Government’s Domestic Debt Rises to D41.3 Billion, Says Governor Saidy

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By: Kebba AF Touray

The Governor of the Central Bank of the Gambia (CBG), Buah Saidy has said that government’s domestic debt rose to D41.3 billion in 2023.

He reported this Tuesday, 27 February 2024 during the meeting of the Monetary Policy Committee (MPC) at the CBG in Banjul.

Governor Saidy said: “The government’s domestic debt rose by 8.4 percent to D41.3 billion (29.4 percent of GDP) in 2023, from D38.1 billion (31.7 percent of GDP) in 2022.”

This increase, he said, is explained mainly by the increased issuance of treasury bills and medium-term government bonds to settle maturities and finance the budget.

As a result, short-term debt accounted for 58.5 percent of the total domestic debt stock, while medium to long-term debt constituted 41.5 percent, indicating a substantial refinancing risk, as over half of the debt stock matures in less than 1 year.

He reported that preliminary balance of payments estimates show that the current account balance deteriorated in 2023, registering a deficit of US$204.1 million (7.0 percent of GDP), from a deficit of US$90.3 million (4.4 percent of GDP) in 2022.

He said the goods account balance widened to a deficit of US$940.4 million (32.2 percent of GDP) in 2023, compared to a deficit of US$642.4 million (31.5 percent of GDP), and that the services account balance registered a surplus of US$204.2 million in 2023, higher than US$80.2 million, benefiting from the strong recovery in tourism activity.

He also said that the cumulative volume of transactions in the domestic foreign exchange market in 2023 stood at US$2.0 billion, slightly lower than the US$2.5 billion in 2022.

“Total remittance inflows increased by 3.5 percent in 2023 to stand at US$737.1 million. The increase in private remittances and significant inflows from grants helped ease foreign currency supply conditions and considerably supported the stability of the dalasi during the review period”, he said.

The preliminary estimates of government fiscal operations indicated that the overall deficit (including grants) narrowed from D6.9 billion (5.7 percent of GDP) in 2022 to D4.4 billion (3.1 percent of GDP) in 2023. However, the overall budget deficit (excluding grants) widened to D18.5 billion (12.9 percent of GDP) in 2023, from D15.3 billion (12.5 percent of GDP) a year ago.

CBG Governor stated that total revenue and grants mobilized in 2023 amounted to D31.9 billion (22.2 percent of GDP), an increase of 39.4 percent compared to last year.

He explicated that the increase in the total revenue and grants mirrors the increase in both domestic revenue and grants.

“Total expenditure and net lending between 2022 and 2023 increased by 21.8 percent to stand at D36.3 billion (25.3 percent of GDP), from D29.8 billion (24.3 percent of GDP), driven by the increase in development expenditures that were largely externally financed”, said Governor Saidy.

He said that inflation declined for the second consecutive month, reflecting the impact of the moderating global commodity prices and domestic policy actions, adding that in January 2024, headline inflation declined to 16.2 percent, down from 17.3 percent in December and from the peak of 18.5 percent in September 2023.

He said: “The decline in inflation is mainly attributed to the decrease in food components of the CPI basket as food prices continue to ease globally, supported by a good cropping season. Going forward, should the easing of global commodity prices and domestic supply conditions improve, inflation is expected to fall within single digits by the end of 2024.”

Saidy reported that food inflation decreased to 21.0 percent in December 2023, from 23.8 percent in October 2023 and 24.9 percent recorded in June 2023.

He said the decline in food inflation was on account of a significant deceleration in the prices of bread and cereals, meat, and vegetables.

He added that similarly, non-food inflation also declined to stand at 10.7 percent from 11.3 percent reported in December 2023, owing to a decrease in prices of textiles, energy, and transportation.

He highlighted that the MPC observed an improvement in the global economy, with both demand and supply factors driving the recovery, the declining trend in global inflation, supported by the impact of the tight monetary policy stance of central banks and the moderating global commodity prices.

“The MPC also observed that on the domestic economy, the Committee anticipates the growth momentum to continue, with robust real GDP growth. Continued moderation in inflation is due partly to the combined effects of prudent monetary policy and sustained decline in global food and energy prices. Moreover, the Committee is of the strong view that to sustain the declining trend in inflation, close policy coordination between fiscal and monetary policy is essential,” he indicated.

He stated that the MPC decided to maintain Monetary Policy Rate (MPR) at 17.0 percent, Required Reserve (RR) ratio of commercial banks will be maintained at 13.0 percent, the interest rate on the standing deposit facility will remain unchanged at 3.0 percent, and the interest rate on the standing lending facility will remain at 18.0 percent or MPR plus 1.0 percentage points.