By Alhagie SF Sora The Monetary Policy Committee (MPC) of the Central Bank of the west African state of Gambia held its 52nd meeting  today November 25th,  2014,  in Banjul, to review domestic and international econom’ic developments, assessed the risks to the outlook and  decided on the  monetary policy stance.   According to the Governor of the Central Bank, Mr.Amadou Colley, since the last meeting of the MPC, global economic recovery remains uneven amid sustained improvements in the US and  UK, and  deteriorating prospects in the         Euro area,  Japan  and    several   emerging   market economies. He said the International Monetary Fund has lowered its forecast for global growth for the rest of 2014 and 2015, citing weaker-than-expected growth during the first half of 2014.    Global growth is now forecast to average 3.3 percent and 3.8 percent in 2014 and 2015 down from the earlier projections of 3.6 percent and 3.9 percent respectively. On the Domestic economy, he said the domestic  growth  outlook  for 2014 for the Gambia  remains weak  following  growth  rates of 5.6 percent and  6.1 percent in 2013 and  2012 respectively,  partly as a result of the impact of delayed rainfall in agriculture,  and  partly  the adverse effect of the  Ebola   outbreak  in the services  sector,   particularly  tourism. He said GDP is expected to be subdued and the risk is assessed to be on the downside. On the Money and Banking sector, he said in the year to end-September 2014, all the key monetary aggregates expanded. He also said Money supply grew by 10.9 percent, slightly lower than the 11.3 percent a year ago. He said the deceleration in the growth of broad money  was mainly  due  to  the  slower  growth  of  the  net  domestic   assets (NDA)  of  the banking sector  by  10.1 percent  from  17.4 percent  a  year  earlier.  The net foreign assets (NFA) of the banking sector on the other hand, he said, grew by 13.2 percent from a contraction of 5.6 percent a year ago. Mr. Amadou Colley said reserve money  continued  to  grow  at  a  robust  pace, increasing by 27.4 percent in September 2014, slightly lower  than  the  27.7 percent growth  in September 2013. He however said the banking sector remains fundamentally safe and  sound; that total assets increased to 025.1 billion in the year to end-September 2014, or 10.0 percent and that Gross loans and advances, accounting for 24.7 percent  of total assets, rose to 06.12 billion or 3.3 percent. “Private sector credit, net of provisions, accounting for 93.10 percent of gross loans and advances, contracted by 5.0 percent to 05.7 billion in September 2014,” said the Central Bank Governor. He also said non-performing loans totalled 00.92 billion ( 14.8 percent of total credit),lower than the D1 .16 billion (20 percent of total credit) recorded in September 2013. “Capital and  reserves  totalled  03.12  billion,  higher  than  the  02.3  billion  in September 2013. Capital adequacy ratio averaged 27.7 percent, significantly higher than the statutory requirement of  10.0 percent, and  Deposit  liabilities increased to D15.25 billion compared to D14.23 billion in September  2013, “ said Colley. He said liquidity ratio stood at 83.1 percent, over and above the  statutory minimum requirement of 30.0 percent. In the year to end-September 2014, Colley said the domestic  debt  rose to 016.73 billion (45.4 percent of GOP) from D12.4 billion (38.0 percent of GOP); that Treasury bills and Sukuk AI Salaam bills, accounting for 81.0 per.cent and 3.4 percent  of the debt  stock, increased by 36.2 percent  and 35.7 percent respectively. “Following the increase in the policy rate at the previous meeting of the MPF, the yield on the 182-day and 364- day Treasury bills increased to 16.43 percent and 19.43 percent September 2014 from 16.0 percent and 18.45 percent respectively  in September  2013. However, he said the yield on the 91-day Treasury bill decreased to 14.20 percent from 14.76 percent  in September  2013. The yield on the 91-day Sukuk AI-Salaam bills also declined to 14.30 percent from 14.76 percent in September  2013. On Government Fiscal Operations, Colley said provisional data  on Government  fiscal operations  for the first nine months  of 2014 indicate a fiscal deficit  of 01.4 billion (3.7 percent of GOP) compared to 01 .3 billio”n (3.9 percent of GOP) in the corresponding period in 2013. He informs that the total revenue  and  grants was estimated. at 06.0 billion (16.2 percent of l GOP),  below   the  target   of  06.3  billion  (16.5 percent  of  GOP). The underperformance ” of  the  outturn  was  as  a  result  of  the  shortfall  in personal  income tax  and  project   grants  by  05.60  million  and  0343.4 million  below  their targets  respectively.  Domestic  revenue,  comprising tax and  non-tax  revenue  rose to 04.9 billion, or 19.8 percent, he said. He added that both tax and  non-tax  revenue  increased  by  18.5 percent and  33.9 percent to 04.20  billion  and  0723.5 million respectively and  Grants  also increased to D1 .12 billion, or 80.5 percent  from the corresponding period in 2013, but was below  the target  of 01.5 billion. He said total  expenditure and  net  lending  increased from  05.98  billion  ( 18.3 percent of  GOP) in  the  first nine  months  of  2013 to  07.4  billion  ( 19.8 percent of GOP) during  the period  under  review  and  higher  than  the projected 07.3 billion (19.5 percent  of GOP).  Although, he said  both current and capital expenditures  increased,  current  expenditure grew  at a stronger pace of  52.2 percent   than  capital expenditure   (5.4 percent). “Of  the components of  current  expenditure,  wages,  salaries and  allowances, other   charges   and   domestic   interest  payments   increased  by  46.7 percent, 30.0 percent and  120.5 percent  respectively.  External interest payments, in contrast, decreased by 52.5 percent,” Governor Colley said. On External Sector developments, Colley said preliminary balance of payments estimates for the first half of 2014 indicate an overall deficit of US$2.15 million, lower than the deficit of US$5.6 million in the first half of 2013. He said slight improvement in the overall balance was mainly due to the increase in the capital and financial account surplus; that the current account deficit, on the other hand, widened to US$58.06 million from a deficit of US$38.25 million in the first half of 2013. And of the components of the current account, the merchandise trade deficit  narrowed slightly to US$98.90 million,from US$1 00.20 million in the corresponding period  of 2013. He also said both imports and exports increased by 17.0 percent and 23.4 percent to US$167.80 million and US$54.40 million respectively. The surplus in the services account narrowed to US$29.60 million or a decrease of 29.8 percent from the corresponding period in 2013 reflecting  mainly  the estimated 42.9 percent decline  in transportation  services, explained Colley, that income from tourism increased to US$57.93 million, reflecting  in the main  the 11.3 percent increase in tourist arrivals in the first half of 2014 compared to the corresponding period in 2013. Governor Colley informed that the capital and financial account surplus increased  to US$56.99 million, higher than the surplus of US$35.45 million in the first half of 2013; that both the capital and financial  account surplus rose from US$14.82 million and  US$20.64 million in the first half of 2013 to US$26.85 million and US$30.14 million respectively  during the period under review. In  the year  to  end-October  2014, he said volume  of  transactions   in  the  foreign exchange market increased to US$1.44 billion, or 12.0 percent. Year-on-year, the Dalasi depreciated against the US dollar by 18.60 percent, Euro ( 12.6 percent)  and Pound Sterling (20.1 0 percent). “As at end-October 2014, gross international reserves amounted to US$132.6 million, lower than the US$160.3 million in October 2013 attributed mainly to the weak external sector,” informs Governor Colley. On inflation, Colley said consumer price  inflation,  measured  by  the  National  Consumer  Price Index, increased  to  6.3 percent  in  September   2014,  slightly  higher  than  the  6.1 percent in September  2013. He said both food  and non-food inflation  accelerated to 7.34  percent  a11d   4.84  percent   from  7.31  percent  and   4.23  percent   in September  2013 respectively; that Core inflation, which  excludes  prices of energy and  volatile  food items, rose to 6.04 percent  in September  2014 compared to 5.94 percent in September  2013. He said headline inflation is forecast  to exceed the end-December 2014 target  of 5.0 percent. “A key upside risk is the exchange rate,” asserted Colley.   He however said the MPC projects that inflation would fall within the target in the medium term. He said given the above developments, the Monetary Policy Committee has decided to leave the policy  rate unchanged at 22.0 percent and the MPC would monitor price   developments  and  continue   to  take  appropriate  policy   actions   to contain  inflation.    ]]>

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