By: Kebba AF Touray
The Monetary Policy Committee (MPC) of the Central Bank of the Gambia (CBG), last Thursday 8th December 2022, met in Banjul to discuss the current financial situation of the country. The meeting discussed the current financial situation of the Gambia amid rising cost of food and other commodity and oil prices, and its impact on the Gambian economy.
According to the Governor of the Central Bank of the Gambia, Mr. Buah Saidy “ the country’s budget deficit (including grants) widened to D4.4 billion in the first nine months of 2022, from a deficit of D3.6 billion at the same period in the preceding year 2021.” That total revenue and grants declined by 4.5 percent to D14.4 billion, reflecting a drop in both tax and non-tax revenue, whereas total expenditure and net lending increased but at a slower pace of 0.5 percent to D18.8 billion, which constitutes 18.0 percent of GDP.
He further reported that the stock of domestic debt increased to D38.6 billion at end-November 2022, from D37.2 billion in 2021, and consequently, the domestic debt to GDP ratio declined to 31.6 percent at end-November 2022, from 35.5 percent in 2021.
“Yields on government securities continue to rise in response to the tight monetary policy stance of the bank. The weighted average interest rate on treasury bills increased from 1.25 percent in November 2021 to 8.71 percent in November 2022,” Governor Saidy reported. He said the banking system continues to be stable with robust financial indicators, and a risk weighed capital adequacy ratio of 26.3 percent in September 2022, which he said is higher than the regulatory requirement of 10 percent. That liquidity ratio stood at 63.4 percent in September 2022, which he said is also above the regulatory requirement of 10 percent, and an industrial non-performing loan ration that continues to remain low at 4.2 percent. He remarked that the balance of payments position continues to be under pressure, stating that the current account deficit is forecasted to widen to 5.6 percent of GDP by end 2022, from a deficit of 4.5 percent of GDP in 2021.
He said deficit in the goods account is expected to narrow to 26.6 percent of GDP in 2022, from 29.8 percent in 2021, due to the slowdown in growth of imports, whilst private remittance inflows are expected to normalize after they peaked in 2021.
“The gross international reserve of the Bank stood at US$400 million as at end-October 2022, adequate to cover more than four months of imports of goods and services. Inflationary pressures have remained elevated, and headline inflation decelerated marginally to 13.2 percent in October 2022, compared to 13.3 percent in 2022”, he reported.
Based on these foregoing among others, he said the committee has therefore decided to increase the Monetary Policy Rate (MPR) by 1 percentage point to 13 percent, in order to maintain the required reserve at 13 percent, and maintain the interest rate on the standing deposit and lending facilities at 3 and 14 percent respectively.