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| Vegetable sellers and buyers at local market in Serrekunda, The Gambia |
Gambia’s Central Bank Monetary Policy Committee (MPC) has confirmed the continuous weakening of the Dalasi against all major international currencies traded in the foreign exchange market.
Year-on-year
as of December 2012, the local dalasi currency depreciated against the US
dollar by 11.6 percent, pound sterling (18.0 percent) and Euro (11.5 percent),
the MPC said on February 4, 2013.
Despite
the significant drop in value of the currency, the Gambia Bureau of Statistics,
GBOS, projected a growth of 4.0 percent in real Grass Domestic Product (GDP) of
The Gambian economy in 2012.
The
slight growth followed a contraction of 4.3 percent in 2011.
“Preliminary
projections indicate that output would expand by 10.0 percent in 2013 premised
on strong growth of agriculture and tourism,” GBOS projected.
The
Gambia’s real GDP grew by 6.7% in 2009, declining to 5.5% in 2010 and further
decreased to 3.3% in 2011 – as a result of a a decline in tourism and
agricultural especially the total crop failure that gripped the country in
2011.
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| At the bottom of the economy: A man on Donkey cart grappeling to make ends meet on the streets of Serrekunda (Photo credit: Wikipedia) |
On
Monday, the MPC said money supply failed to grow to its estimated target of 8.5
percent; it only grew by 7.8 percent in 2012 compared to 11.0 percent in 2011.
But
it said the reserve money, which is the Central Bank’s operating target, rose
by 6.8 percent compared to 15.6 percent in 2011. It actually surpassed by 1
percent of a projected growth of 5.8 percent in 2012.
The
Committee warns that it is essential to continue strengthening the resilience
of banks in order to ensure effective transmission of monetary policy.
“Bank
soundness is also critical to protect depositors and other creditors as well as
ensuring an appropriate provision of credit to the economy,” they said.
The
warning followed the impromptu closure of a major financial institution, Prime
Bank, two weeks ago. Prime Bank was forced
to close after failed to meet the Central Bank’s (CBG) capital requirement of
D200 million.
But the MPC said the banking industry remains “fundamentally
sound”.
In December, an
International Monetary Fund (IMF) mission to the country led by Mr. David Dunn revealed that the recent directive by
President Yahya Jammeh on the exchange rate and shipments of U.S. dollars led
to some “disruptions” in the foreign exchange market and created “uncertainty”
about The Gambia’s exchange rate policy.
“The
industry’s capital and reserves increased to D3.06 billion in December 2012
compared to D2.63 billion in 2011,” the Committee said.
This,
they said, is mainly on account of capital injection totaling D392.4 million.
The
MPC also said the average risk-weighted capital adequacy ratio also increased
to 33.0 percent compared to 25.1 percent in 2011 and the minimum requirement of
10 percent.
Domestic debt increases
Total
industry assets increased to 20.6 billion or 10.5 percent from 2011. Loans and
advances, accounting for 26.4 percent of total assets decreased toD5.3 billion,
or 2.4 percent from a year ago, they added.
Credit
to distributive trade, building and construction and other commercial loans
increased by 5.0 percent, 11.0 percent and 26.0 percent respectively.
In contrast, the CBG’s MPC said advances to
agriculture, transportation and tourism declined by 3.0 percent, 6.0 percent
and 5.0 percent respectively.
The
non-performing loan ratio also decreased to 11.6 percent of gross loans, lower
than the 12.6 percent in 2011, while deposit liabilities rose to D13.08
billion, or 2.1 percent over 2011.
But
the financial industry’s net profit rose from D12.2 million in 2011 to D102.2
million in D2012. The return on assets and return on equity increase to 1.98
percent and 3.33 percent compared to 0.26 percent and 0.46 percent respectively
in 2011.
“The outstanding domestic dept increased to D10.7
billion (37 percent of GDP) in 2012, or 14.3 percent from a year ago,” the CBG,
financial industry’s main regulator confirmed.
It said both the Treasury Bills and Sukuk Al-Salam, the Islamic
Banking equivalent of Treausry Bill, which accounted for 80.0 percent of the
domestic dept rose to D8.6 billion, or 21.0 percent.
“Provisional
balance of payments estimates for the first nine months of 2012 indicate an
overall deficit of US dollar 9.19 million compared to a surplus of US dollar
64.14 million in the corresponding period a year ago.
“The
current account balance, including current transfers, was in a surplus of US
dollar 19.16 million, lower than the surplus of US dollar 64.47 million a year
ago.
“The
deficit in the capital and financial account widened to US dollar 28.35
million from US dollar 0.34 million in the corresponding period in 2011,” the
CBG’s monitary monitoring committee said.
Gross
international reserves stood at US
dollar 184.5 million as at end December 2012, equivalent to about 5.0 months of
imports of goods and serves, the MPC added. Volume of transactions in the
domestic foreign exchange market, measured by aggregate purchases and sales,
increased to US dollar 1.6 billion in 2012 - from US dollar 1.4 billion in
2011.
Inflation
Preliminary
estimates of government fiscal operations in 2012 showed a lower deficit
(including grants) of 4.4 percent of GDP compared to 4.6 percent of GDP in
2011. Total revenue and grants increased to D6.5 billion (22.5 percent of GDP)
or15.7 percent from 2011. Government expenditure and net leading also rose to
D7.7 billion 26.9 percent of GDP), or 13.6 percent from 2011.
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| This bank liquidated in a "financial sound" environment in January 2013 |
End-
period inflation, measured by the National consumer price index (NCPI),
increased slight to 4.9 percent in December 2012 from 4.4 percent in December
2011. Average inflation (12-months moving average) was 4.5 percent compared to
5.4 percent a year earlier. Consumer food inflation fell slight to 5.6 percent
in December 2012 from 5.7 percent in December 2011. Non-inflation, on the other
hand, increased to 4.0 percent from 2.4 in December 2011.
Core
inflation, which excludes the prices of energy, utility and volatile food
items, increased slightly to 4.9 percent fro 4.3 percent in December 2011.
Meanwhile,
inflation is forecast to remain in single digit consistent with the pace of
monetary expansion. The MPC said it assesses the balance of risks to the
inflation outlook to be on the upside given heightened inflationary
expectations.
In
the light of these developments, the MPC is of the view that the current
monetary policy stance is appropriate and has therefore decide to leave the
rediscount rate, the bank’s policy rate, unchanged at 12.0 percent.
The
MPC would continue to monitor price developments and to take action consistent
with its mandate to keep inflation low and non-volatile, it said.
Written by Modou S. Joof
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