Gambia Monthly Eco Bulletin May 2009

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The Gambia Monthly Economic Bulletin- May 2009

THE GAMBIA MONTHLY

ECONOMIC BULLETIN1

May 2009

Institutional Support Project for Economic and Financial Governance (ISPEFG)Department of State for Finance and Economic Affairs (DOSFEA)

The Republic of GambiaThe Quadrangle, Banjul, the Gambia

1The Gambia Monthly/ Quarterly Economic Bulletinprovides an update on recent economicdevelopments and policies in the Republic of the Gambia. The Bulletin is prepared by a research teamcomprising Tamsir Cham, Director; Momodou Taal, Principal Economist and Ami Khan, Senior

Economist, in the Economic Management and Planning Unit (EMPU) and Tarun Das, Macroeconomic

Adviser (ISPEFG); Ministry of Finance and Economic Affairs (MOFEA); with key inputs from the Debt

Management Adviser, Fiscal/Financial Adviser, the Central Bank of Gambia (CBG), the Gambian Bureau

of Statistics (GBOS), and the Gambian Revenue Authority (GRA). Any questions and feedback can beaddressed to: Either Tamsir Cham ([email protected]) or Tarun Das ([email protected])

1
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Political and Administrative Structure

The Gambia is divided into seven regions comprising two Municipalities namely, Banjul City

Council (BCC) and the Kanifing Municipal Council (KMC) and five provincial administrative

regions namely, Western Region (WR), North Bank Region (NBR), Lower River Region (LRR),

Central River Region (CRR) and Upper River Region (URR).

Politically, the relevant units are Local Government Areas (urban), Districts, Wards and Villages.The Gambia has 35 districts and about 1870 villages with an average of 13 compounds.Basic Facts about Gambia:

Fiscal year: 1st January to 31st DecemberItems (Year) Units Value Rank in the World

from topin descending order

Area (2009) Sq. km. 11,300 171 out of 248countries

Population (2008) Million 1.735 148 out of 241countries

GDP PPP (2004) Million US$ 3284 167 out of 224countriesGDP Nominal (2006) Million US$ 511 199 out of 229

countriesGDP PPP per capita (2004) US$ 1945 177 out of 223

countriesGDP per capita (2006) US$ 329 192 out of 207

countriesPoverty Ratio (% of people Percent 59 7 out of 59 countries

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below One-US$) (2000)

Source:http://www.nationmaster.com

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http://www.nationmaster.com/http://www.nationmaster.com/http://www.nationmaster.com/


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____________________________________________________________

Contents

Items Page

ISPEFG Project/ Research Team and Document History 4

Highlights 5-6

At a Glance 7-10

1. Global Economic Outlook and Global Public Policy

1.1Sustained weakness and risk in global output and trade in 20091.2Global Commodity Prices and Inflation1.3 Trends of international crude oil prices

11-15111414

2. Current State of the Gambian Economy

2.1Overall and Sectoral GDP Growth Rates2.2Growth Rates of Selected Indicators for Trade and Transport2.3Consumer Price Index (CPI) and Inflation2.4Factors affecting inflation and Anti-inflationary Measures2.5Projection of CPI inflation during May-December 20092.6Government Fiscal Performance in January-April 20092.7 External Debt Situation2.8Domestic Debt and Outstanding Treasury Bills2.9Treasury Bills Yields2.10Money Supply in March 20092.11Sectoral Distribution of Bank Credits in March 2009

2.12Commercial Banks Assets in April 20092.13Commercial Banks Liabilities in April 20092.14Interest Rates and CBG Policy Rates in May 20092.15Balance of Payments and Foreign Exchange Reserves2.16Exchange Rates in May 2009

16-37

1618192122232728293031

3233343537

3. Assessment of Quantitative Targets agreed with IMF under MEFP 38-39

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ISPEFG Project and Monthly Report Research Team

Project Supervisors Honorable Mr. Mod A. K. Secka,Permanent Secretary-IandHonorable Mr. Serign Cham,Permanent Secretary-II

Project Coordinator Mr. Momodou Cham

Director (EMPU)Principal Economist

Senior EconomistTechnical Assistant (Debt Management)Technical Assistant (Fiscal/ Financial)Technical Assistant (Macroeconomic)

Mr. Tamsir ChamMr. Momodou Alagie Taal

Ms. Ami KhanMr. Adam AikutaMr. Dan Mambule MwanjeMr. Tarun Das

Document History:

This report is an update of the following reports prepared by the Research Team:

1. The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009.2. The Gambia Monthly Economic Report, pp.1-18, 31 March 2009.3. Fiscal Performance in the First Quarter of 2009, pp.1-4, 16 April 2009.4. The Gambia Quarterly Economic Bulletin-An Update, pp.1-40, 30 April 2009.5. The Gambia Monthly Economic Report, pp.1-38, 30 April 2009.6. The Gambia Monthly Economic Report, pp.1-39, 31 May 2009.7. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009.

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HIGHLIGHTS

Impact of Global Financial Crisis and Economic Slowdown

In recent years African countries in general experienced an economic boom contributed by threefavorable factors namely increased donors funding, rising exports driven by high commodity

prices, and inflows of remittances and foreign investment.

Since the middle of 2008 the US housing bubbles had led to severe financial crisis and economic

slowdown in the developed countries, which in turn led to reversal of the positive factorsmentioned above and imposed serious adverse impact on the African economies.

As per the latest IMF World Economic Outlook (April 2009) projections, world output is projected

to decline by 1.3 percent in 2009 as a whole and to recover gradually in 2010, growing by only1.9 percent. In African developing economies, growth is projected to slow down significantly from5.2 percent in 2008 to 2 percent in 2009

Food and Oil Prices

Due to sluggish demand and economic slowdown, there had been significant decline of worldcommodity prices including food and petroleum since August 2008.

Given weakness in the Chinese demand and negative growth in the US and EU and OPECs

decision to have no supply cuts, global crude oil prices were projected to remain soft and rulearound $51 per barrel in 2009. However, since April 2009 petroleum prices started rising andincreased to US$60 per barrel in May 2009.

Impact on the Gambian Economy

A global crisis of this magnitude is bound to have adverse impact on any country. The Gambianeconomy was not an exception and witnessed sharp decline in exports, remittances,manufacturing production and wholesale and retail trade during 2008.

However, thanks to bumper crops contributed by favorable monsoon and very good performanceby electricity, telecom and financial sectors, the real GDP growth improved from 6.1% in 2007 to7.2% in 2008, supported by a spectacular growth of 28.4% in agriculture output.

Real GDP growth rate in 2009 is expected to be around 4.5% aided by a growth of 6% in

agriculture value added, 2% in industry and 4.4% in services.

CPI Inflation

Annual point-to-point CPI inflation accelerated from 1.4% (Food 1.7% and non-food 1%) in April

2008 to 6.3% (Food 7.7% and non-food 4.5%) in April 2009. The 12-month average inflation rate

accelerated marginally to 5.5% in April 2009 from 5.4% a year ago.

Government Financial Performance

Government Financial Performanceis significantly better in Jan-April 2009 than in Jan-April 2008.

In Jan-April 2009 revenue and grants increased by 15.5% aided by 16.7% increase in taxes,4.7% increase in non-taxes and 16.9% increase in grants over Jan-April 2008.

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Overall, there is a fiscal surplus of 35 million Dalasi in Jan-April 2009, lower than the fiscal

surplus of 75 million Dalasi in Jan-April 2008, due to significant increase of capital expenditure by88% in Jan-April 2009 over Jan-April 2008.

Domestic Debt and Treasury Bills Yields

At the end of April 2009, outstanding domestic debt stood at D5.7 billion (amounting to 28.4% of

GDP), down by 5.9% from the outstanding domestic debt at D6 billion (amounting to 33.5% ofGDP) a year ago. Treasury bills accounted for 84.4% of total domestic debt at the end of April2009, compared to 80.3% a year ago.

Yields on treasury bills fluctuated widely in recent months. Despite significant decline of CPIinflation from 7% in January 2009 to 6.3% in April 2009, Average yield on the 91-day increasedfrom 10.5% in Jan 2009 to 12% in April 2009, yield of 182-day bills increased from 12.1% to 13%and that of 364-day bills increased from 14.4% to 14.6% over the period.

Money Supply and Bank Credits

Annual growth rate of broad money supply (M3) accelerated from 3.7% in April 2008 to 18.8% in

April 2009, supported by 17.8% growth in currency, 19.6% growth in demand deposits, 11.6%

growth in savings deposits and 29.1% growth in time deposits. On the demand side, growth wasmainly due to 31.9% growth in domestic credits.

Domestic credit increased from D5.1 billion in April 2008 to D6.7 billion in April 2009, supportedby 46% growth in government borrowing, 103.3% growth in credits to public entities and 24.1%growth in credits to the private sector.

Commercial Banks Assets and Liabilities

Gambian banks were least affected by global financial crisis as the Gambian banks do not have

large exposure to foreign assets or liabilities. At end-April 2009, foreign assets constituted only8.9% of total assets and external liabilities constituted only 1.8% of total liabilities.

Interest Rates and Central Bank Policy Rates

Given the acceleration in inflation and the weakening of the Dalasi, the MPC decided to increase

the Rediscount Rate by one percentage point to 16.0% in October 2008. Since then policy rate

remained unchanged at 16% until the end of March 2009.

Despite significant fall of the inflation rate since January 2009, Treasury bill yields, short-term

deposit rates and commercial banks lending rates remain very high leading to wide interest rate

spreads and high cost economy. Appropriate monetary measures are necessary to reduce the

short-term deposit rates and the lending rates.

Balance of Payments and Exchange Rate

Balance of Payments estimates indicate an overall deficit of D767.3 billion (-) $34.2 million) in

2008 compared to surplus of D741.7 million ($29.8 million) in 2007, reflecting the deterioration inboth current and capital accounts. The Net Usable Reserve of the CBG stood at US$95.6 millionat end-March 2009 and was above the IMF Program target (floor) by US$3.6 million.

Projections for 2009 BOP accounts indicate deterioration in the overall balance emanating from

the on-going slowdown in global economic activity which is expected to adversely impactremittances, foreign direct investment and tourism income.

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In 2008, the Dalasi depreciated against major international currencies except the British Pound.

Since Jan 2009, Dalasi has appreciated against major international currencies.

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At a Glance- May 2009

EconomicIndicators

LatestReference

Period

Status in thelatest reference

period

Status in theCorresponding

period in theprevious year

Outlook for 2009

1. Real Sector Growth Rates (in percentage)

Real GDP (FC)Growth rate (%)

Calendar year2008

Overall 7.2Agriculture 28.4Industry 0.7Services (-) 0.6

Overall 6.1Agriculture 3.9Industry (-) 3.1Services 10.4

Overall 4.5Agriculture 6.0Industry 2.0Services 4.4

Growth rates of selected indicators for transport and communication (in percentage)

Ports cargounloaded

Calendar year2008

9.5 11.8

Ports cargoloaded

2008 20.9 -9.8

Total cargohandled at ports

2008 10.6 9.3

Growth rate of portscargo may decline.

Quantity of riceimports

2008 30.9 166.8

Quantity of flourimports

2008 -100.0 -10.9

Quantity of sugarimports

2008 -10.8 83.4

Quantity ofcement imports

2008 28.7 19.3

Quantity of POLimports

2008 6.5 -8.2

Growth rates of rice andcement may decelerate,while growth rates ofsugar and POL mayimprove.

Total cargo

handled by air

2008 -3.2 -31.1

Total mailhandled by air

2008 -53.8 65.6

Total air-flights2008 -5.4 -6.4

Arrivingpassengers

2008 -21.9 19.0

Originatingpassengers

2008 -15.7 14.8

Total airpassengers

2008 -18.9 16.9

Growth rates of air cargo

and passenger trafficmay improve by the endof 2009 if the developedcountries startrecovering in the quarterof 2009.

Total touristarrivals

2008 -5.0 14.3 Tourists arrivals may godown.

Vehiclesimported

2008 -27.0 18.4

Total licensedvehicles

2008 2.5 2.8

Likely to remain stable.

Fixed telephonesubscribers

2008 4.5 4.8 Likely to remain stable.

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At a Glance- May 2009 Continued

EconomicIndicators

LatestReference

Period

Status in thelatest reference

periodin 2009

Status in theCorrespondingperiod in 2008

Outlook for 2009

2. Inflation rate (in percentage) and Crude Oil price (in US$/ barrel)CPI inflation (%) April 2009 Overall 6.7

Food 8.2Non-food 4.8

Overall 3.1Food 4.5Non-food 1.2

Expected to rise in May2009, but declinethereafter

Brent crude oilprice (US$/ brl)

April 2009 Average US$47 Average US$109 May rise to US$50By the end of 2009

3. Government fiscal operations - Percentage change over previous periodRevenue & grants Jan-Apr 2009 16.2 -2.2

Dom. Revenue Jan-Apr 2009 15.4 -4.9Tax Revenue Jan-Apr 2009 16.5 0.1Nontax Rev Jan-Apr 2009 4.7 -35.9

Grants Jan-Apr 2009 30.0 107.8Exp & Net Lending Jan-Apr 2009 19.6 0.7

Current Exp Jan-Apr 2009 5.1 21.4Per. Emoluments Jan-Apr 2009 17.6 39.1Other Charges Jan-Apr 2009 0.7 31.3Interest Jan-Apr 2009 -2.3 -1.8

External Jan-Apr 2009 -19.5 -24.9Domestic Jan-Apr 2009 2.7 8.0

Cap Exp & NL Jan-Apr 2009 72.8 -38.0Cap. Expenditure Jan-Apr 2009 87.9 -32.8Net Lending Jan-Apr 2009 -56.7 -62.8

Overall Bal Jan-Apr 2009 -41.0 -33.8

Basic balance Jan-Apr 2009 46.4 -61.5

Basic Pr. Balance Jan-Apr 2009 14.9 -36.5

Fiscal performance inthe first four months of2009 i.e. Jan-April 2009can be considered to beon track as per theBudget estimates.

Better performance byrevenue items in Jan-April 2009 compared tothat in Jan-April 2008.Overall Fiscal surplus ofD35 million, despitesignificant increase ofcapital expenditure by88% in Jan-April 2009over Jan-April 2008.

4. Government fiscal operations as percentage of GDP at current market pricesRev. and grants Jan-Apr 2009 7.7 7.4

Exp & Net Lending Jan-Apr 2009 7.5 7.0Interest Jan-Apr 2009 1.4 1.6

Overall fiscal bal. Jan-Apr 2009 0.2 0.4Basic Balance Jan-Apr 2009 1.2 0.9Primary Bas. Bal, Jan-Apr 2009 2.6 2.5

As % of GDP at current

market prices, revenues,expenditures and basicbalance are on-track.

5. Outstanding Domestic Public Debt in Million DalasiTreasury bills April 2009 4776 4826Sukuk Al-Salam April 2009 86 64Govt Bonds April 2009 250 250NIB Treas. Notes April 2009 547 873Total (Million D) April 2009 5659 6013

Outstanding treasurybills are expected todecline.

As % of GDP April 2009 28.4% 33.5% Likely to decline in 2009.

6. Composition of Outstanding Domestic Public Debt (Percentage share in total)

Treasury bills April 2009 84.4 80.3Sukuk Al-Salam April 2009 1.5 1.1Govt Bonds April 2009 4.4 4.2NIB Treas. Notes April 2009 9.7 14.5Total April 2009 100 100

Share of non-interestbearing Treasury notesis expected to decline.

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EconomicIndicators

LatestReference

PeriodStatus in the

latest referenceperiodin 2009


Outlook for 2009

7. Maturity Composition of Treasury Bills (in Percentage)91-days April 2009 14 9182-days April 2009 13 22364-days April 2009 72 69

Expected to remainstable

8. Yields of Treasury Bills (in Percentage)

91-days April 2009 12.0 10.9182-days April 2009 13.0 11.9364-days April 2009 14.6 13.3

Yields may come downas CPI inflation hasstarted decelerating.

9. Annual Growth Rate of Money Supply (Percentage)

Broad Moneysupply (M3)

April 2009 18.8 3.7

Reserve Money April 2009 11.1 -6.0

Broad money growthrate is likely todecelerate.

10. CBG Policy Rates and Banks Lending rates (Percentage per annum)

CBG Bank rate April 2009 10 10Rediscount rate April 2009 16 15Bank lendingrate

April 2009 18 to 27 18 to 27

Banks lending rates maydecline if the credit ratingsystem is strengthened.

11. Share of Banks Foreign Assets/ Liabilities in Total Assets/ Liabilities (%)

Foreign assets April 2009 8.9 10.9Foreign liabilities April 2009 1.8 3.6

Likely to remain stable

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12. Sectoral distribution of bank credits (in percentage)

Agriculture March 2009 6.7 7.9Fishing March

20090.6 0.5

Manufacturing March2009

3.7 4.7

Building March2009

10.7 10.7

Transportation March2009

9.5 8.6

Trade March2009

25.5 23.2

Tourism March2009

8.0 6.7

Financial Inst. March2009

3.2 3.6

Other comm. March2009

19.8 17.6

Others March2009

12.3 16.5

Total credits March2009

100.0 100.0

Bank credits toagriculture andmanufacturing are rising

at faster rate in 2009,while trade, commercialactivities, andconstruction attractmajor shares of bankcredits, indicating somerevival of economicactivities in 2009.

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EconomicIndicators

LatestReference

PeriodStatus in the

latest referenceperiodin 2009


Outlook for 2009

13. Balance of Payments (Million US Dollar)

Goods A/C Bal. 2008 (-) 156.0 (-) 166.3Goods exports 2008 141.6 132.2Goods imports 2008 297.6 298.5Services, net 2008 59.6 66.8Tourism 2008 72.4 75.1Official transfer 2008 6.1 5.2Remittances 2008 53.3 38.8Income, net 2008 (-) 33.8 (-) 44.6

Likely to remain underpressure.

Current A/C Bal 2008 (-) 49.5 (-) 58.8Overall BOP Bal 2008 (-)34.2 29.8Foreign Exch.Reserve

End Dec2008

125.2 159.4

Equi. to monthsof imports c.i.f.

End Dec2008

5.7 6.2Likely to deteriorate

further in 2009.

14. Inter-bank Exchange Rate- End Period Mid-Market RatesDalasi per unit of foreign currency

UK May 2009 40.20 40.25US$ May 2009 26.78 20.64CHF May 2009 22.75 19.46Euro May 2009 36.09 32.10CFA (5000) May 2009 256.38 245.84

Dalasi is likely todepreciate against majorcurrencies during theyear 2009.

15. Annual Appreciation (-)/ Depreciation of Dalasi per unit of foreign currencyAt the End of the period

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UK May 2009 -0.1 -24.6US$ May 2009 29.7 -24.5CHF May 2009 16.9 -12.0Euro May 2009 12.4 -11.9CFA (5000) May 2009 4.3 -11.9

Dalasi is likely todepreciate against majorcurrencies in the secondquarter.

16. Foreign Exchange Reserves (US$ Million)

FER End-Jan2009

116.8 140.4 Likely to remain under pressure.

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1. Global Economic Outlook and Global Public Policies1.1 Sustained weakness and risk in global output and trade in 2009

The global economy is presently passing through a critical conjecture affected adversely by amassive financial crisis and severe recession. As per the projections made by the IMF in theirlatest World Economic Outlook: Crisis and Recovery April 20092, world output is projected to

decline by 1.3 percent in 2009 as a whole and to recover only gradually in 2010, growing byonly 1.9 percent (Table-1.1). Achieving this turnaround will depend on stepping up efforts toheal the financial sector, while continuing to support demand with monetary and fiscal easing.

This is the first global contraction in the last 60 years since the great depression in 1930s.Global real sectors and financial markets continue to weaken both in advanced and emergingeconomies. Trade volumes continue to shrink rapidly, while production and employment datasuggest that the global activity continues to contract in the current quarter. Recent data point tosustained weakness in the period ahead (Figure-1).

Africa and the Middle East: In African developing economies, growth is also projected to slowsignificantly from 5.2 percent in 2008 to 2 percent, while growth in the Middle East is projected

to decline from 5.9 percent in 2008 to 2.5 percent in 2009 (Table-1.2). In Africa, growth isexpected to moderate particularly in commodity exporting countries, and several countries areexperiencing declining exports and lower inflows of tourism income, remittances, and foreigndirect investment (FDI), while aid flows are under threat. In the Middle East, the effects of thefinancial crisis have been more limited so far. Despite the sharp drop in oil prices, governmentspending is largely being sustained to cushion the toll on economic activity.

Prospects of the Gambian Economy: As per the IMF estimates, the real GDP growth in theGambia decelerated from 6.3 percent in 2007 to 5.9 percent in 2008 and is projected todecelerate further to 4 percent in 2009 (Table-1.2) due to adverse impact of the global financialcrisis and economic slowdown.

Figure-1: Trends of Global Growth Rates and World Trade

2World Economic Outlook: Crisis and Recovery, April 2009, IMF Washington D.C.

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Table 1.2 Growth Prospects of African Economies

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1.2 World Commodity Prices and Inflation

As a result of the sharp downturn in global demand, commodity prices, especially for energy,declined significantly since the last quarter of 2008. Inflationary pressures had subsided in themajor advanced economies. There are also significant declines of housing prices in someadvanced countries, showing signs of deflation.

Inflation will continue to retreat due to the combination of lower commodity prices and increasingeconomic slackness, with deflation risks growing in advanced economies. IMF forecastsindicate that G-7 deflation vulnerability has risen above its previous peak, reflecting high risks inJapan and the United States and moderate risks in several euro area members includingGermany, Italy and France.

Inflationary pressures also subsided in the low and income economies. Although commodityprices recorded some increase in January 2009, they declined again since Feb 2009 (Table-2).

1.3 Trends of International Crude Oil Prices

During 2008 Brent crude oil prices ruled very high until July 2008 when prices increased to $147per barrel. However, due to global financial crisis and economic slowdown oil prices starteddeclining thereafter.

A recent report from the Paris based International Energy Agency (IEA) has projected that theworld oil demand in 2009 will decline by half a million barrels per day (bpd). In their last meeting,the OPEC has decided not to have any cut in oil supply. Accordingly, oil prices are expected toremain soft in the rest of the year 2009.

In March-April 2009 Brent crude oil prices ranged around US$47 per barrel. Given weakness in theChinese demand and negative growth in the US and EU and OPECs decision to have no supply cuts,global crude oil prices were projected to remain soft and rule around $51 per barrel in 2009. However,

since April 2009 petroleum prices started rising and increased to US$60 per barrel in May 2009.

Trends of Monthly Brent Crude Oil Prices (US$/ barrel)

0

20

40

60

80

100

120

140

Jan-99

Jul-99

Jan-0

Jul-0

Jan-01

Jul-01

Jan-0

Jul-0

Jan-0

Jul-0

Jan-0

Jul-0

Jan-0

Jul-0

Jan-0

Jul-0

Jan-0

Jul-0

Jan-0

Jul-0

Jan-09

Months and Years 1999-2009

US$perBa

Series1

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Table-2 Trends of World Commodity Prices

Quarterly averages Monthly averages

Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Feb Mar Apr

Commodity Unit 2008 2008 2008 2008 2009 2009 2009 2009

EnergyCoal, Australia $/mt 114.00 138.65 162.80 92.97 71.93 75.38 61.00 63.56

Crude oil, Brent $/bbl 96.67 122.39 115.60 55.89 44.98 43.24 46.84 50.85Crude oil, Dubai $/bbl 91.30 116.67 113.47 53.67 44.56 43.14 45.58 50.18Natural gas Index 2000=1

00235.3 286.0 284.1 266.2 198.3 187.4 177.7 144.7

Natural gas, Europe $/mmbtu

10.86 12.40 14.62 15.75 11.94 11.04 10.90 8.51

AgricultureCoffee, Arabica /kg 328.5 315.1 321.2 267.8 283.9 285.5 283.3 297.4Tea, Mombasa auctions /kg 221.8 221.6 252.8 190.8 214.9 211.8 213.8 222.5Coconut oil $/mt 1,379 1,499 1,246 772 677 673 625 747Groundnut oil $/mt 2,007 2,328 2,417 1,773 1,283 1,293 1,214 1,188Soybean oil $/mt 1,384 1,466 1,353 830 755 748 727 800Barley $/mt 216.8 239.1 216.6 129.5 116.3 112.5 114.8 110.9Maize $/mt 220.4 259.0 244.7 168.4 166.9 163.4 164.6 168.5Rice, Thailand, 25% $/mt 182.2 n.a. 669.5 449.9 469.4 472.8 471.5 446.0Wheat, US, HRW $/mt 411.8 346.5 317.7 228.1 231.6 224.7 230.9 233.6

Wheat US SRW $/mt 384.1 277.8 241.5 182.7 187.4 183.4 183.7 182.6Fishmeal $/mt 1,126 1,185 1,198 1,023 1,013 1,001 1,030 1,038Meat, beef /kg 282.1 332.7 372.4 268.0 245.2 236.2 247.7 255.5Meat, chicken /kg 158.8 167.9 177.1 174.7 173.5 173.8 171.9 171.1Meat, sheep /kg 453.6 493.2 477.3 410.0 378.5 380.3 374.6 396.1Shrimp, Mexico /kg 1,103 1,109 1,048 1,014 976 970 970 970Sugar, world /kg 28.42 27.01 31.14 26.28 28.85 29.26 29.54 30.09Raw MaterialsLogs, Cameroon $/cum 530.8 554.4 548.5 473.8 426.8 421.9 388.2 382.5Plywood /sheets 640.4 647.3 648.6 645.5 572.8 573.0 570.8 567.7Sawnwood, Cameroon $/cum 1,035.5 1,052.3 974.5 770.8 689.2 690.2 679.9 684.3Cotton Memphis /kg 174.2 171.6 170.0 130.1 129.8 131.4 123.3 135.6Rubber RSS1, US /kg 292.6 311.7 329.1 202.8 165.8 165.8 161.8 183.6FertilizersDAP $/mt 860.2 1,191.6 1,153.7 663.3 362.2 367.9 367.6 335.4Phosphate rock $/mt 234.4 367.5 409.2 371.3 193.3 157.5 157.5 125.5Potassium chloride $/mt 367.7 511.1 635.0 766.7 865.2 872.5 870.0 745.0Urea $/mt 357.6 575.7 745.4 292.2 267.3 273.3 265.4 245.2Metals and MineralsAluminum $/mt 2,743 2,940 2,787 1,821 1,360 1,330 1,336 1,421Copper $/mt 7,796 8,443 7,680 3,905 3,428 3,315 3,750 4,407Gold $/toz 927 896 870 795 909 943 924 890Steel cr coilsheet $/mt 763 900 1,100 1,100 1,033 1,100 900 700Steel hr coilsheet $/mt 700 833 1,000 1,000 933 1,000 800 600Steel, rebar $/mt 639 838 934 630 473 485 470 425Steel wire rod $/mt 754 950 1,135 1,200 1,200 1,200 1,200 1,100Tin /kg 1,778 2,265 2,051 1,310 1,103 1,104 1,068 1,174Zinc /kg 243.0 211.3 177.0 118.5 117.2 111.2 121.7 137.9

Source: World Bank Pink Sheet May 2009

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2. Current State of the Gambian Economy2.1 Overall and Sectoral GDP Growth Rates

The sharp decline in global economic activity had also adverse impact on the Gambianeconomy in 2008 leading to decline of exports and remittances and decline ofmanufacturing production and wholesale and retail trade.

However, thanks to bumper crops contributed by favorable monsoon at home and highinternational prices of food grains, and very good performance by electricity, telecom andfinancial sectors, the real GDP growth at constant 2004 factor cost improved from 6.1%in 2007 to 7.2% in 2008 (Table-2.1 and Figure-2.1).

Figure 2.1 Trends of Sectoral Growth Rates 1998-2009

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year 1998-2009

GrowthRate(%)

GDP Agriculture Industry Services

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As per the Provisional Estimates of the GBOS, the 7.2% growth in real GDP in 2008 wassupported by a spectacular growth of 28.4% in agriculture value added and a marginalgrowth of 0.7% by industry while services value added declined by (-) 0.6% due to poorperformance by trade and public administration.

Share of agriculture increased from 26.3 percent in 2007 to 31.5 percent in 2008, whileshare of industry declined from 15.1 percent in 2007 to 14.2 percent in 2008 and shareof services declined from 58.6 percent in 2007 to 54.3 percent in 2008. Increase ofagricultural share was contributed by increase in share of crops, while decline ofservices share was mainly due to decline of share of wholesale and retail trade.

Agriculture is expected to perform well in 2009, but due to higher base in 2008 the

agricultural growth will be moderate in 2009. It is projected that real GDP growth rate in

2009 is likely to be around 4.5% aided by 6% growth in agriculture, 2% in industry and

4.4% in services. However, the general increase in civil servant salaries, introduction of

work efforts incentives and donors commitment to provide financial support to Gambia

under PRGF and to help Gambia to mitigate adverse impact would boost both consumerspending and investment and might enhance economic growth in the range of 5%.

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2005-2009 (in %)Sectoral GDP Growth Rates

(in percentage)Sectoral Shares in GDP

(in percentage)Items 2006

Actual2007

Actual2008

Actual2009Proj.

2006Actual

2007Actual

2008Actual

2009Proj.

GDP at 2004 FC 6.6 6.1 7.2 4.5 100.0 100.0 100.0 100.0

Agriculture and allied 3.9 3.9 28.4 6.0 26.9 26.3 31.5 32.0

-- Crops 4.1 4.3 45.7 7.4 16.0 15.7 21.3 21.9

-- Livestock 3.0 4.0 3.0 3.1 8.5 8.4 8.0 7.9

-- Forestry 3.0 -4.0 1.0 2.7 0.6 0.6 0.5 0.5-- Fishing 7.3 3.2 3.5 3.5 1.8 1.7 1.7 1.6

Industry 18.5 -3.1 0.7 2.0 16.6 15.1 14.2 13.8-- Mining and quarrying 7.7 6.9 6.0 7.5 1.7 1.7 1.7 1.7

-- Manufacturing -0.5 1.4 -2.5 -2.2 5.6 5.3 4.8 4.5

-- Electricity, gas, water 6.0 17.0 15.0 10.0 0.8 0.9 1.0 1.0

-- Construction 40.0 -9.8 0.0 2.5 8.6 7.3 6.8 6.6

Services 5.7 10.4 -0.6 4.4 56.4 58.6 54.3 54.2-- Wholesale/retail trade -1.5 7.1 -12.9 -1.8 24.5 24.6 20.0 18.8

-- Hotels/ restaurants 0.9 1.7 3.0 3.0 2.5 2.4 2.3 2.3

-- Transport / storage 5.7 8.5 6.0 4.4 3.6 3.7 3.6 3.6

-- Telecom 18.0 25.0 10.0 10.0 9.4 11.1 11.4 12.0

-- Financial 18.2 12.8 14.5 12.0 8.2 8.7 9.3 10.0-- Real est., business 6.9 3.1 3.0 4.1 3.7 3.5 3.4 3.4-- Public administration 0.0 8.0 0.0 2.0 2.1 2.1 2.0 1.9-- Other service 11.1 4.5 2.4 3.1

2.4 2.4 2.3 2.2

Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2008 and projections for 2009 by theMacroeconomic Adviser.

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2.3 Consumer Price Index and Inflation

As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflationaccelerated from 1.4% April 2008 to 6.3% in April 2009. The 12-month average inflationrate accelerated marginally to 5.5% in April 2009 from 5.4% a year ago.

Food and drinks (with weights of 55.2% in overall CPI) recorded average inflation of7.7% in April 2009, up from 1.7% a year ago, and contributed 70.8% to overall inflation inApril 2009.

Non-food items (with weights of 44.8% in overall CPI) recorded annual inflation of 4.5%in April 2009 compared to 1% a year ago and contributed 29.2% to inflation.

Among other groups, in April 2009, clothing and textiles recorded annual inflation of4.6%, housing and utilities 5.4%, restaurants and hotels 6.8% and transport 4.2%.

Table-2.3 CPI Inflation Rates in April 2009 (in percentage)

Items WeightsWi (%)

April-2008Index

Apriil-2009Index

Inflation(%)

Wi (CPIi1CPIi0)

Contribution3 (%)

Overall 100.0 113.21 120.36 6.3 700.9 100.0Food 55.2 116.61 125.6 7.7 496.3 70.8Tobacco 0.7 104.19 105.78 1.5 1.1 0.2Clothing 11.3 106.19 111.08 4.6 55.1 7.9Utilities 3.4 115.38 121.64 5.4 21.3 3.0Furnishing 5.2 111.50 114.97 3.1 18.2 2.6Health 1.0 101.00 101.77 0.8 0.8 0.1Transport 4.4 115.14 119.95 4.2 21.2 3.0

Telecom 3.0 101.54 101.98 0.4 1.3 0.2Recreation 8.0 103.94 104.67 0.7 5.8 0.8

Education 1.5 101.87 102.25 0.4 0.6 0.1Hotels 0.4 108.86 116.24 6.8 2.7 0.4Misc. 5.9 112.46 125.37 11.5 76.5 10.9non-food 44.8 109.08 114.03 4.5 221.7 29.2

Source of basic data: Gambian Bureau of Statistics (GBOS).

3Contribution of an item to overall inflation is estimated by the following formula:

Contribution of Item (i) = W i (CPIi1 CPIi0) / Wi (CPIi1 CPIi0) expressed as a percentage.where CPIi1 = Consumer Price Index for Item (i) in the current period

CPIi0 = Consumer Price Index for Item (i) in the previous period

Wi = Weights for Item (i) and

W = Total weights = Wi

For example, contribution of food is estimated as 100 X 525.0 / 746.7 = 70.3%.

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Sub-group wise inflation in April 2009 (%)

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

Overall

Tobacco

Utilities

Health

Telecom

Education

Misc.

Series1

Contribution to Inflation in April 2009 (%)

Food

70%

Clothing

8%

Utilities3%

Furnishing

3%

Transport

3%

Others

13%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

07-J a

Mar May Jul Sp Nv 08-J a

Mar May Jul Sp Nv 09-J a

Mar

All

Food

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2.4Factors affecting inflation and Anti-inflationary Measures

Due to combined result of various fiscal and monetary measures undertaken by thegovernment and the Central Bank of Gambia, the 12-month average CPI inflation ratemoderated to 4.5% in 2008, compared to 5.4% in 2007, despite a significant rise ofinternational prices of food and petroleum products and substantial increase of salariesof civil services at home in 2008.

Hardening of international prices of food products and petroleum oil, and disruptions in

the supply of foodstuffs from the neighboring countries put pressures on consumerprices in the Gambia since 2007.

Government responded by reducing the sales tax on rice imports from 15% to 5% in July2007 and eliminating it altogether in May 2008.

To compensate for revenue loss, the authorities increased other taxes (on car parts andused vehicles). Pump prices of petroleum products were increased in May 2008 by 10

24% to remove an implicit budget subsidy that had emerged in the preceding monthsand to bring them in line with import costs.

To check effective demand and inflationary pressures on the economy the

CBG raised the bank rate from 9% to 10% in June 2007 and raised itsrediscount rate from 14% to 15% in June 2007 and further to 16% in October 2008.

In March 2008, in response to tight monetary conditions and against a

backdrop of falling inflation, the CBG reduced the statutory minimum reserverequirement of banks from 16% to 14%.

Appreciation of the dalasi helped cushion the impact on inflation to some extent in 2008,but this exchange rate advantage has been lost in 2009 due to Dalasi depreciation.

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CPI Inflation in Gambia (%)

200620072008

2009

Jan4.02.05.17.0

Feb2.82.1

5.07.0

Mar3.84.23.16.7

Apr2.7

6.31.46.3

May2.76.61.6

Jun2.26.42.2

July1.56.33.8

0.0

1.0

2.0

3.0

4.05.0

6.0

7.0

8.0

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

2006 2007 2008 2009

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2.5 Projection of CPI inflation during May-December 2009

Two alternative projections of inflation rates during the remainder of the year 2009 have beendone under the following assumptions:

(1) Alternative-1: It is assumed that the variation of CPI for a month over the previous

month in 2009 will be the average variation of the CPI for the respective month over theprevious month during last two years (2008 and 2007). For example, CPI for May 2009is estimated by the following formula:

Projected CPI for May 2009 = Actual CPI for April 2009 + (May 2008 CPI + May 2007 CPI April 2008 CPI April 2007 CPI)/ 2. CPI for the subsequent months is projected by the similarformula.

(2) Alternative-2: It is assumed that the variation of CPI for a month over the previousmonth in 2009 will be the same as the variation of the CPI for the respective month overthe previous month in 2008. For example, CPI for April 2009 is estimated by thefollowing formula:

Projected CPI for May 2009 = Actual CPI for April 2009 + (May 2008 CPI April 2008 CPI). CPIfor the subsequent months is projected by the similar formula.(3) Alternative-3: Average of inflation rates underAllternatives 1 and 2.

Results are presented in Table 2.5 which indicates that inflation is expected to deceleratecontinuously during the remaining month of the year 2009 and the year-end inflation isexpected to range around 4.7 percent.

Table-2.5: Projections of CPI inflation during May-December 2009 (in percentage)2007 2008 2009-

Alt12009-Alt2

2007 2008 2009-Alt1

2009-Alt2

Ave-rage

Jan 106.86 112.31 120.13 120.13 2.0 5.1 7.0 7.0 7.0Feb 107.01 112.34 120.25 120.25 2.1 5.0 7.0 7.0 7.0

Mar 109.36 112.73 120.3 120.3 4.2 3.1 6.7 6.7 6.7

Apr 111.64 113.21 120.36 120.36 6.3 1.4 6.3 6.3 6,3

May 112.05 113.83 120.88 120.98 6.6 1.6 6.2 6.3 6.2

Jun 111.98 114.48 121.17 121.63 6.4 2.2 5.8 6.2 6.0

July 111.95 116.21 122.02 123.36 6.3 3.8 5.0 6.2 5.6

Aug 112.09 117.65 122.81 124.80 6.4 5.0 4.4 6.1 5.2

Sep 111.86 118.96 123.35 126.11 6.0 6.3 3.7 6.0 4.8

Oct 111.95 119.29 123.56 126.44 6.0 6.6 3.6 6.0 4.8

Nov 112.13 119.54 123.77 126.69 6.0 6.6 3.5 6.0 4.8

Dec 112.26 119.93 124.03 127.08 6.0 6.8 3.4 6.0 4.7

Q1 107.7 112.5 120.2 120.2 2.8 4.4 6.9 6.9 6.9

Q2 111.9 113.8 120.8 121.0 6.4 1.7 6.1 6.3 6.2

Q3 112.0 117.6 122.7 124.8 6.2 5.0 4.3 6.1 5.2

Q4 112.1 119.6 123.8 126.7 6.0 6.7 3.5 6.0 4.7

2.6Government Financial Performance in Jan-April 2009

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Columns (5) and (6) of Table-2.6.1 present major item-wise revenue realization andexpenditure of the government in the first four months of 2009 (i.e. Jan-April 2009) and Jan-April 2008 respectively. Columns (7) and (8) indicate the percentage changes of major itemsof revenues and expenditure in Jan-April 2009 compared with those in Jan-April 2008.

It may be observed from the table that, in terms of percentage increases, the governmentsfiscal performance has been significantly better in Jan-April 2009 than in Jan-April 2008.

In Jan-April 2008 total revenues and grants declined by 2.2%, as tax revenues increased byonly 0.1% while non-tax revenues declined by 35.9% over Jan-Apr 2007. On contrast, Jan-April 2009 has witnessed 16.2% increase in total revenue and grants aided by 16.5%increase in taxes, 4.7% increase in non-tax revenues and 30% increase in grants.

During Jan-Apr 2009, total expenditures and net lending has increased by 19.6% over Jan-Apr 2008 due to 17.6% increase in personnel emoluments and 88% increase of capitalexpenditure while interest payments declined by 2.3% over Jan-Apr 2008.

Overall, there is a fiscal surplus of D43.9 million, and basic surplus of D230.3 million in Jan-Apr 2009, despite significant increase of capital expenditure in Jan-Apr 2009.

Table-2.6.1 Govt Financial Performance in Jan-Apr 2009 compared with Jan-Apr 2008

Items2008Actual

Mln Dal.

2008 BEMln Dal.

2009 BEMln. Dal.

2009Jan-AprActual

2008Jan-AprActual

% change overPrev. period

2009Jan-Apr

2008Jan-Apr

(1) (2) (3) (4) (5) (6) (7) (8)Revenue and grants 3644.6 4,475.5 4582.2 1537.1 1323.0 16.2 -2.2

Domestic Revenue 3479 3,770.9 3771.1 1449.8 1255.9 15.4 -4.9Tax Revenue 3161.3 3,362.6 3390.5 1327.7 1139.3 16.5 0.1Nontax Revenue 317.7 408.3 380.5 122.1 116.6 4.7 -35.9

Grants 165.6 704.7 811.1 87.3 67.2 30.0 107.8Exp & Net Lending 4134.8 5,205.1 5362.9 1493.2 1248.5 19.6 0.7

Current Expenditure 3011.4 2,812.3 3838.0 1029.9 980.4 5.1 21.4Personnel Emoluments 905.5 917.5 1035.2 356.0 302.6 17.6 39.1

Other Charges 1397.5 1,143.4 1957.5 392.8 390.0 0.7 31.3

Interest 708.4 622.3 845.3 281.1 287.8 -2.3 -1.8External 153.5 72.3 147.3 52.6 65.3 -19.5 -24.9Domestic 554.9 550.0 698.0 228.5 222.5 2.7 8.0

Cap Exp & Net Lending 1123.4 2,332.8 1524.9 463.3 268.1 72.8 -38.0

Capital Expenditure 1016.6 2,223.2 1468.2 451.1 240.1 87.9 -32.8Net Lending 106.8 109.6 56.7 12.1 28.0 -56.7 -62.8

Overall Bal Inc. grants -495.1 -729.5 -780.7 43.9 74.5 -41.0 -33.8Basic balance -155.5 259.3 -267.7 230.3 157.3 46.4 -61.5Basic Primary Bal 557.8 881.6 577.6 511.4 445.2 14.9 -36.5

Nominal GDP (IMP Prg) 17959 17859 19904 17959 17859 11.5 11.6

Notes:(1) Overall balance= (Revenue and grants) minus (expenditure and net lending).(2) Basic balance= Domestic revenue minus (expenditure and net lending)plus externallyfinanced capital expenditure; (3) Basic primary balance= Basic balanceplus interestpayments

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Columns (2) and (3) of Table-2.6.2 present the major item-wise performance of revenuesand expenditure in Jan-Apr 2009 and Jan-Apr 2008 respectively as percentages of thecorresponding budget estimates for the full year. It is evidenced from the table that aspercentages of the respective budget estimates, government revenue collections andexpenditures have performed better in Jan-Apr 2009 than those in Jan-Apr 2008.

Columns (7) and (8) of Table-2.6.2 present the major item-wise performance of revenuesand expenditure in Jan-Apr 2009 and Jan-Apr 2008 respectively, as percentages of thecorresponding nominal GDP (IMF Program estimate) for the full year. It is observed from thetable that, in terms of the percentages of GDP, the total reveues and expenditures have alsoperformed better in Jan-Apr 2009 than those in Jan-Apr 2008.

The revenue and expenditure ratios to GDP are also observed to be on track in Jan-Apr2009 as compared with the 2009 budget estimates (given in column-5).

Table-2 .6.2 Govt Financial Performance in Jan-Apr 2009 compared with Jan-Apr 2008

Items

2009Jan-Apr

as % ofBudget

2008Jan-Apr

as % ofBudget

2008Jan-Apr

as % ofactual

2009 BEFull Year

as % ofGDP

2008 ACFull Year

as % ofGDP

2009Jan-Apr

as % ofGDP

2008Jan-Apr

as % ofGDP

(1) (2) (3) (4) (5) (6) (7) (8)

Revenue and grants 33.5 29.6 36.3 23.0 20.3 7.7 7.4

Domestic Revenue 38.4 33.3 36.1 18.9 19.4 7.3 7.0

Tax Revenue 39.2 33.9 36.0 17.0 17.6 6.7 6.4

Nontax Revenue 32.1 28.6 36.7 1.9 1.8 0.6 0.7

Grants 10.8 9.5 40.5 4.1 0.9 0.4 0.4

Exp & Net Lending 27.8 24.9 30.2 26.9 23.0 7.5 7.0

Current Expenditure 26.8 36.5 32.6 19.3 16.8 5.2 5.5

Personnel Emoluments 34.4 33.0 33.4 5.2 5.0 1.8 1.7

Other Charges 20.1 34.1 27.9 9.8 7.8 2.0 2.2

Interest 33.3 46.3 40.6 4.2 3.9 1.4 1.6External 35.7 90.4 42.6 0.7 0.9 0.3 0.4

Domestic 32.7 40.5 40.1 3.5 3.1 1.1 1.2

Cap Exp & Net Lending 30.4 11.5 23.9 7.7 6.3 2.3 1.5

Capital Expenditure 30.7 10.8 23.6 7.4 5.7 2.3 1.3

Net Lending 21.4 25.6 26.3 0.3 0.6 0.1 0.2

Overall BalInc.grants4

-5.6 -13.8 -15.2 -3.9 -2.7 0.2 0.4

Basic balance5 -86.0 60.7 -101.2 -1.3 -0.9 1.2 0.9

Basic Prim. Balance6 88.6 50.5 80.5 2.9 3.1 2.6 2.5

Source: Economic Planning and Management Unit (EMPU), DODFEA.

Column (2) of the Table-2.6.3 below presents detailed item-wise revenues and expenditure in

Jan-Apr 2009. We have estimated the ratios of actual realization for any item in Jan-Apr to the

final outturn for the item during the complete year for the last five years viz. 2004, 2005, 2006,

4 (1) Overall balance= (Revenue and grants) minus (expenditure and net lending).5 (2) Basic balance= Domestic revenue minus (expenditure and net lending)plus externallyfinanced capital expenditure;6 (3) Basic primary balance= Basic balanceplus interest payments

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2007 and 2009. Item-wise average ratios (as percentage to the actual outturn for the year) for

these five years are presented in column (3) of the Table-2.6.3. Taking these ratios as norms for

the seasonality, expected revenue and expenditure outcomes for the full year 2009 are

estimated by the following formula and are presented in column (4).

Expected outturn for an item in 2009 = 100 X (actual realization in Jan-Apr 2009) / average

realization ratio (in percentage) in Jan-Apr during the last five years (2004-2008)

Comparison of the expected outcome with the budget estimates given in Column (5) leads to

the following conclusions:

(a) Total domestic revenue and tax revenue targets as given in the Appropriation Budget for

2009 are expected to be exceeded by actual collections in 2009.

(b) However, there is likely to be shortfall in grants realization unless the subsequent

disbursements are significantly augmented.

(c) There is also expected shortfall in non-tax revenues.

(d) There is likely to be expenditure overrun of capital expenditure, while actual currentexpenditure is expected to show some surplus over the budgeted expenditure.

(e) Overall, it is expected to have a fiscal deficit of D569 million (amounting to 2.9% ofnominal GDP (IMF Program estimate) compared to budget estimate of fiscal deficit atD780.7 million (amounting to 3.9 percent of GDP).

2.6.3 Government Financial and Fiscal Performance in Jan-Apr 2009 and Expected Outturn for 2009

Items 2009-Ja-AprActual

Ratio of Jan-Apr performance inAnnual Outturn (in Percentage)

2004-

Ja-Ap

2005-

Ja-Ap

2006-

Ja-Ap

2007-

Ja-Ap

2008-

Ja-Ap

Average

2004-

2009

2009Proj.Out-

turn7

2009Budget

Esti-

mate

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)1.Rev & grants (2+5) 1537.1 39.4 34.4 33.2 36.9 36.5 4677.3 4582.22.Dom. Revenue (3+4) 1449.8 34.9 32.4 33.8 38.1 36.3 4080.3 3771.13.Tax Rev (3.1+3.2) 1327.7 35.1 32.5 34.2 37.3 36.2 3762.0 3390.63.1 Direct Tax (a to e) 430.2 36.5 33.3 33.1 40.9 36.8 1180.3

(a) Personal 171.2 31.6 34.1 30.9 30.3 33.7 32.1 533.1(b) Corporate 200.3 37.6 30.3 32.4 44.4 38.0 36.5 548.2(c) Capital Gains 8.8 38.7 32.1 25.5 49.6 28.9 34.9 25.2(d) Payroll 32.6 75.6 77.0 76.7 0.0 65.1 58.9 55.5(e) Other 17.2 .. 89.4 92.2 95.9 95.8 93.3 18.5

2.6.3 Government Financial and Fiscal Performance in Jan-Apr 2009 and Expected Outturn for 2009

Items 2009

Ja-AprActual

Ratio of Jan-Apr performance in

Annual Outturn (in Percentage)2004-Ja-Apr

2005-Ja-Apr

2006-Ja-Apr

2007-Ja-Apr

2008-Ja-Apr

Avera

ge2004-2009

2009

Proj.Out-turn8

2009Budget

Esti-mate

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

3.2 Indirect Tax(3.2.1+3.2.2)

897.5 34.6 32.1 34.7 35.8 35.9 2581.6

7 Expected outturn for an item in 2009 = 100 X (actual realization in 2009-Q1) / average realization ratio (inpercentage) during the last five years (2004-2008)

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3.2.1 Dom Tax on G&S 220.5 34.9 34.7 34.3 39.7 40.0 613.6(a) Stamp Duties 6.3 41.8 21.3 39.2 31.9 64.5 39.7 15.9(b) Excise Duties 56.0 29.1 26.3 30.9 35.6 38.4 32.1 174.5(c) Dom Sales Tax 158.2 35.5 36.7 35.1 41.5 38.2 37.4 423.1

3.2.2 Tax on Ext Trade(a+b)

677.0 34.5 31.3 34.8 34.5 34.0 1968.1

(a) Duty (i+ii) 419.0 34.8 33.0 39.8 33.6 34.7 1167.9

(i) Oil 258.4 40.6 31.2 48.4 32.1 32.1 36.9 701.0(ii) Non-oil 160.6 32.9 33.6 34.9 34.4 36.1 34.4 466.9

(b) Sale tax on imp (i+ii) 258.0 34.2 29.6 28.9 35.5 33.1 800.2(i) Oil 35.0 33.5 30.2 31.0 33.7 33.0 32.3 108.3(ii) Non-oil 223.0 34.3 29.5 28.3 35.9 33.2 32.2 691.8

4. Nontax Rev (a to d) 122.1 32.7 31.8 31.0 43.7 36.7 318.3 380.5(a) Govt Charges 56.9 36.8 46.0 41.7 58.0 56.2 47.7 119.1(b) NTR from CRD 1.8 .. 43.4 46.8 40.1 32.8 40.8 4.4(c) NTR from CED 35.2 .. 33.8 25.6 31.8 33.8 31.2 112.7(d) Others 28.2 .. .. 25.0 51.5 26.5 34.3 82.1

5. Grants 87.3 59.5 58.6 23.1 16.6 40.5 39.7 597.0 811.16. Exp & Net Lend (7+8) 1760.5 40.5 39.7 31.5 34.1 29.6 5246.2 5362.97. Cur. .Exp (7.1 to 7.3) 1029.9 29.2 36.9 33.5 31.2 31.7 3194.7 3838.07.1 Pers. Emoluments 356.0 33.8 35.3 31.8 32.0 30.8 32.7 1087.5 1035.2

7.2 Other Charges 392.8 26.8 39.6 31.8 27.2 27.9 30.7 1281.0 1957.57.3 Interest (a+b) 281.1 28.7 35.9 36.7 36.0 40.3 826.2 845.3

(a) External 52.6 37.0 41.8 33.3 37.7 42.6 38.5 165.0 147.3(b) Domestic 228.5 25.7 34.3 37.8 35.3 39.7 34.6 661.2 698

8. Cap Exp & Net Lend. 730.6 55.3 41.1 28.2 41.3 23.9 2051.5 1524.98.1 Capital Exp. (a+b) 718.5 54.6 40.3 29.4 36.7 23.6 2006.0 1468.2

(a) Ext. Financed (i+ii) 541.0 58.4 40.5 30.0 42.1 29.7 40.1 1558.0(i) Loans 340.0 53.6 37.9 30.9 50.5 24.4 961.0

(ii) Grants 201.0 69.8 55.1 23.1 16.6 40.5 597.0(b) GLF Capital 177.5 14.0 36.3 17.4 15.0 17.6 20.0 448.0

8.2 Net lending 12.1 7.5 0.0 0.0 99.7 26.3 26.7 45.5 56.79. Overall fis. bal (1-6) -223.4 47.7 57.6 26.1 405.9 -12.7 -568.9 -780.710. Basic balance 317.6 0.0 1149.2 49.3 66.6 -63.4 989.1 -267.711. Basic Primary Bal. 598.7 0.0 0.0 0.0 19.6 95.7 1815.4 577.6

Memorandum Items: As percentage of IMF Program Nominal GDP (equal to D19904 million)12. Overall fis. bal (1-6) -1.1 -2.9 -3.913. Basic balance 1.6 5.0 -1.314. Basic Primary Bal. 3.0 9.1 2.9

8 Expected outturn for an item in 2009 = 100 X (actual realization in 2009-Q1) / average realization ratio (inpercentage) during the last five years (2004-2008)

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2.7 External Debt

As per the latest Joint Fund-Bank Debt Sustainability Analysis (DSA)9, the stock of external debtdeclined substantially at end-2007 following HIPC and MDRI debt relief. At the end of 2006,prior to completion point, the stock of nominal external public debt was US$676.7 million (133.1percent of GDP). Multilateral creditors accounted for 84 percent of this debt, with IDA as the

largest creditor (39 percent of total outstanding debt). At end-2007, post-completion point, thestock of external public debt fell to US$299.4 million (46.0 percent of GDP).

In January 2008, Paris Club creditors agreed to cancel outstanding claims (US$13 million in PVterms at end-2006) on The Gambia. Bilateral agreements have been signed with Paris Clubcreditors and Kuwait. Agreements on the delivery of debt relief have also been reached with theEU/EC, OPEC Fund for International Development (OFID), the Islamic Development Bank(IsDB), and the International Fund for Agricultural Development (IFAD) but are still pending withthe Economic Community of West African States (ECOWAS), Saudi Arabia, Taiwan Province ofChina, Libya, China, and India.

The current DSA concludes that The Gambia remains at a high risk of debt distress after HIPC

and MDRI debt relief due to the high level of debt as well as the countrys vulnerability toshocks. The World Banks Country Policy and Institutional Assessment (CPIA), classifies TheGambia as a poor performer based on an average of the ratings for the preceding threeyears and the table below presents the policy-dependent debt burden thresholds. The PV ofdebt-to-GDP and the PV of debt-to-revenue ratios remain comfortable. Debt service paymentsremain manageable throughout the projection period, rising no higher than 10 percent of exportsand revenue. But, the PV of debt-to-exports ratio breaches the debt-burden threshold fora protracted period.

Given continuing risks, the staffs urge authorities to prepare a medium-term debtmanagement strategy (including the debt of public enterprises and contingent liabilities). Staffsalso recommend that the authorities continue to rely on a combination of grants and highly

concessional borrowing in external financing and exercise restraint in contracting new loans.The major risks to The Gambias debt sustainability include lower than expected economic andexport growth, higher than expected new borrowing, and a deterioration in fiscal balance. In lightof these risks, staffs underline the importance of sustained policy and governance reforms.

Table2.7: Policy Dependent Debt Burden Thresholds under Debt Sustainability AnalysisIndicators Strong

PerformerModeratePerformer

WeakPerformer

The Gambia2008

NPV of External Debt to GDP Ratio (%) 50 40 30 22NPV of External Debt to Exports Ratio (%) 200 150 100 117NPV of External Debt to Revenue Ratio (%) 300 250 200 117Debt service to Exports Ratio (%) 25 20 15 9

Debt Service to Revenue Ratio (%) 35 30 25 9

2.8 Domestic Debt and Treasury Bills Outstanding

9 Joint IMF/World Bank Debt Sustainability Analysis, Prepared by the Staffs of theInternational Monetary Fund and the International Development Association, Approved byEmilio Sacerdoti and Dominique Desruelle (IMF) and Sudhir Shetty and Carlos Alberto Braga(IDA), February 3, 2009.

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At the end of April 2009, outstanding domestic debt stood at D5.7 billion (amounting to28.4% of GDP), down by 5.9% from the outstanding domestic debt at D6 billion(amounting to 33.5% of GDP) a year ago.

The share of Treasury bills increased from 80.3% at the end of April 2008 to 84.4% at theend of April 2009, share of Sukuk Al-Salam from 1.1% to 1.5% and that of Governmentbonds increased from 4.2% to 4.4% over the period.

On contrary, the share of Non-interest bearing Treasury Notes declined from 14.5% to9.7% over the period

Table-2.8.1: Outstanding Domestic Public Debt as on 30 April 2009Type of debt Million Dalasi

30-Apr-08 30-Apr-09

% change inApril 09

over April 2008

Composition (inpercentage)

30-Apr-08 30-Apr-09

Treasury bills 4826 4776 -1.0 80.3 84.4

Sukuk Al-Salam 64 86 34.6 1.1 1.5Government Bonds 250 250 0.0 4.2 4.4

NIB Treasury Notes 873 547 -37.4 14.5 9.7

Total 6013 5659 -5.9 100 100

Memo Item: Domestic debt as % of nominal GDP (As per IMF Program, nominal GDP equalsD17959 for 2008 and D19904 for 2009)

As % of nominalGDP

33.5 28.4

Domestic Debt Sustainability

As per the analysis made by the CBG, the Gambias domestic debt is unsustainable. Out of

three sustainability indicators given in Table-2.8.2, only one indicator viz. debt to revenue ratio issatisfied. However, debt to GDP ratio may be satisfied during 2009.

Table-2.8.2 Primary Benchmarks for Domestic Debt Sustainability Ratios (%)Item Threshold 2006 2007 2008 2009

Projected1. Debt service torevenue ratio

28-63 142 124 118 91

2. Debt to GDP ratio 20-25 33 30 27 31

3. Debt to revenueratio

92-167 180 158 166 147

Note: (1) Debt service the sum of interest payments plus the amortization (i.e. repayment of principal)including the rollover of treasury Bills. (2) There are no internationally agreed levels of thresholds. Thethresholds used here are those used by the Debt Relief International (DRI) for many HIPC countries.

Source: The Central Bank of Gambia (CBG)

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2.9 Treasury Bills Yields

Yields on treasury bills fluctuated widely in recent months. Despite significant decline ofCPI inflation from 7% in January 2009 to 6.3% in April 2009, Average yield on the 91-dayincreased from 10.5% in Jan 2009 to 12% in April 2009, yield of 182-day bills increasedfrom 12.1% to 13% and that of 364-day bills increased from 14.4% to 14.6% over the

period.

This implies that the margins of yields over inflation rates are increasing over time andneed to be corrected by adopting appropriate monetary policies.

Table 2.9 Interest Rates (yields on treasury bills in percentage per annum)

2007 2008 20093-M 6-M 12-M 3-M 6-M 12-M 3-M 6-M 12-M

Jan 10.5 12.7 13.6 10.6 11.4 13.6 10.5 12.1 14.4Feb 12.0 13.4 13.8 10.9 11.9 13.7 11.1 12.8 14.4Mar 12.6 13.4 13.7 11.0 12.1 13.6 11.4 12.7 14.4Apr 13.0 13.4 13.8 10.9 11.9 13.3 12.0 13.0 14.6

May 12.8 13.3 13.8 10.2 11.3 13.0Jun 12.6 13.1 13.9 10.0 11.2 13.3Jul 12.5 13.2 13.9 9.6 10.6 12.6Aug 12.6 12.9 13.6 8.8 10.2 12.1Sep 11.6 12.2 12.9 8.9 11.0 13.1Oct 10.6 11.7 12.5 10.3 11.4 13.6Nov 10.5 11.5 12.5 10.1 13.4 13.7Dec 10.4 11.6 13.6 9.9 12.5 14.0

Trends of Yields of Treasury Bills during 2007-2009

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2.10 Money Supply in April 2009

Annual growth rate of broad money supply (M3) accelerated from 3.7% in April 2008 to18.8% in April 2009.

On the supply side, 18.8% growth in money supply in April 2009 was supported by17.8% growth in currency, 19.6% growth in demand deposits, 11.6% growth in savingsdeposits and 29.1% growth in time deposits.

On the demand side, growth was mainly due to 31.9% growth in domestic credits, whilenet foreign assets increased by only 1.6% over a year ago.

Domestic credit increased from D5.1 billion in April 2008 to D6.7 billion in April 2009,supported by 46% growth in government borrowing, 103.3% growth in credits to publicentities and 24.1% growth in credits to the private sector, over a year ago.

Table-2.10: Money Supply in April 2009

Components Apr 2007Mill.D.

Apr 2008Mill.D.

Apr 2009Mill.D.

Apr 2008% Share

Apr 2009% Share

Apr 2008% changeover Ap07

Apr 2009% changeover Ap08

1.Broad Money Supply (M3)(2+3)

8008.72 8306.73 9869.66 100.0 100.0 3.7 18.8

2.Narrow Money (2.1+2.2) 4258.97 4041.47 4805.75 48.7 48.7 -5.1 18.9

2.1 Currency 1822.92 1534.52 1807.69 18.5 18.3 -15.8 17.8

2.2 Demand deposits (a+b) 2436.05 2506.95 2998.06 30.2 30.4 2.9 19.6

(a) Private sector 2249.21 2248.46 2616.33 27.1 26.5 0.0 16.4

(b) Official 186.84 258.49 381.74 3.1 3.9 38.3 47.7

3.Quasi money (3.1+3.2) 3749.75 4265.26 5063.91 51.3 51.3 13.7 18.7

3.1 Savings deposits (a+b) 2636.74 2529.54 2822.76 30.5 28.6 -4.1 11.6

(a) Private sector 2633.12 2514.65 2790.85 30.3 28.3 -4.5 11.0(b) Official 3.62 14.89 31.91 0.2 0.3 311.3 114.3

3.2 Time deposits (a+b) 1113.01 1735.72 2241.15 20.9 22.7 55.9 29.1

(a) Private sector 826.53 1272.75 1657.06 15.3 16.8 54.0 30.2

(b) Official 286.48 462.97 584.094 5.6 5.9 61.6 26.2

Demands for money (1+2) 8008.72 8306.73 9869.66 100.0 100.0 3.7 18.8

1.Net foreign assets (1.1+1.2) 4860.16 3327.63 3379.89 40.1 34.2 -31.5 1.6

1.1 Monetary Authorities 2557.55 2616.82 2590.39 31.5 26.2 2.3 -1.0

1.2 Commercial banks 2302.61 710.81 789.5 8.6 8.0 -69.1 11.1

2.Net Domestic Assets(2.1+2.2)

3148.56 4979.1 6489.77 59.9 65.8 58.1 30.3

2.1 Domestic credit 4032.49 5053.83 6665.28 60.8 67.5 25.3 31.9

(a) Credits to government 1435.24 1843.84 2692.67 22.2 27.3 28.5 46.0

(b) Credits to public entities 240.04 272.56 554.18 3.3 5.6 13.5 103.3

(c) Credits to private sector 2173.92 2754.14 3418.43 33.2 34.6 26.7 24.1

(d) Credits to forex bureau 183.29 183.29 0 2.2 0.0 0.0 -100.0

2.2 Other items, net -883.93 -74.73 -175.51 -0.9 -1.8 -91.5 134.9

Source: Economic Research and Statistics Department of CBG.

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2.11 Sectoral Distribution of Bank Credits

Bank credits increased by 40.2% in March 2009 over March 2008. There was significantincrease across all sectors. While credits to agriculture increased by 66.2%, manufacturingcredits increased by 76.9%, building credits by 39.3%, transport credits by 27.4% anddistributive trade credits by 27.5% in March 2009 over March 2008. Credits to financial

institutions and other commercial credits also registered significant increases, while tourismcredits recorded the lowest increase by 16.5% among all the sectors.

As regards composition of bank credits, trade had the largest share (23%), followedby other commercial credits (17%), miscellaneous sectors (16%), building (11%),transport (9%), agriculture (8%), tourism (7%), manufacturing (5%), and financialinstitutions (4%) in 2008.

Sectors Outstanding credits(Million Dalasi)

March-2008 March 2009

Annual GRin Mar 2009

(%)

Composition of bank credits(in percentage)

Mar-2008 Mar-2009Agriculture 178.507 296.65 66.2 6.7 7.9Fishing 16.268 19.156 17.8 0.6 0.5Manufacturing 99.959 176.846 76.9 3.7 4.7Building 286.313 398.95 39.3 10.7 10.7Transportation 253.027 322.375 27.4 9.5 8.6Trade 679.72 866.5 27.5 25.5 23.2Tourism 214.237 249.526 16.5 8.0 6.7Financial Inst. 84.225 135.869 61.3 3.2 3.6Other comm. 529.002 657.543 24.3 19.8 17.6Others 327.238 617.467 88.7 12.3 16.5Total credits 2668.496 3740.882 40.2 100.0 100.0

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2.12 Commercial Banks Assets

The banking industry remains sound. Total industry assets increased by 21% on year-on-year basis from D9.4 billion at end-April 2008 to D11 billion at end-April 2009.

Gambian banks do not have large exposure to foreign assets or foreign liabilities. Atend-April 2009, foreign assets constituted only 8.9% of total assets (foreign exchange1.7%, balances abroad 6.3% and foreign investment 0.9%), down from 10.3% a yearago (foreign exchange 1.9%, balances abroad 7.5% and foreign investment 0.9%).

At end-April 2009, loans and advances to the public sector increased by almost 3.5times, while those to the private sector increased by 18.8% over April-2008.

At end-April 2009, investments in government Treasury Bills by the banks increased by2.3% while banks other investment increased by almost 12.5%.

The risk-weighted capital adequacy ratio stood at 35.9% in Dec 2008, well above the

statutory requirement of 8%.

Non-performing loans rose from 7.3% in Sep 2008 to 9.5% in Dec 2008, but declined to7.1% in March 2009 and were adequately provisioned in compliance with the statutorynorms and requirements.

However, commercial banks Return on Assets (ROA) declined from 2.10% in March2008 to 1.43% in 2009.

Table-2.12: Commercial Banks Assets at the end-April 2009 (Million Dalasi)

Assets April

2007MillionDalasi

April

2008MillionDalasi

April

2009MillionDalasi

Composition (%)

April2008 April2009

% ch. in

Apr-08overApr-07

% ch. In

Apr-09overApr-08

1. Notes and coins 130.6 173.5 165.1 1.7 1.3 32.9 -4.82. Foreign exchange 187.6 201.8 216.8 1.9 1.7 7.6 7.43. Local Bank balance 846.7 879.5 954.0 8.4 7.6 3.9 8.5

ii. CBG 833.1 850.1 951.8 8.2 7.5 2.0 12.0iii. Banks locally 13.7 29.4 2.2 0.3 0.0 115.2 -92.6

4. Balances abroad 2,074.5 785.6 798.0 7.5 6.3 -62.1 1.65. Bills purchased 7.7 21.9 185.5 0.2 1.5 183.7 746.06. Loans and advances 2,157.3 2,668.1 3,478.7 25.6 27.6 23.7 30.4

i. Public sector 103.1 135.7 469.5 1.3 3.7 31.5 246.1ii. Private sector 2,054.2 2,532.5 3,009.2 24.3 23.8 23.3 18.8

7. Investments 2,228.0 3,150.8 3,250.9 30.2 25.8 41.4 3.2

i. Govt Treasury Bills 2,054.6 2,892.8 2,960.4 27.7 23.5 40.8 2.3ii. Others 78.8 160.6 180.9 1.5 1.4 103.7 12.6iii Foreign Investments 94.6 97.4 109.6 0.9 0.9 2.9 12.5

8. Fixed assets 402.1 609.7 889.7 5.8 7.1 51.6 45.99. Guarantees 1,104.5 1,071.9 1,641.2 10.3 13.0 -2.9 53.110. Other assets 603.0 867.6 1,040.1 8.3 8.2 43.9 19.911. Total assets (1 to 10) 9,742.0 10,430.5 12,620.1 100.0 100.0 7.1 21.012. Net Balance (11-9) 8,637.5 9,358.6 10,978.9 89.7 87.0 8.3 17.3

Source: Central Bank of Gambia.

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2.13 Commercial Banks Liabilities

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities.At end-April 2009, external sector related liabilities constituted only 1.8% of totalliabilities (non-residents deposits 1.5%, balances with banks abroad 0.1% and externaldebt 0.2%), down from 3.6% a year ago (non-residents deposits 1.2%, balances with

banks abroad 1.2% and external debt 1.2%).

In April 2009 banks total deposits increased by 19% over April 2008, aided by a growth

of 19.6% in demand deposits, 11.6% in savings deposits and 29.1% in time deposits.

In April 2009 banks capital and reserves increased by 21.3%, bank balances increased

by 39% while borrowings declined by 38.8% over April 2008.

At end April 2009, direct contingent liabilities (i.e. guarantees) of banks increased by

53.1% over end- April 2008 and constituted 13% of total liabilities

Table-2.13: Commercial Banks Liabilities at the end-April 2009 (MillionDalasi)

LIABILITIES April2007

MillionDalasi

April2008

MillionDalasi

April2009

MillionDalasi

Composition (%)April2008

April2009

% ch. inApril -08

over Ap-07

% change inApril-09

over Ap-2008

1. Capital and reserves1,053.8 1,238.0 1,501.5 11.9 11.9 17.5 21.3

2. Demand deposits 2,436.1 2,506.9 2,998.1 24.0 23.8 2.9 19.6

i Residents 2,146.9 2,217.6 2,588.0 21.3 20.5 3.3 16.7

ii Non residents 102.3 30.8 28.4 0.3 0.2 -69.9 -8.1

iii Government entities 186.8 258.5 381.7 2.5 3.0 38.3 47.7

3. Savings deposits 2,636.7 2,529.5 2,822.8 24.3 22.4 -4.1 11.6

i Residents 2,558.7 2,445.8 2,718.8 23.4 21.5 -4.4 11.2

ii Non residents 74.4 68.9 72.1 0.7 0.6 -7.4 4.7


4. Time deposits 1,113.0 1,735.7 2,241.2 16.6 17.8 55.9 29.1

i Residents 811.7 1,255.5 1,567.9 12.0 12.4 54.7 24.9

ii Non residents 14.8 17.2 89.2 0.2 0.7 16.1 417.6


Total deposits 6,185.8 6,772.2 8,062.0 64.9 63.9 9.5 19.0

5. Bank Balances 23.6 136.2 189.4 1.3 1.5 477.4 39.0

i HO & branches 23.6 8.6 179.0 0.1 1.4 -63.7 1989.6ii Other banks abroad - 127.6 10.4 1.2 0.1 -91.9

6. Borrowings from 30.5 237.8 145.5 2.3 1.2 678.6 -38.8i CBG - - - 0.0 0.0

ii Other banks locally - - - 0.0 0.0iii HO & branches 30.5 114.2 125.1 1.1 1.0 274.0 9.5

iv Other banks abroad - 123.6 20.4 1.2 0.2 -83.5v. Other sources - - - 0.0 0.0

7. Guarantees 1,104.5 1,071.9 1,641.2 10.3 13.0 -2.9 53.18. Other liabilities 1,343.8 974.3 1,080.5 9.3 8.6 -27.5 10.9

9. Total liabilities (1 to 8) 9,742.0 10,430.5 12,620.1 100.0 100.0 7.1 21.0

10. Net balance (9-7) 8,637.5 9,358.6 10,978.9 89.7 87.0 8.3 17.3

Source : Central Bank of The Gambia (CBG)

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2.14Interest Rates and Central Bank Policy Rates

Interest rate on government treasury bills declined from 31% in 2003 to 14.9% in 2006 and

further to 13.7 per cent in 2007. It ranged in between 13.1% to 14.7% during 2008. The bank

rate of the Central bank declined from 29% in 2003 to 9% in 2007, but was raised to 10% at the

end of 2007 to check effective demand and inflationary pressures on the economy.

The Central bank rediscount rate declined from 34% in 2003 to 14% in 2004. In order to counter

emerging inflationary pressures, the CBG raised its rediscount rate from 14% to 15% in June

2007, In response to tight monetary conditions and against a backdrop of falling inflation, the

CBG reduced the statutory minimum reserve requirement of banks from 16% to 14% in March

2008. Given the acceleration in inflation and the weakening of the Dalasi, the MPC decided to

increase the Rediscount Rate by one percentage point to 16.0% in October 2008.

Despite significant fall of the yields on treasury bills in recent years, maximum short-term

deposit rates and commercial banks lending rates remain very high, and there exist wideinterest rate spreads. Successful disinflation allowed the weighted yield on treasury bills to fall

from over 25% in early 2005 to 14.6% in January 2009. By contrast, commercial banks lending

rates remained sticky above 20% due to high operating costs and risks of bank credits.

Appropriate monetary policies are necessary to reduce the maximum short-term deposit

rates and the lending rates.

Table-2.14: Trends of Nominal Interest rates (per cent per annum, end period)

Items 2000 2001 2002 2003 2004 2005 2006 2007 2008Bank lending rare- min 18 18 17 21 21 21 18 18 18Bank lending rare- max 24 24 24 36.5 36.5 30 28 27 27Deposit rate (SB) min 8 8 8 8 10 5 5 5 4Deposit rate (SB) max 10 10 10 17 17 10 7 7 7Time dep (3 months) min 9.5 9.5 6 7 8 5 5 5 5Time dep (3 months) max 12.5 12.5 13 22 22 14 8.5 12.9 13.6Time dep (6 months) min 10 10 6 8 8 7 6 6 6Time dep (6 months) max 12.5 12.5 13 22 22 15 13 12.9 13.6Time dep (12 month) min 11 11 7 10 12 7 6 7 7Time dep (12 month) max 12.5 12.5 13 22 23 13 13 12.9 13.6Govt treasury bills 12 15 20 31 30 16 12.8 13.7 13.6CBG Bank Rate 10 13 18 29 28 14 9 10 10CBG Rediscount Rate 15 18 23 34 33 19 14 15 16

Range = Maximum Minimum

Bank lending rate 6 6 7 15.5 15.5 9 10 9 9

Deposit rate (SB) 2 2 2 9 7 5 2 2 3Time deposits (3 months) 3 3 7 15 14 9 3.5 7.9 8.6Time deposits (6 months) 2.5 2.5 7 14 14 8 7 6.9 7.6Time deposits (12 month) 1.5 1.5 6 12 11 6 7 5.9 6.6

Some important factors influencing interest rates

Inflation (GDP-Deflator) 3.6 15.2 16.1 23.8 17.6 4.2 2.0 5.0 4.1CPI-Inflation 0.9 4.5 8.6 17.0 14.3 5.0 2.1 5.4 4.9Real GDP-Growth Rate 5.5 5.8 0.7 2.4 -0.7 2.0 6.6 6.3 7.2Exchange rate change (%) 12.2 22.7 27.0 43.2 5.3 -4.8 -1.8 -11.4 -9.8

Source: Central Bank of Gambia (CBG)

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2.15Balance of Payments (BOP) and Foreign Exchange Reserves

Central Bank of Gambia has prepared the provisional BOP estimates for the year 2008 inconformity with the IMF Balance of Payments (BOP) Statistics. Although these are not strictlycomparable with the final IMF estimates, which make some changes as per their concepts anddefinitions and also on the basis of leads and lags in foreign exchange transactions, an analysis

of the provisional estimates leads to the following observations:

(a) The overall BOP outcome for 2008 is not as bad as they were anticipated earlier.Year end foreign exchange reserves at US$125.2 million were still equivalent to 5.7months of c.i.f. imports compared to US159.4 million equivalent to 6.2 months at theend of 2007.

(b) BOP estimates indicate an overall deficit of D767.3 billion (-) $34.2 million),amounting to (-) 3.4 percent of GDP in 2008 compared to an estimated surplus ofD741.7 million ($29.8 million), amounting to 3.6 percent of GDP in 2007, reflectingthe deterioration in both the current and the capital and financial accounts.

(c) The goods account deficit improved from a deficit of D3.52 billion, amounting to 17.2percent of GDP in 2007 to a deficit of D2.92 billion, amounting to 12,.8 percent ofGDP in 2008, or a decline by 17.14%.

(d) Exports of goods are estimated at D3.18 billion (amounting to 14 percent of GDP) in2008 compared to D3.29 billion (amounting to 16.1 percent of GDP) or a decline byonly 3.4%. However, due to appreciation of average exchange rate of dalasi perUS$, goods exports in terms of US$ increased from US$132.2 million in 2007 toUS$141.6 in 2008.

(e) The c.i.f. import bill declined by 10.1% from D7.43 billion, amounting to 36.4 percentof GDP, in 2007 to D6.67 billion, amounting to 29.3 percent of GDP, in 2008.

(f) Current account deficit including official transfer declined from (-)D1.46 billion,amounting to 7.2 percent of GDP, in 2007 to (-) D1.11 billion, amounting to 4.9percent of GDP in 2008.

Foreign Exchange Reserves

Reflecting the widening of the current account deficit, gross external reserves stood atUS$116.8 million at end-January 2009 compared to US$140.4 million in January 2008.

Volume of transactions in the inter-bank foreign exchange market in the year to end-

January 2009 amounted to D35.1 billion (US$1.3 billion) compared to D37.8 billion(US$1.7 billion) a year ago.

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2.15 BOP Summary Table for 2007-2008

Items 2007 2008 2007 2008 2007 2008 2007 2008Million Dalasi Million US$ AS % of GDP Annual %

change1 Goods balance (1.1-1.2) -4138 -3499 -166.3 -156.0 -20.3 -15.4 8.5 -15.4

1.1 Exports of goods (a+b+c) 3289 3176 132.2 141.6 16.1 14.0 7.6 -3.4a. Exports of goods in trade

statistics266 330 10.7 14.7 1.3 1.5 -17.2 24.1

b. Re-exports 2781 2489 111.8 111.0 13.6 10.9 9.2 -10.5c. Other goods 242 356 9.7 15.9 1.2 1.6 29.5 47.5

1.2 Imports of goods c.i.f 7427 6675 298.5 297.6 36.4 29.3 8.1 -10.12 Services, net (2.1 to 2.7) 1663 1338 66.8 59.6 8.1 5.9 188.4 -19.6

2.2 Travel 1869 1624 75.1 72.4 9.2 7.1 11.4 -13.12.3 Communications 103 214 4.1 9.6 0.5 0.9 -43.2 107.92.5 Construction 224 120 9.0 5.3 1.1 0.5 -46.42.6 Information technology -33 -71 -1.3 -3.2 -0.2 -0.3 49.0 115.2

2.7 Others business -500 -550 -20.1 -24.5 -2.4 -2.4 -60.3 10.03 Income, net (3.1 + 3.2) -1111 -757 -44.6 -33.8 -5.4 -3.3 4.5 -31.8

3.1 Investment income -1129 -931 -45.4 -41.5 -5.5 -4.1 6.7 -17.53.2 Compensation to labor 19 174 0.7 7.8 0.1 0.8 -553.

4836.0

4 Transfers, net(4.1+4.2+4.3)

2123 1809 85.3 80.7 10.4 8.0 -13.7 -14.8

4.1 Official transfer 130 137 5.2 6.1 0.6 0.6 -22.7 5.24.2 Remittances 965 1196 38.8 53.3 4.7 5.3 -45.4 23.94.3 Other transfer 1028 476 41.3 21.2 5.0 2.1 96.6 -53.6

5 Current account balance

5.1 Incl. official transfers

(1+2+3+4)

-1463 -1110 -58.8 -49.5 -7.2 -4.9 -20.5 -24.2

5.2 Excl. off. Transfer (5.1 -4.1)

-1594 -1247 -64.1 -55.6 -7.8 -5.5 -20.7 -21.8

6 Capital Account 43 24 1.7 1.1 0.2 0.1 -62.4 -43.37 Financial Account

(7.1+7.2)2162 318 86.9 14.2 10.6 1.4 6.2 -85.3

7.1 Foreign direct investment 1902 1556 76.4 69.4 9.3 6.8 -17.6 -18.27.2 Other investment 112 -1430 4.5 -63.7 0.5 -6.3 -56.2 -13797.3 Reserve change 148 192 6.0 8.5 0.7 0.8 -128.

229.3

8 Capital and FinancialA/C (6+7)

2205 342 88.6 15.3 10.8 1.5 2.5 -84.5

9 Overall BOP Balance

(5.1+8)

742 -767 29.8 -34.2 3.6 -3.4 139.8 -203.

5Foreign ExchangeReserves

4441 3673 159.4 125.2 21.8 16.1 20.1 -17.3

Equivalent to months ofimports c.i.f

6.2 5.7 6.2 5.7

Ave. Exch. Rate (D/$) 24.88 22.43

GDP at cmp (MillionDalasi)

20413 22754 820.5 1014.4


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2.16 Exchange Rate

During the last one year, the Dalasi depreciated against major international currenciestraded in the inter-bank market except the British Pound, reflecting the impact of theglobal financial crisis on remittances and tourism as well as increased demand forforeign exchange to meet the high cost of imports.

During 2009 also the Dalasi has depreciated against major currencies in every monthuntil May 2009 over the corresponding month in 2008.

At the end of May 2009, Dalasi has appreciated marginally against British Pound by0.1%, while it depreciated by 29.7%, 16.9% , 12.4% and 4.3% against US$, CHF, Euroand CFA respectively over May 2008.

Table-2.17 Inter-bank exchange rates - end of period mid-market rates(Dalasi per unit of foreign currency)

Year Month UK US$ CHF Euro CFA(5000)

2008 Jan 44.27 22.34 19.91 32.89 252.85

Feb 42.58 21.88 19.57 32.28 243.98

Mar 40.87 19.46 19.15 30.83 239.16

Apr 39.52 20.12 19.16 31.43 235.95

May 40.25 20.64 19.46 32.1 245.84

June 40.77 20.65 189.27 32.07 245.51

July 41.65 20.94 19.9 32.21 251.05

Aug 40.73 21.37 20.08 32.23 249.47

Sept 41.65 23.12 19.86 33.02 249.30

Oct 40.49 24.89 20.15 32.89 258.09

Nov 40.56 26.26 20.07 33.28 258.31Dec 40.14 26.54 22.94 35.67 259.15

2009 Jan 37.25 26.07 20.85 33.52 262.81

Feb 37.38 26.11 22.04 33.6 257.78

Mar 38.18 26.38 23.31 35.22 259.30

Apr 38.94 26.56 22.8 35.07 259.13

May 40.20 26.78 22.75 36.09 256.38

Rate of appreciation (-) / depreciation (+) of Dalasiover the corresponding month in 2008 (%)

2009 Jan -15.9 16.7 4.7 1.9 3.9

Feb -12.2 19.3 12.6 4.1 5.7

Mar -6.6 35.6 21.7 14.2 8.4Apr -1.5 32.0 19.0 11.6 9.8

May -0.1 29.7 16.9 12.4 4.3


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3. Assessment of Quantitative Targets agreed with IMF under

The Gambias three-year Poverty Reduction and Growth Facility (PRGF) arrangement wasapproved by the IMFs Executive Board in February 2007. The third review was completed onSeptember 8, 2008 and the Fourth Review was done in February 2009. The updated Letter ofIntent (LOI) and Memorandum of Economic and Financial Policies (MEFP), and Technical

Memorandum of Understanding (TMU) were signed jointly by the honorable Mousa Gibril Bala-Gaye, Secretary of State (Finance and Economic Affairs) and honorable Momodou BambaSaho, Governor, Central Bank of Gambia on February 3, 2009.

The MEFP reviewed progress in implementing the Governments PRGF supported program in2008, and set out the policies that the Government will pursue in 2009. The Government ofGambia committed that the program, as usual, will continue to be monitored based on agreedquantitative targets and a set of structural performance criteria and benchmarks indicated in theMEFP as per program reviews.

The quantitative financial targets for endMarch 2009 and end-September 2009 areperformance criteria; and those for endDecember 2008, endJune 2009, and end-December

2009 are indicative targets. The Performance criteria for end March 2009 and the actualperformance is indicated in the following table 3.1.

It may be observed from the table that all quantitative targets have been satisfied at theend of March 2009.

Performance Targets Stock end-Dec 2006

Target atend-Mar

2009

Status atend-Mar

2009

Net domestic assets of the central bank (ceiling)adjusted for privatization proceeds (Million Dalasi)

38.7 797.7 127.3

Basic balance (floor) defined as domestic revenueminus expenditure and net lending, excluding externallyfinanced capital expenditure. Adjusted downward by thedalasi equivalent of the amount of external budgetsupport in excess of the projected levels up to acummulative maximum in of US$10 million in 2009

--- 616.9 738.1

New external payments arrears of the centralgovernment (ceiling)

0.0 0.0 0.0

Net usable international reserves (floor) adjusted forprivatization proceeds. Adjusted upward(downward) by the extent to which actualreceipts exceed (fall short of) projected level ofprivatization receipts (Million US$)

94.9 92 95.6

New non-concessional debt contracted or guaranteedby the government with original maturity of more thanone year (ceiling)

0.0 0.0 0.0

Outstanding stock of external public debt with originalmaturity of one year or less (ceiling)

0.0 0.0 0.0

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Bearing in mind the linkages of the key macroeconomic sectors of monetary, fiscal and externalsectors, the net usable reserves target was set at $92 million for the first quarter of 2009.Similarly, the net domestic asset target was set at D797.7 for the same period. The CentralBank through pro-active, consistent and prudent use of various policy instruments, was able to

meet all the agreed quantitative targets for end-March 2009.With regard to the performance of the monitored variables vis--vis their end-March 2009 target,the NUR totaled D2.5 billion (US$95.6 million) at end-march 2009 and was above the end-march target (floor) by D108.8 million (US$3.6 million). Similarly, the NDA of the Central Bankamounting to D127.3 million was below target ceiling by D220.7 million.

The target for basic fiscal balance (floor) was fixed at D616.7 million for the end of March 2009.Government achieves a basic balance of D738.1 million.

Government did not default on the payment of debt services on any external debt. As agreedgovernment did not contract or guarantee any new non-concessional external loan havingmaturity exceeding one year. There is also no non-concessional external debt outstanding

having original maturity exceeding one year.

Gambia Monthly Eco Bulletin May 2009

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