|In October 2012, President Yahya Jammeh forced exchange rate down in a directive against "hoarding" but the IMF did not recognise such mandate as the Central Bank of The Gambia is responsible of regulating the financial market (Photo credit: Wikipedia)|
An International Monetary Fund (IMF) mission to the country led by Mr. David Dunn revealed that the recent directive by the Office of 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 president’s office apparently acted “beyond powers” on October 22, 2012 when it threatened that very drastic action will be taken against any individual or business found culpable of foreign currency hoarding and speculating – an operation no compromise on foreign currency hoarding it was dubbed.
It forced the reduction of the dollar to a selling rate of D28 from D34 (the market price at the time). The president’s office described as “all powerful” then imposed a moratorium with immediate effect on all shipping of the US Dollar out of the country with possible exemption for essential importation, which must obtain prior clearance from the same office.
The directive was withdrawn barely 15 days after it was imposed.
Even though it was clear that the CBG is legally mandated to regulate the financial industry including the Foreign Exchange business, the institution failed to protest against the presidential directive – knowing fully the damage it can cause.
Now, after a December 3-7 IMF mission to The Gambia to assess the impact of the recent directive on exchange rate policy and operations of the foreign exchange market, the Breton Woods institution said the CBG must assume its role.
The IMF welcomes the recent lifting of the restrictions imposed by the directive and the renewed commitment to a flexible, market-determined exchange rate policy, which has helped the foreign exchange market to largely return to normal conditions.
“Nevertheless, full confidence will return to the market only as the Central Bank of The Gambia (CBG), which is responsible for exchange rate policy, continues to implement this policy framework,” Mr. Dun said.
“It will be important that the CBG resume its gradual accumulation of international reserves, which is key to maintaining economic stability,” he added. “To help strengthen and further develop the foreign exchange market, the IMF stands ready to provide technical assistance.”
The Revised Regulations for the licensing and operation of foreign bureaus clearly states that every bureau is free to quote its selling and buying rates. However, the legal power to regulate the financial industry and foreign exchange business is the responsibility of the Central Bank, not the office of the president.
Written by Modou S. Joof