (GBOS) 25313 27885 25313 27885 10.2 10.2 22978 Source: Statistics and Special Studies Unit, MOF. Notes: (1) Overall balance = (Revenue and Grants) minus (Expenditure and Net Lending); (2) Basic Balance = (Domestic Rev) less (Exp. and Net Lending excluding externally financed capital exp) and (3) Basic Primary Balance = Basic Balance plus interest payments

20

The Gambia Monthly Economic Bulletin- June 2010 Column (2) to (6) of Table-2.4.2 indicates the item-wise fiscal performance of the government, as percentage of GDP, for 2009-outturn, 2010-Budget, Jan-May 2008, JanMay 2009 and Jan-May 2010 outturn respectively. It is observed from the table that the fiscal performance in Jan-May 2010 is not better than in Jan-May 2009 in terms of percentages of GDP. The 2010 Budget has targeted basic balance at nil as per commitment to the IMF. But, there was a Basic deficit at (-) 0.3% of GDP in Jan-May 2010, significantly higher than that at (-) 0.1% of GDP in Jan-May 2009. The Budget for 2010 has targeted at total revenue and grants amounting to 19.3% of GDP (the same as that in 2009-Outturn) and total expenditure and net lending amounting to 20.3% of GDP (significantly lower than 22.2% of GDP in 2009-Outturn) resulting in an overall fiscal deficit amounting to 1.1% of GDP, significantly lower than 2.9% of GDP recorded in 2009-Outturn. Significant reduction in total expenditure is sought to be achieved through drastic cut in capital expenditure from 7.5% of GDP in 2009-Outturn to 4.4% of GDP in 2010 Budget. Such a cut in capital expenditure may be good to maintain fiscal sustainability, but may affect adversely development activities unless funds are supplemented by donors aid. Table-2.4.2 Govt Financial Performance in 2009 and Jan-May 2010 (As % of GDP at current market prices) 2009 2010 2008 2009 Items
(1) Revenue and grants Domestic Revenue Tax Revenue Nontax Revenue Grants Exp & Net Lending Current Expenditure Personnel Emoluments Other Charges Interest External Domestic Cap Exp & Net Lending Capital Expenditure Externally financed Net Lending Actual (2) 19.3 15.4 13.9 1.5 3.9 22.2 14.3 4.7 6.7 2.9 0.6 2.3 7.9 7.5 5.1 0.5 -2.9 -1.7 1.2 Budget (3) 19.6 15.8 14.3 1.5 3.8 20.7 16.0 5.4 7.9 2.7 0.6 2.1 4.7 4.5 4.9 0.2 -1.1 0.0 2.7 Jan-May (4) 7.1 6.8 6.0 0.7 0.3 6.8 5.4 1.6 2.2 1.5 0.3 1.2 1.5 1.3 0.7 0.2 0.3 0.7 2.2 Jan-May (5) 7.6 6.9 6.2 0.7 0.6 8.5 5.8 1.8 2.6 1.4 0.3 1.1 2.7 2.5 1.4 0.1 -0.9 -0.1 1.3

Overall Bal Inc. grants Basic Balance Basic Primary Balance

2010 Jan-May (6) 6.8 6.3 5.5 0.8 0.5 7.6 5.8 2.1 2.4 1.3 0.3 1.0 1.8 1.8 1.0 0.0 -0.8 -0.3 1.0

Source: Statistics and Special Studies Division, MOF. Notes: (1) Overall balance = (Revenue and Grants) minus (Expenditure and Net Lending); (2) Basic Balance = (Domestic Revenue) less (Expenditure and Net Lending excluding externally financed capital expenditure) and (3) Basic Primary Balance = Basic Balance plus interest payments

21

The Gambia Monthly Economic Bulletin- June 2010

2.5 Domestic Debt and Treasury Bills Outstanding

(a) Including CBG support, the total outstanding domestic debt increased to D7.5 billion (27% of GDP) at end-May 2010, from D6.6 billion (26.1% of GDP) a year ago. Outstanding Treasury bills increased by 8.2 percent to D5.2 billion and accounted for 68.7 percent of the stock (including TMA overdraft).. (b) The share of Treasury bills declined from 72.2% at end-May 2009 to 68.2% at end-May 2010, that of Sukuk Al-Salam increased from 1.2% to 1.8%, that of Govt. bonds declined from 5.1% to 4.7%, that of NIB treasury bills declined from 8.3% to 6.6% while share of TMA overdraft increased from 13.4% to 18.1% over the same period. Table-2.5-A Outstanding Domestic Public Debt as on 31 May 2010 Type of debt Million Dalasi Composition (in %) % change in May 2010 31 May 31 May 31 May 31 May over May 2009 2009 2010 2009 2010 Treasury bills 72.2 68.7 4,772 5,162 8.2 Sukuk Al-Salam 1.2 1.8 76 135 77.3 Marketable Govt 0 25 0.0 0.3 -Bonds Non-marketable GNPC Non-mark.Govt Bond NIB Treasury Notes TMA Overdrawn Total dom. Debt Nominal GDP As % of GDP Excluding overdraft 85 250 85 250

0.0 0.0 -9.3 54.4 13.7 10.2 3.2 -2.5

1.3 3.8 8.3 13.4 100.0

1.1 3.3 6.6 18.1 100.0

547 883
6,613 25313 26.1 22.6

496 1,364
7,517 27885 27.0 22.1

Domestic Debt Sustainability As per the analysis made by the CBG, the current level of Gambias domestic debt is not sustainable. Out of the three sustainability indicators given in Table-2.5-B, one indicator viz. debt service to revenue ratio is not satisfied. Table-2.5-B Primary Benchmarks for Domestic Debt Sustainability Ratios (%) Item 1. Debt service/Rev ratio 2. Debt /GDP ratio 3. Debt/ Revenue ratio Threshold 28-63 20-25 92-167 2006 142 2007 124 2008 118 2009 91 2010 95

24.5 22.1 25.7 24.5 22.9 151.5 131.1 169.6 154.5 154.8 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. The thresholds used here are those used by the Debt Relief International (DRI) for many HIPC countries. Source: Central Bank of Gambia

22

The Gambia Monthly Economic Bulletin- June 2010 2.6 Treasury Bills Yields 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 significant decline 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 and yield on 182-day bills from 12.1% in Jan 2009 to 12.9% in Dec 2009. In view of the declining trend of inflation rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, average yields of the 91-day, 182-day and 364-day bills had declining trend since then and fell from 11%, 12.9% and 14.3% respectively in December 2009 to 9.8%, 10.8% and 13.3% respectively in May 2010.
Table-2.6 Average yields on treasury bills (in percentage per annum) 2009 2010 2008 91-D 162-D 364-D 91-D 182-D 364-D 91-D 182-D 10.5 12.1 14.4 10.3 12.0 10.6 11.4 13.6 11.1 12.8 14.4 10.7 11.7 10.9 11.9 13.7 11.4 12.7 14.4 11.3 11.5 11.0 12.1 13.6 12.0 13.0 14.6 11.0 11.5 10.9 11.9 13.3 12.5 13.8 15.3 9.8 10.8 10.2 11.3 13.0 13.0 13.8 15.6 10.0 11.2 13.3 11.5 12.0 14.4 9.6 10.6 12.6 10.2 11.2 13.3 8.8 10.2 12.1 10.4 11.7 14.3 8.9 11.0 13.1 10.8 12.1 14.2 10.3 11.4 13.6 10.8 12.3 14.0 10.1 13.4 13.7 11.0 12.9 14.3 9.9 12.5 14.0

364-D

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

13.6 13.2 12.9 13.1 13.3

Trends of Yields of Treasury Bills during 2007-2010

23

The Gambia Monthly Economic Bulletin- June 2010 2.7 Money Supply Broad money supply (M2) recorded an annual growth of 23.6% in April 2010, compared to 18.8% a year ago. While quasi money increased by a faster pace of 29.3%, narrow money increased by 17.6 percent. On the supply side, 23.6% growth of broad money in April 2010 was supported by 9.6% growth in currency in circulation outside banks, 22.5% growth in demand deposits, 17% growth in savings deposits and significant growth of 44.8% in time deposits. On the demand side, growth was due to 1.8% growth in net foreign assets and 34.1% growth in net domestic assets over a year. Domestic credit increased by 22.3% from D6.7 billion in April 2009 to D8.2 billion in April 2010, supported by 25% growth in government borrowing, 23.3% growth in credits to public entities and 20% growth in credits to the private sector, over a year. Table-2.7 Money Supply and Demand in April 2010
Components April 2008 Million Dalasi 8307 4041 April 2009 Million Dalasi 9870 4806 April 2010 Million Dalasi 12201 5653 April 2009 % share 100 49 18 30 51 29 23 100 33 25 8 67 68 27 6 35 0 0 April 2010 % share 100 46 16 30 54 27 27 100 27 25 2 73 67 28 6 34 0 6 April-09 % ch. over April-08 18.8 18.9 17.8 19.6 18.7 11.6 29.1 18.8 3.2 0.9 11.1 28.2 31.9 46.0 103.3 24.1 -100.0 -106.6 April-10 % ch. over April-09 23.6 17.6 9.6 22.5 29.3 17.0 44.8 23.6 1.8 26.1 -72.9 34.1 22.3 25.0 23.3 20.0 0 -8606.2

1.Money Supply (M3) (2+3) 2.Narrow Money (2.1+2.2) 2.1 Currency 2.2 Demand deposits 3.Quasi money (3.1+3.2) 3.1 Savings deposits 3.2 Time deposits Demands for money (1+2) 1.Net foreign assets (1.1+1.2) 1.1 Monetary Authorities 1.2 Commercial banks 2.Net Dom. Assets (2.1+2.2) 2.1 Domestic credit (a) Credits to government (b) Credits to public entities (c) Credits to private sector (d) Credits to forex bureau 2.2 Other items, net

1535
2507 4265 2530 1736 8307 3113

1,808
2998 5064

1,981 3,672
6547

2,823 2,241
9870 3214

3,301 3,246
12201 3272 3058 214 8929 8150 3365 683 4102 0 778

2,403 711
5193 5054 1844 273 2754 183 140

2,424 790
6656 6665

2,693
554 3418 0 -9

Source: Central Bank of Gambia

24

The Gambia Monthly Economic Bulletin- June 2010

2.8 Performance by Commercial Banks

(a) The Gambian banking industry consists of 13 banks with highly skewed distribution of assets. The industry is dominated by three large banks holding almost two-thirds of the total assets, although their share has declined over the years. (b) The banking industry continues to show increasing signs of resilience with growth in assets, capital and reserves. The industrys total assets increased to D15.5 billion in April 2010, up by 22.8% over a year, and the asset quality is satisfactory. (c) The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to 18.7% in March 2010 and was well above the statutory norm at 8% and all the banks satisfied the minimum requirement. (d) However, nonperforming loans as a ratio of gross loans deteriorated from 12.0% in December 2009 to 16.9% in March 2010. This was due to the Central Banks inclusion of restructured loans in non-performing category. However, all loans were adequately provisioned. (e) Loans and advances to the private sector, accounting for 51% of total domestic credit, increased to D4.7 billion in March 2010 from D3.4 billion in March 2009. (f)Credit to agriculture, manufacturing and building and construction increased by 30.0%, 47.0% and 28.3% respectively. Similarly, credit to distributive trade and other commercial loans rose by 41.6% and 24.1% during the same period. (g) In contrast, loans and advances to fishing and tourism declined marginally by 0.25% and 0.1% respectively. Table-2.8 Sectoral Distribution of Bank Loans (Million Dalasi) Items Agriculture Fishing Manufacturing Construction Transportation Trade Tourisum Financial Personal loans Others Total March 2009
283.2 14.4 137.9 364.4 322.4 695.9 229.1 122.0 636.6 622.9

3428.7

March 2010 404.5 14.4 260.3 508.2 320.2 1191.6 228.8 179.2 775.0 820.7 4703.0

Composition (%) Mar-2009 Mar-2010 8.3 8.6 0.4 0.3 4.0 5.5 10.6 10.8 9.4 6.8 20.3 25.3 6.7 4.9 3.6 3.8 18.6 16.5 18.2 17.4 100.0 100.0

GR (%) Mar-2010 30.0 -0.3 47.0 28.3 -0.7 41.6 -0.1 31.9 17.9 24.1 25.2

Source: Central Bank of Gambia (CBG)

25

The Gambia Monthly Economic Bulletin- June 2010

2.9 Commercial Banks Assets

Total assets of the commercial banks increased by 22.8% on year-on-year basis from D12.6 billion at end-April 2009 to D15.5 billion at end-April 2010. Gambian banks do not have large exposure to foreign assets or foreign liabilities. At end-April 2010, foreign assets constituted only 6.9% of total assets (foreign exchange 1.1%, balances abroad 5.5% and foreign investment 0.3%), down from 8.9% a year ago (foreign exchange 1.7%, balances abroad 6.3% and foreign investment 0.9%). Gambian banks also do not have large contingent liabilities. At end-April 2010 contingent liabilities increased by 24.5% over one year and constituted only 13.2% of total liabilities, marginally up from 13% a year ago. At end-April 2010, loans and advances increased by 27.5% over a year and constituted 28.6% of total assets, compared to 27.6% a year ago. At end-April 2010, investments in government Treasury Bills by the banks increased by 30.7% over a year and constituted 25% of their total assets. As expected, three large banks had the dominant share. At end-April 2010, loans and advances to the public sector increased by 27.5% over a year, while those to the private sector also increased by 27.5% over a year ago.
Apr-2008 173.5 201.8 879.5 850.1 29.4 785.6 21.9 2,668.2 135.7 2,532.50 3,150.8 2,892.80 160.6 97.4 609.7 1,071.90 867.6 10,430.5 9,358.6 1,084.8 Apr-2009 165.1 216.8 954.0 951.8 2.2 798 185.5 3,478.7 469.5 3,009.20 3,250.9 2,960.40 180.9 109.6 889.7 1,641.20 1,040.10 12,620.0 10,978.8 1,124.4 Apr-2010 236.0 176.6 1,525.4 1,291.6 233.9 850.4 88.8 4,436.2 598.7 3,837.5 4,049.8 3,868.4 131.6 49.8 1,191.4 2,043.0 902.4 15,499.9 13,456.9 1,076.8 % ch. Ap09 % ch. Ap10 Composition (%) Apr-2009 Apr-2010 over Apr08 over Apr09 1.3 1.5 -4.8 42.9 1.7 1.1 7.4 -18.5 7.6 9.8 8.5 59.9 7.5 8.3 12.0 35.7 0.0 1.5 -92.5 10530.5 6.3 5.5 1.6 6.6 1.5 0.6 747.0 -52.1 27.6 28.6 30.4 27.5 3.7 3.9 246.0 27.5 23.8 24.8 18.8 27.5 25.8 26.1 3.2 24.6 23.5 25.0 2.3 30.7 1.4 0.8 12.6 -27.2 0.9 0.3 12.5 -54.5 7.0 7.7 45.9 33.9 13.0 13.2 53.1 24.5 8.2 5.8 19.9 -13.2 100.0 100.0 21.0 22.8 87.0 86.8 17.3 22.6 8.9 6.9 3.7 -4.2

Table-2.9 Commercial Banks Assets at the end-April 2010 (Million Dalasi)

Assets (Million Dalasi) 1. Notes and coins 2. Foreign exchange 3. Local Bank balance ii. CBG iii. Banks locally 4. Balances abroad 5. Bills purchased 6. Loans and advances i. Public sector ii. Private sector 7. Investments i. Govt Treasury Bills ii. Others iii Foreign Invest. 8. Fixed assets 9. Guarantees 10. Other assets 11. Total assets (1 to 10) 12. Net Balance (11-9) Memo: Foreign Assets

Source: Central Bank of Gambia.

26

The Gambia Monthly Economic Bulletin- June 2010

2.10 Commercial Banks Liabilities

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities. At end-April 2010, external sector related liabilities constituted only 2% of total liabilities (non-residents deposits 1.2%, balances with banks abroad 0.1% and external debt 0.7%), up from 1.7% a year ago (non-residents deposits 1.5%, balances with banks abroad 0.1% and external debt 0.2%). At end-April 2010 bank deposits increased by 26.8% over a year, aided by a growth of 22.5% in demand deposits, 17% in savings deposits and 44.8% in time deposits. At end-April 2010 banks capital and reserves increased by 12.7% and bank balances declined by 31%, while borrowings increased by more than four times over a year.

Table-2.10 Commercial Banks Liabilities at the end-April 2010 (Million Dalasi)

Liabilities (Million Dalasi) 1. Capital and reserves 2. Demand deposits i Residents ii Non residents iii Government entities 3. Savings deposits i Residents ii Non residents iii Government entities 4. Time deposits i Residents ii Non residents iii Government entities Total deposits 5. Bank Balances i HO & branches ii Other banks abroad iii. Banks locally 6. Borrowings from i Cent. bank of Gambia ii Other banks locally iii HO & branches iv Other banks abroad v. Other sources 7. Guarantees 8. Other liabilities Apr-2008 1,238.00 2,506.9 2,217.60 30.8 258.5 2,529.6 2,445.80 68.9 14.9 1,735.7 1,255.50 17.2 463 6,772.2 136.2 8.6 127.6 0 237.8 0 0 114.2 123.6 0 1,071.90 Apr-2009 1,501.50 2,998.1 2,588.00 28.4 381.7 2,822.8 2,718.80 72.1 31.9 2,241.2 1,567.90 89.2 584.1 Apr-2010 1,692.2 3,672.1 3,338.3 30.7 303.0 3,301.4 3,204.7 90.8 6.0 3,245.8 2,275.1 % ch. Ap09 % ch. Ap10 Composition (% ) Apr-2009 Apr-2010 over Apr08 over Apr09 11.9 10.9 21.3 12.7 23.8 20.5 0.2 3.0 22.4 21.5 0.6 0.3 17.8 12.4 0.7 4.6 63.9 1.5 1.4 0.1 0.0 1.2 0.0 0.0 1.0 0.2 0.0 13.0 8.6 100.0 87.0 23.7 21.5 0.2 2.0 21.3 20.7 0.6 0.0 20.9 14.7 0.4 5.8 65.9 0.8 0.8 0.1 0.0 4.9 0.0 0.1 4.0 0.7 0.0 13.2 4.3 100.0 86.8 53.1 10.9 21.0 17.3 19.6 16.7 -7.8 47.7 11.6 11.2 4.6 114.1 29.1 24.9 418.6 26.2 19.0 39.1 1981.4 -91.8 -38.8 22.5 29.0 8.3 -20.6 17.0 17.9 25.9 -81.3 44.8 45.1 -28.1 55.2 26.8 -31.0 -32.8 1.1 416.8

64.1 906.6 8,062.1 10,219.3 189.4 130.7 179 120.2 10.4 10.5 0 145.5 0 0 125.1 20.4 0 1,641.20 751.9 20.1 622.5 109.3 2,043.0 662.8 15,499.9 13,456.9

9.5

397.6 436.0 24.5 -38.7 22.8 22.6

974.3 1,080.50 9. Total liabilities (1 to 8) 10,430.50 12,620.10 9,358.60 10,978.90 10. Net balance (9-7)

Mem Central Bank o: 368.1 Source:Foreign liabl. of Gambia

220.5

305.5

1.7

2.0

-40.1

38.6

27

The Gambia Monthly Economic Bulletin- June 2010

2.11 Interest Rates and Central Bank Policy Rates

Interest rate on treasury bills declined from 31% in 2003 to 14.9% in 2006 and further to 13.7% in 2007. It ranged in between 13.1% to 14.7% in 2008 and between 12.3% to 14.3% in 2009. The bank rate 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. It has remained at 10% since then. However, with the introduction of the Monetary Policy Committee (MPC) Policy Rate, the Bank rate has become ineffective and non-operational. In response to tight monetary conditions and against a backdrop of falling inflation, the CBG reduced 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 point from 14% to 15% in June 2007, and further to 16% in October 2008. The rediscount rate remained unchanged at 16% since then until November 2009. In view of the declining trend of inflation rates, the MPC reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, the yield on the 91-day and 182-day Treasury bills declined to 9.19% and 10.24% in May 2010 from 10.14% and 12.13% in December 2009. Similarly, the yield on the 364-day bills decreased to 13.0% from 13.65% during the same period. Despite significant fall of the yields on treasury bills in recent years, maximum short-term deposit rates and commercial banks lending rates remain very high, and there exist wide interest rate spreads. Successful disinflation allowed the weighted yield on treasury bills to fall from over 25% in early 2005 to 10.9% in May 2010. By contrast, commercial banks lending rates remained sticky above 20% due to high operating costs and high risks of bank credits.

Table-2.11 Trends of Nominal Interest rates (per cent per annum, end period)
Items Bank lending rare- min Bank lending rare- max Deposit rate (SB) min Deposit rate (SB) max Time dep (3 months) min Time dep (3 months) max Time dep (6 months) min Time dep (6 months) max Time dep (12 month) min Time dep (12 month) max Govt. treasury bills CBG Bank Rate CBG Rediscount Rate Bank lending rate Deposit rate (SB) Time deposits (3 months) Time deposits (6 months) Time deposits (12 month) Inflation (GDP-Deflator) CPI-Inflation Real GDP-Growth Rate Exch. Rate change (%)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

18 24 8 10 9.5 12.5 10 12.5 11 12.5 12 10 15 6 2 3 2.5 1.5 3.6 0.9 5.5 12.2

18 17 21 21 21 24 24 36.5 36.5 30 8 8 8 10 5 10 10 17 17 10 9.5 6 7 8 5 12.5 13 22 22 14 10 6 8 8 7 12.5 13 22 22 15 11 7 10 12 7 12.5 13 22 23 13 15 20 31 30 16 13 18 29 28 14 18 23 34 33 19 Range = Maximum-Minimum 6 7 15.5 15.5 9 2 2 9 7 5 3 7 15 14 9 2.5 7 14 14 8 1.5 6 12 11 6 Factors Influencing Interest Rates 14.9 15.0 22.9 13.6 3.9 4.5 8.6 17.0 14.3 5.0 5.7 0.7 2.4 2.1 -0.1 22.7 27.0 43.2 5.3 -4.8

18 28 5 7 5 8.5 6 13 6 13 12.8 9 14 10 2 3.5 7 7 0.0 2.1 3.1 -1.8

18 27 5 7 5 12.9 6 12.9 7 12.9 13.7 10 15 9 2 7.9 6.9 5.9 2.0 5.4 6.3 -11.4

18 27 4 7 5 13.6 6 13.6 7 13.6 13.6 10 16 9 3 8.6 7.6 6.6 8.0 4.9 6.3 -9.8

18 27 4 7 5 15.5 6 15.5 6 15.5 14.2 10 16 9 3 9.5 9.5 9.5 4.7 4.5 5.0 15.9

2.12 BOP, Foreign Exchange Reserves and Exchange Rates 28

The Gambia Monthly Economic Bulletin- June 2010

(a) BOP Situation in 2009 The overall BOP situation in 2009 was better than expected earlier. The revised balance of payments estimates for 2009 indicate an improvement in the overall BOP situation from a deficit of US$23.35 million in 2008 to a surplus of US$6.79 million in 2009. While the current account improved to a surplus of US$63.29 million compared to a surplus of US$12.35 million in 2008, the capital and financial account balance recorded a decline from US$11 million in 2008 to (-) US$70.08 in 2009. The goods account worsened from a deficit of US$68.25 million in 2008 to US$85.98 million in 2009, but below the 2009 projection of US$141.20 million. Exports and imports declined by 8.5% and 3.7% to US$170.91 million and US$261.10 million compared to a year ago. Net services declined from US$33.37 million in 2008 to US$21.65 million in 2009, net income improved from a deficit of US$34.26 million in 2008 to a lower deficit of US$8.13 million in 2009, while net transfers improved significantly from US$89.49 million in 2008 to US$135.75 million in 2009 due to increase of both official and non-official transfers including remittances by the Gambians living abroad. (b)BOP Situation in 2010-Q1 The year 2010 has started with a significant improvement in the overall BOP situation as compared with that in the first quarter of 2009. Current account recorded a surplus of D642 million in 2010-Q1 compared to a deficit of (-) D108 million in 2009-Q1, due to significant improvements in exports and current transfers in 2010-Q1. Capital and financial accounts also recorded an increase from (-)D751.31 Dalasi to D104 million in 2010-Q1. Consequently, the overall balance of payments showed a surplus of D746 million in 2010Q1 compared with a deficit at (-)D859 in 2009Q1. (c) Foreign Exchange Reserves Volume of transactions in the domestic foreign exchange market, measured by aggregate sales and purchases of foreign exchange in the first five months of 2010 amounted to D16.69 billion or US$691.02 million compared to D13.72 billion or US$520.50 million in 2009. As at end-April 2010, gross international reserves, including the SDR allocations, stood at US$177.63 million, equivalent to 7.0 months of import cover compared to US$116.3 million or 4.9 months of import cover.

29

The Gambia Monthly Economic Bulletin- June 2010 Table-2.12 Balance of Payments in 2008-2009 and 2010Q1 in Million GD and US$
Period 1.Current A/C =2+3+4+5 2.Goods (2.1+2.2) 2.1 Exports FOB -- Exports trade stat -- Re-exports --Goods in transit 2.2 Imports FOB --Imports trade stat --For re-exports 3. Services --Transportation --Travel --Communications --Insurance --Construction -- IT --Other Business 4. Income --Investment income --Compensation of labor 5. Current transfers 5.1 Government 5.2 Remittances 5.3 Other transfers 6.CapitalFin.A/C=7+8 7. Capital 8. Financial=8.1+8.2+8. 3 8.1 FDI 2008 Million GD 207.1 (1,558.4) 4,536.5 1,691.1 2,489.1 356.2 (6,094.8) (7,111.8) 1,017.0 713.5 (434.1) 1,624.1 214.4 (146.0) 76.0 (70.9) (550.0) (757.4) (931.4) 174.0 1,809.3 137.2 1,195.8 476.4 463.4 24.4 439.1 1,555.7 2008 Mln US$ 12.3 (68.2) 202.8 76.1 110.7 16.0 (271.1) (316.3) 45.2 33.4 (19.4) 73.5 9.8 (6.5) 3.5 (2.8) (24.7) (34.3) (42.1) 7.8 81.5 6.3 52.6 22.6 11.0 1.1 9.9 70.1 2009Q1 Million GD (107.6) (683.9) 934.5 239.1 660.9 34.5 (1,618.4) (1,888.4) 270.0 367.2 (123.6) 612.7 52.4 (38.0) 12.9 (23.6) (125.5) (74.8) (115.1) 40.3 283.9 108.3 420.0 (244.4) (751.3) (751.3) 262.7 (827.8) (197.1) 62.8 (259.9) (630.7) (528.3) 214.2 276.8 (62.5) (316.7) (186.2) (858.9) 2009Q1 Mln US$ (4.1) (26.1) 35.7 9.1 25.3 1.3 (61.8) (72.2) 10.3 14.0 (4.7) 23.4 2.0 (1.5) 0.5 (0.9) (4.8) (2.9) (4.4) 1.5 10.8 4.1 16.0 (9.3) (28.7) (28.7) 10.0 (31.6) (7.5) 2.4 (9.9) (24.1) (20.2) 8.2 10.6 (2.4) (12.1) (7.1) (32.8) 2009 million GD 1,692.7 (2,282.5) 4,646.0 1,706.1 2,829.6 110.3 (6,928.5) (8,084.6) 1,156.1 571.1 (480.2) 1,421.7 264.0 (165.9) 66.3 (35.9) (499.0) (214.9) (374.9) 160.0 3,619.1 798.6 1,741.6 1,079.0 (1,864.3) (1,864.3) 1,050.9 (1,029.8) 543.3 378.7 164.7 (1,573.1) (2,357.8) 526.1 798.5 (272.4) 258.7 (1,885.4) (171.6) 2009 Mln US$ 63.3 (86.0) 175.1 64.3 106.6 4.2 (261.1) (304.6) 43.6 21.7 (18.1) 53.7 10.0 (6.3) 2.5 (1.4) (18.8) (8.1) (14.2) 6.0 135.7 30.0 65.7 40.1 (70.1) (70.1) 39.6 (39.3) 20.2 14.2 6.0 (59.6) (88.9) 19.8 30.1 (10.3) 9.5 (70.3) (6.8) 2010Q1 million GD 642.5 (416.7) 1,103.7 466.9 620.9 15.8 (1,520.4) (1,774.1) 253.7 156.1 (224.6) 447.4 93.7 (33.4) (2.5) (124.5) (126.0) (103.4) (22.5) 1,029.0 248.8 242.6 537.6 104.2 104.2 262.7 119.1 276.5 94.7 181.8 (157.3) (595.1) 224.3 292.2 (67.9) 213.5 (277.7) 746.6 2010Q1 mln USD 23.8 (15.5) 41.0 17.3 23.0 0.6 (56.4) (65.9) 9.4 5.8 (8.3) 16.6 3.5 (1.2) (0.1) (4.6) (4.7) (3.8) (0.8) 38.2 9.2 9.0 20.0 3.9 3.9 9.8 4.4 10.3 3.5 6.7 (5.8) (22.1) 8.3 10.8 (2.5) 7.9 (10.3) 27.7

8.2 Other inv.=A+B+C (1,308.5) (68.1) (A) Assets=i+ii 93.5 0.2 (i) Loans 251.1 11.5 (ii) Deposits (157.6) (11.3) (B) Liabilities=i+ii (1,401.9) (68.3) (i) Trade credits (1,472.0) (69.3) (ii) Govt Loans=a+b 16.4 0.6 (a) Disbusements 339.6 15.1 (b) Amortization (323.2) (14.5) (C) Curr. & dep. 53.7 0.4 8.3 Reserve Assets (increase if negative) 191.8 7.9 Overall Balance (surplus if negative) 670.5 23.4 SOURCE: Central Bank of The Gambia.

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The Gambia Monthly Economic Bulletin- June 2010 2.13 Exchange Rate From end-December 2009 to end May 2010, the Dalasi depreciated by 2.21% against the US dollar, while it appreciated against the Euro by 2.03% and Pound Sterling by 1.3%. Over one year, in May 2010 Dalasi depreciated against US$ by 7.4%, against SEK by 8.3%, against CHF by 14.6% and against CFA by 5.6%, while it appreciated against the UK by 5.5% and against Euro marginally by 0.7%. Table-2.13 End-period mid-market exchange rates (Dalasi per unit of foreign currency) Year SEK(10 CHF CFA 0) (5000) 2009 Jan 37.25 26.07 325.12 20.85 262.81 Feb 37.38 26.11 305.29 22.04 257.78 Mar 38.18 26.38 309.62 23.31 259.30 Apr 39.05 26.80 321.49 23.00 262.17 May 41.40 26.74 325.95 22.40 265.98 June 43.13 26.87 347.89 21.96 272.87 July 43.31 26.79 346.46 24.42 277.53 Aug 43.80 26.63 326.25 24.36 281.45 Sept 42.99 26.95 325.34 25.47 283.58 Oct 43.48 26.91 377.70 26.07 297.13 Nov 43.88 26.93 348.88 26.65 295.53 Dec 43.04 26.94 348.01 25.81 288.26 Ave 41.41 26.68 334.00 23.86 275.37 2010 Jan 43.01 26.94 362.62 25.29 289.32 Feb 42.32 26.94 372.91 25.27 284.26 Mar 40.79 27.01 364.08 25.09 273.22 Apr 41.00 27.25 368.69 25.03 281.41 May 39.11 28.73 353.12 25.67 280.85 Year Month UK US$ SEK(10 CHF CFA 0) (5000) Rate of appreciation (-) / depreciation (+) of Dalasi over the same period of previous year (in Percentage) 2009 Oct 7.4 8.1 14.4 29.4 15.1 Nov 8.2 2.5 8.5 32.8 14.4 Dec 7.2 1.5 -8.3 12.5 11.2 2009 Average 0.7 19.3 0.0 19.5 10.6 2010 Jan 15.5 3.3 11.5 21.3 10.1 Feb 13.2 3.2 22.1 14.6 10.3 Mar 6.8 2.4 17.6 7.6 5.4 Apr 5.0 1.7 14.7 8.8 7.3 May -5.5 7.4 8.3 14.6 5.6
Source: Central Bank of Gambia (CBG)

Month

UK

US$

Euro 33.52 33.6 35.22 35.32 37.00 37.04 38.06 37.68 38.61 39.61 40.15 39.87 37.14 39.03 39.02 37.11 36.05 36.72 Euro

20.4 20.6 11.8 14.0 16.4 16.1 5.4 2.1 -0.7

3. Recent Policy Developments and Development Issues 31

The Gambia Monthly Economic Bulletin- June 2010

3.1 IMF Executive Board Completes Sixth Review Under The Gambias ECF Arrangement and Approves a 12-Month Extension and US$ US$7.1 Million Augmentation As per the Press Release No. 10/55 dated February 19, 2010, posted on the International Monetary Fund (IMF) Website, the Executive Board of the IMF completed the sixth review of The Gambias economic performance under a program supported by the Extended Credit Facility (ECF)4. The Board approved a waiver for the non-observance of the fiscal performance criterion based on corrective actions, notably the governments 2010 budget approved by the National Assembly, which aims for a near-zero basic balance. The Boards decision allows the government to request a further disbursement amounting to SDR 2.0 million (about US$ 3.0 million), bringing total disbursements under the ECF to The Gambia to SDR 20.2 million (about US$30.8 million). The Executive Board approved an extension for one year and an augmentation by SDR 4.67 million (about US$ 7.1 million) of The Gambia's ECF arrangement, originally approved on February 21, 2007 (vide Press Release No. 07/28). The IMF Board complemented the Gambian authorities for pursuing satisfactory economic policies which contributed to robust economic growth and low inflation despite ongoing global economic crisis. However, they observed that even after extensive debt relief, The Gambia remains at high risk of debt distress. Besides the yields on Treasury Bills are ruling high mainly due to fiscal slippages and the governments recourse to domestic borrowing. The governments efforts to strengthen its debt management strategy are, therefore, welcome. Until the debt burden is reduced, Government should continue to limit external borrowing to highly concessional loans. The governments budget for 2010 appropriately targets a near-zero basic balance that will return The Gambia to a path of declining domestic debt. Fiscal restraint will ease pressure on TBill yields and eventually generate fiscal savings for other spending priorities. However, disciplined budget execution will be key to achieve these results, and the governments new action plan to improve public financial management is in the right direction to achieve such fiscal discipline. The IMF appreciates the governments commitment to maintain low inflation and to take steps to ease pressures on interest rates. The reinforced banking supervisory framework, including the phased-in increase in the minimum capital requirement, will contribute to the development of the sound and efficient banking system.

The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Funds main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF currently carries a zero interest rate, with a grace period of 5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

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The Gambia Monthly Economic Bulletin- June 2010 3.2 Assessment of Quantitative Targets agreed with IMF under PRGF The Gambias three-year Poverty Reduction and Growth Facility (PRGF) arrangement was approved by the IMFs Executive Board in February 2007. The third review was completed on September 8, 2008 and the Fourth Review was done in February 2009. The updated Letter of Intent (LOI) and Memorandum of Economic and Financial Policies (MEFP), and Technical Memorandum of Understanding (TMU) were signed jointly by the then honorable Finance Minister Mr. Mousa Gibril Bala-Gaye and honorable Governor, Central Bank of Gambia, Mr. Momodou Bamba Saho, on February 3, 2009. The MEFP reviewed progress in implementing the Governments PRGF supported program in 2008, and set out the policies that the Government will pursue in 2009. The Government of Gambia committed that the program, as usual, will continue to be monitored based on agreed quantitative targets and a set of structural performance criteria and benchmarks indicated in the MEFP as per program reviews. The quantitative financial targets for endMarch 2009 and end-September 2009 are performance criteria; and those for endDecember 2008, endJune 2009, and end-December 2009 are indicative targets. Performance of Monitored Variables at the end of December 2009 With regard to the performance of the monitored variables under the PRGF vis--vis their endDecember 2009 targets, the CBG through pro-active, consistent and prudent use of various monetary policy instruments, was able to meet comfortably all the quantitative targets. The Net useable reserves (NUR) totaled US$148.9 million at end-December 2009 and were above the end-December target (floor) by US$0.13 million. Similarly, the Net Domestic Assets (NDA) of the Central Bank amounting to D1.4 billion was below target ceiling by D50.9 million. The target for basic fiscal balance (floor) was fixed at D685.6 million for the end of December 2009. However, despite good revenue realization, Government failed to achieve this target due to expenditure pressures. Government achieved a basic balance of (-) D426.9 million at the end of December 2009, which was well below the target. Government did not default on the payment of debt services on any external debt. As agreed under the Program, the government did not contract or guarantee any new non-concessional external loan having maturity exceeding one year. There is also no non-concessional external debt outstanding on government account having original maturity exceeding one year.

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