Gambia Monthly Economic Report April 2009

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The Gambia Monthly Economic Bulletin- April 2009

THE GAMBIA MONTHLY

ECONOMIC BULLETIN1

April 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 Economic Bulletinprovides an update on recent economic developments andpolicies in the Republic of the Gambia. This Bulletin has been prepared by a research team comprisingTarun Das, Macroeconomic Adviser; Tamsir Cham, Director and Ami Khan and Momodou Taal, Principal

Economists in the Economic Management and Planning Unit (EMPU) of the Ministry of Finance and

Economic Affairs (DOSFEA); with key inputs from the Debt Management Adviser, Fiscal/Financial

Adviser, the Gambian Bureau of Statistics (GBOS), the Central Bank of Gambia (CBG) and the Gambian

Revenue Authority (GRA). Any questions and feedback can be addressed to: either Tarun Das([email protected]) or Tamsir Cham ([email protected]).

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


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At a Glance- April 2009 Continued

EconomicIndicators

LatestReference

Period

Status in the latestreference period

in 2009

Status in theCorrespondingperiod in 2008

Outlook for 2009

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

Treasury bills Feb 2009 79.5 86.6Sukuk Al-Salam Feb 2009 1.5 1.3Govt Bonds Feb 2009 4.2 4.6Non-int. bearingTreasury Notes

Feb 2009 14.8 7.6

Total Feb 2009 100 100

Share of non-interestbearing Treasury notesis expected to decline.

6. Composition of Interest Bearing Domestic Debt By Holders (in percentage)

Central Bank Feb 2008 8 8

Banks Feb 2008 63 56Parastatals Feb 2008 15 18Other Non Banks Feb 2008 14 18Total Feb 2008 100 100

Likely to remain stable.

7. Composition of Interest Bearing Domestic Debt By Instruments (in percentage)

Treasury Bills Feb 2008 93 94Sukuk Al Salaam Feb 2008 2 1Govt Bonds Feb 2008 5 5Total dom. Debt Feb 2008 100 100

Expected to remainstable.

8. Maturity Composition of Treasury Bills (in Percentage)

91-days Feb 2008 15 11182-days Feb 2008 16 22364-days Feb 2008 69 67

9. Yields of Treasury Bills (in Percentage)

91-days Feb 2008 11.1 10.9182-days Feb 2008 12.8 11.9364-days Feb 2008 14.4 13.7

Yields may come downwhen CPI inflationdecelerates.

10. Annual Growth Rate of Money Supply (Percentage)

Broad Moneysupply (M3)

Jan-2009 19.3 3.9

Reserve Money Jan-2009 12.7 0.1

Broad money growthrate is likely todecelerate.

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At a Glance- April 2009 Continued

EconomicIndicators

LatestReference

Period

Status in the latestreference period

in 2009

Status in theCorrespondingperiod in 2008

Outlook for 2009

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

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

Mar 2009 18 to 27 18 to 27

Banks lending rates maydecline if the credit ratingsystem is strengthened.

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

Foreign assets Jan 2009 9.2 14.4Foreign liabilities Jan 2009 3.1 4..1

Likely to remain stable

13. Balance of Payments (billion Dalasi)

Goods A/CBalance

2008 (-) 5.27 (-) 4.27

Goods exports 2008 2.16 2.27Goods imports 2008 7.41 6.54

Likely to remain underpressure.

Overall BOPBalance

2008 (-) 1.30 0.80 Likely to deterioratefurther in 2009.

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

US$ Mar 2009 26.14 19.46UK Mar 2009 37.25 40.87Euro Mar 2009 34.15 30.82CHF Mar 2009 22.59 19.15CFA (5000) Mar 2009 257.18 239.16

Dalasi is likely todepreciate against majorcurrencies.

15. Foreign Exchange Reserves (US$ Million)

FER End-Jan2009

116.8 140.4

Inter-bank FEtransactions

Jan 2009 1300 1700

Likely to remain underpressure.

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volumes continue to shrink rapidly, while production and employment data suggest that theglobal activity continues to contract in the current quarter.

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

Emerging Asia

Emerging Asia is being hurt through its reliance on manufacturing exports. The regionsmanufacturing activity has been particularly hurt by collapsing IT exports and decline of

automobile and electronics production. Growth in China is also slowing, albeit from a high rate(13 percent in 2007), and domestic demand is being supported by strong policy stimulus.

Africa and the Middle East

In Africa and the Middle East, growth is also projected to slow, but more modestly than in otherregions. In Africa, growth is expected to moderate particularly in commodity exporting countries,and several countries are experiencing reduced demand for their exports, lower remittances,and foreign direct investment (FDI), while aid flows are under threat. In the Middle East, theeffects of the financial crisis have been more limited so far. Despite the sharp drop in oil prices,government spending is largely being sustained to cushion the toll on economic activity.

Global Responses and Risks

Governments and central banks across countries have responded to the crisis through large,aggressive and unconventional fiscal and monetary measures to bail out failed financial andother strategic sectors and to boost domestic consumption and investment demand. However,there is a contentious debate on whether these measures are adequate and appropriate, andwhen, if at all, they will start to show some positive and encouraging results.

1.2 Deflation Risks and Prospects of Emerging Economies

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Deflation risks, concentrated in the major advanced economies, could reinforce a deeper andlonger downturn for the global economy. Expectations of falling prices could encourage bothhouseholds and business houses to postpone consumption and investment spending and pushthe economy into deeper recession. With policy rates already near the zero limits, monetaryauthorities in many countries have limited capacity to counteract deflationary pressures throughtraditional means, while the effectiveness of less conventional approaches is uncertain.

There is a serious risk that emerging economies will not be able to secure adequate externalfinancing, especially given global deleveraging, potentially large borrowing needs of advancedeconomies and increased domestic bias guided by growing feeling of strong nationalism.Overall, risks are largest for emerging economies that relied on cross-border flows to financecurrent account deficits or to fund the activities of their financial or corporate sectors.

1.3 Decisions of G20 Meeting at London on April 2, 2009

The Group of Twenty (G20) Leaders in their meeting on April 2, 2009 at London agreed to takecollective action to strengthen financial regulation and supervision for improving transparencyand accountability, enhancing sound regulation, promoting integrity in financial markets and

reinforcing international cooperation. Amongst others, major actions include the following:

(a) To expand the Financial Stability Forum with broadened mandate and re-established with astronger institutional basis and enhanced capacity as the Financial Stability Board (FSB).

(b) Concrete measures for strengthening international cooperation and prudential regulation toassure economic recovery and to maintain quality of capital thereafter.

(c) Hedge funds or their managers will be registered and will be required to disclose appropriate

information on an ongoing basis.

(d) Principles on pay and compensation in significant financial institutions to ensure thatcompensation structures are consistent with firms long-term goals and prudent risk taking.

(e) Information exchange on tax havens and non-cooperative jurisdictions to protect public

finances and international standards against the risks posed by non-cooperative jurisdictions.

(f) Reviewing tax treaty policies according to agreed principles of tax transparency and

information exchange.

(g) To improve accounting standards for realistic and fair valuation of financial instruments

based on their liquidity and investors holding horizons.

(h) To improve accounting standards for recognition and provisioning of loan-loss, off-balancesheet contingent liabilities and valuation uncertainty;

(i) More effective oversight of the activities of the Credit Rating Agencies, as they are essentialfinancial market participants.

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1.4 India-Africa Partnership Conclave held in New Delhi on 23-24 March 2009

During 23-24 March 2009 at New Dellhi, the Confederation of Indian Industry (CII) and the

EXIM Bank of India held the 5th CII-EXIM Bank Conclave on India Africa Project

Partnership. The CII-EXIM Bank India-Africa Partnership Project was launched in 2004. The

first ever India-Africa Forum Summit held in New Delhi in April 2008 was convened in

partnership with the African Union.

This years Conclave had participation by 38 African nations, four regional bodies and six

financial institutions on the either side. The two-day conclave was attended by 450 participants

from Africa, including 15 ministers from Botswana, Burkina Faso, Central African

Republic, Comoros, Congo, Cote dlvoire, Liberia, Mauritius, Mozambique, Sudan, Togo,

Uganda, and Zimbabwe.

India called for doubling the India-Africa bilateral trade to the level of $70 billion over the next

five years, continuing the growth trajectory that began in 2000-01 with a trade of only $3 billion

but shot up 12 times to $36 billion in 2007-08.

In April 2008 India had announced duty free tariff preferential scheme for 49 least developed

countries (LDCs) which has benefited 33 African countries. India is the worlds largest importer

of rough diamonds, most of which are sourced from Africa. It is also a major exporter of cut and

polished diamonds. India has also comparative advantages in many sectors.

While Indian companies have already begun investing in Africa, the African Ministers and other

leaders have called for boosting investments in almost all sectors including agriculture,

transportation, health, education, water supply, mining, power, agro-processing, irrigation,

pharmaceuticals, IT, micro finance, retail chain and small and medium scale sector for

generating employment and helping Africa to achieve poverty reduction and MDG targets.

India is committed to helping Africa to bridge the digital divide and help spread the benefits of

development, especially in sub-Saharan Africa. The Indian Technical and Economic

Cooperation has benefited African students undertaking training courses in India and in 2009

the Indian government has designed special courses for experts from Africa in mining and new

and renewable energy resources. The number of training slots for African students has been

increased from 1100 to 1600. The number of scholarships for African students has been

doubled to 500.

The EXIM Bank of India has already provided $2 billion line of credit to African nations and

additional $600 million credit is under active consideration at various stages. This is a part of the

commitment to extend $5.3 billion assistance for development of trade and infrastructure both inthe private and public sectors over a period of five years.

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1.5 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).

1.6 Petroleum 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 inthe Chinese demand and negative growth in the US and EU, global oil prices are likely toremain around US$50 per barrel in 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 Jan Feb Mar Commodity Unit 2008 2008 2008 2008 2009 2009 2009 2009

EnergyCoal, Australia $/mt 114.00 138.65 162.80 92.97 71.93 79.40 75.38 61.00Crude oil, Brent $/bbl 96.67 122.39 115.60 55.89 44.98 44.86 43.24 46.84Crude oil, Dubai $/bbl 91.30 116.67 113.47 53.67 44.56 44.97 43.14 45.58

Natural gas Index2000=100 235.3 286.0 284.1 266.2 199.0 229.6 187.9 179.3

AgricultureCoffee, Arabica /kg 328.5 315.1 321.2 267.8 283.9 282.9 285.5 283.3Tea, Mombasaauctions /kg 221.8 221.6 252.8 190.8 214.3 219.3 211.8 211.8Coconut oil $/mt 1,379 1,499 1,246 772 677 734 673 624

Groundnut oil $/mt 2,007 2,328 2,417 1,773 1,287 1,343 1,293 1,224Soybean oil $/mt 1,384 1,466 1,353 830 754 789 748 725Maize $/mt 220.4 259.0 244.7 168.4 166.9 172.8 163.4 164.6Rice, Thailand,25% $/mt 182.2 n.a. 669.5 449.9 469.4 464.0 472.8 471.5Wheat, US, HRW $/mt 411.8 346.5 317.7 228.1 231.6 239.1 224.7 230.9Wheat US SRW $/mt 384.1 277.8 241.5 182.7 187.4 195.1 183.4 183.7Fishmeal $/mt 1,126 1,185 1,198 1,023 1,013 1,009 1,001 1,029Meat, beef /kg 282.1 332.7 372.4 268.0 245.2 251.6 236.2 247.7Meat, chicken /kg 158.8 167.9 177.1 174.7 173.5 174.9 173.8 171.9Meat, sheep /kg 453.6 493.2 477.3 410.0 378.5 380.7 380.3 374.6Oranges $/mt 1,103 1,322 1,163 842 799 783 767 847Sugar, world /kg 28.42 27.01 31.14 26.28 28.85 27.76 29.26 29.54Raw Materials

Logs, Cameroon $/cum 530.8 554.4 548.5 473.8 426.8 470.2 421.9 388.2Plywood /sheets 640.4 647.3 648.6 645.5 563.3 574.7 573.0 542.1Cotton A Index /kg 167.9 166.5 168.2 126.9 120.8 127.2 121.7 113.4Cotton Memphis /kg 174.2 171.6 170.0 130.1 129.8 134.9 131.4 123.3* Rubber RSS3,SGP /kg 273.5 303.5 298.4 159.0 146.0 148.7 146.3 143.1

Fertilizers DAP $/mt 860.2 1,191.6 1,153.7 663.3 362.2 351.0 367.9 367.6Phosphate rock $/mt 234.4 367.5 409.2 371.3 193.3 265.0 157.5 157.5Potassiumchloride $/mt 367.7 511.1 635.0 766.7 865.2 853.1 872.5 870.0Urea $/mt 357.6 575.7 745.4 292.2 267.3 263.4 273.3 265.4Metals and

Minerals Aluminum $/mt 2,743 2,940 2,787 1,821 1,360 1,413 1,330 1,336Copper $/mt 7,796 8,443 7,680 3,905 3,428 3,221 3,315 3,750Gold $/toz 927 896 870 795 909 859 943 924

Source: World Bank Pink Sheet April 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 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 favorable rainfall and bumper crops, high food grains prices and verygood performance by electricity, telecom and financial sectors, the real GDP growth atconstant 2004 factor cost improved from 6.1% in 2007 to 7.2% in 2008, supported by aspectacular growth of 28.4% in agriculture value added and a marginal growth of 0.7%by industry while services value added declined by (-) 0.6% due to poor performance bytrade and public administration.

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 a growth of 6% 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 consumer spending

and investment and enhance economic growth in the range of 5%.

Table-2.1: Trends of Sectoral Growth Rates and Shares in GDP4In the Gambia in 2005-2009 (In percentage)

I T E MS GDP Growth Rates (%) Sectoral Shares (%)

2005Actual

2006Actual

2007Actual

2008Est.

2009Proj.

2005Actual

2006Actual

2007Actual

2008Est.

2009Proj.

GDP at 2004 FC 2.0 6.6 6.1 7.2 4.5 100.0 100.0 100.0 100.0 100.0

Agriculture and allied -0.8 3.9 3.9 28.4 6.0 29.1 28.4 27.8 33.4 33.9

Industry 6.2 18.5 -3.1 0.7 2.0 15.8 17.5 16.0 15.0 14.7

Services 3.2 5.7 10.4 -0.6 4.4 60.0 59.5 61.9 57.4 57.4

Source: Gambian Bureau of Statistics (GBOS) for the years 2005-2008 and projections for2009 by the Macroeconomic Adviser.

4Gross Domestic Product at Factor Cost at constant 2004 prices.

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2.2 Consumer Price Index and Inflation

As measured by the Consumer Price Index (CPI), the annual point-to-point inflationaccelerated from 5% in February 2008 to 7.0% in February 2009. However, the 12-month average inflation rate decelerated to 4.5% from 5.7% a year ago.

Food items (with weights of 55.2% in overall CPI) recorded average inflation of 8.8% inFeb 2009 compared to 8.1% a year ago and contributed 72% to inflation in Feb 2009.

Non-food items (with weights of 44.8% in overall CPI) recorded annual inflation of 4.8%in February 2009 compared to 1.2% a year ago and contributed 28% to inflation.

Among other groups, in February 2009, clothing and textiles recorded annual inflation of5.4%, housing and utilities 5.9%, restaurants 7.7% and transport 4.4%.

Items Weights(%)

Feb-2008 Feb-2009 Inflation(%)

Wi.(CPI1-CPI0) Contribution5 (%)

Overall 100.0 112.3 120.25 7.0 777.3 100.0Food 55.2 115.5 125.57 8.8 558.7 71.9

Tobacco 0.7 103.8 105.68 1.8 1.3 0.2Clothing 11.3 105.3 110.98 5.4 64.1 8.2Utilities 3.4 114.4 121.18 5.9 23.1 3.0

Furnishing 5.2 110.6 114.87 3.9 22.6 2.9Health 1.0 101.0 101.77 0.8 0.8 0.1

Transport 4.4 114.9 119.93 4.4 22.2 2.9Telecom 3.0 101.1 101.95 0.9 2.6 0.3

Recreation 8.0 103.6 104.5 0.9 7.5 1.0Education 1.5 101.9 102.24 0.4 0.6 0.1

Hotels 0.4 107.6 115.89 7.7 3.0 0.4Misc. 5.9 112.3 124.28 10.7 71.0 9.1non-food 44.8 108.6 113.79 4.8 233.4 28.1

Source: Gambian Bureau of Statistics (GBOS).

5Contribution 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 558.7 / 777.3 = 71.9%.

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2.3 Government Financial Performance in the First Quarter (Q1) of 2009

Columns (5) and (6) of Table 2.3.1 present major item-wise revenue realization andexpenditure of the government in the first quarter of 2009 (2009-Q1) and that of 2008 (2008-Q1) respectively. Columns (7) and (8) indicate the percentage changes of major items ofrevenues and expenditure in 2009-Q1 compared with those in 2008-Q1.

It may be observed from the table that, in terms of percentage changes, the governmentsfiscal performance has been significantly better in 2009-Q1 than in 2008-Q1.

In the 2008-Q1 total revenues and grants had declined by 1.4%, as tax revenues increasedby only 1.9% while non-tax revenues declined by 38.1% over 2007-Q1. On contrast, 2009-Q1 has witnessed 15.5% increase in total revenue and grants aided by 15.2% increase intaxes and 60.7% increase in grants, while non-tax revenues declined by only 6.6% over2008-Q1.

During the first quarter of the current year, total expenditures and net lending has increased

by 15.8% over 2008-Q1 due to 12.5% increase in personnel emoluments and more thandoubling (114.4% increase) of capital expenditure while interest payments declined by 8.9%over 2008-Q1.

Overall there is a fiscal balance of 77.8 million Dalasi in 2009-Q1, higher than the overallfiscal balance of 66.4 million Dalasi in 2008-Q1, despite significant increase of capitalexpenditure in 2009-Q1.

Table 2.3.1 Govt Financial Performance in 2009Q1 compared with 2008Q1

Items 2008Actual

Mln Dal.

2008 BEMln

Dal.

2009 BEMln.

Dal.

2009-Q1Jan-Mar

Actual

2008-Q1Jan-Mar

Actual

% change over prev.period

09-Q1 08-Q1

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

Revenue and grants 3644.6 4,475.5 4582.2 1,142.3 988.6 15.5 -1.4Domestic Revenue 3479 3,770.9 3771.1 1,061.4 938.2 13.1 -4.0

Tax Revenue 3161.3 3,362.6 3390.5 977.2 848.2 15.2 1.9Nontax Revenue 317.7 408.3 380.5 84.1 90.1 -6.6 -38.1

Grants 165.64 704.7 811.1 80.9 50.4 60.7 102.7Exp & Net Lending 4134.8 5,205.1 5362.9 1,067.5 922.2 15.8 -3.9

Current Expenditure 3011.4 2,812.3 3838.0 709.2 720.2 -1.5 21.3Personnel Emoluments 905.53 917.5 1035.2 252.9 224.9 12.5 34.8

Other Charges 1397.5 1,143.4 1957.5 256.0 275.5 -7.1 43.3Interest 708.42 622.3 845.3 200.3 219.8 -8.9 -6.3

External 153.52 72.3 147.3 44.0 57.6 -23.7 -21.1

Domestic 554.89 550.0 698.0 156.4 162.2 -3.6 0.4Cap Exp & Net Lending 1123.4 2,332.8 1524.9 358.3 202.1 77.3 -44.8

Capital Expenditure 1016.6 2,223.2 1468.2 375.3 175.0 114.4 -39.2Net Lending 106.77 109.6 56.7 -17.0 27.0 -162.9 -65.4

Overall fiscal balance -490.2 -729.5 -780.7 77.8 66.4 17.2 55.1Primary Balance 218.2 -107.2 64.6 278.1 286.2 -2.8 3.2

Nominal GDP 22788 22788 25253 25253 22590 11.0 10.5

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An analysis of Table 2.3.2 leads to the following observations:

Columns (2) and (3) present the major item-wise performance of revenues and expenditureas percentages of the corresponding budget estimates in 2009-Q1 and 2008-Q1respectively. It is evidenced from the table that as percentages of the budget respectiveestimates, government revenue collections and expenditures have performed better in the

first quarter of 2009 than those in the first quarter of 2008.

Columns (7) and (8) present the major item-wise performance of revenues and expenditureas percentages of the corresponding GDP at current market prices in 2009-Q1 and 2008-Q1respectively. It is observed from the table that, in terms of the percentages of GDP, the totalrevenues and expenditures have performed better in the first quarter of 2009 than in the firstquarter of 2008.

The revenue and expenditure ratios to GDP are also observed to be on track in 2009-Q1..

Table 2.3.2 Govt Financial Performance in 2009Q1 compared with 2008Q1

Items2009-Q1as % ofBudget

2008-Q1as % ofBudget

2008-Q1as % ofactual

2009 BEas % of

GDP

2008 ACas % of

GDP

2009-Q1as % ofGDP

2008-Q1as % of

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

Revenue and grants 24.9 22.1 27.1 18.3 16.1 4.6 4.4Domestic Revenue 28.1 24.9 27.0 15.0 15.4 4.2 4.2

Tax Revenue 28.8 25.2 26.8 13.5 14.0 3.9 3.8Nontax Revenue 22.1 22.1 28.3 1.5 1.4 0.3 0.4

Grants 10.0 7.1 30.4 3.2 0.7 0.3 0.2

Exp & Net Lending 19.9 17.7 22.3 21.4 18.3 4.3 4.1Current Expenditure 18.5 25.6 23.9 15.3 13.3 2.8 3.2Personnel Emoluments 24.4 24.5 24.8 4.1 4.0 1.0 1.0

Other Charges 13.1 24.1 19.7 7.8 6.2 1.0 1.2Interest 23.7 35.3 31.0 3.4 3.1 0.8 1.0

External 29.9 79.7 37.5 0.6 0.7 0.2 0.3Domestic 22.4 29.5 29.2 2.8 2.5 0.6 0.7

Cap Exp & Net Lending 23.5 8.7 18.0 6.1 5.0 1.4 0.9Capital Expenditure 25.6 7.9 17.2 5.9 4.5 1.5 0.8Net Lending -30.0 24.7 25.3 0.2 0.5 -0.1 0.1

Overall fiscal balance -10.0 -9.1 -13.5 -3.1 -2.2 0.3 0.3

Primary Balance 430.5 -267.0 131.2 0.3 1.0 1.1 1.3

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

Column (2) of the Table 2.3.3 below presents detailed item-wise revenues and expenditure of

the expenditure in the first quarter of 2009. We have estimated the ratios of realization for any

item in the first quarter to the actual outturn for the item during the complete year for the last

five years viz, 2004, 2005, 2006, 2007 and 2009. Item-wise average ratios (as percentage to the

actual outturn for the year) for these years are presented in column (3) of the table 2.3.3. Taking

these ratios as norms, expected revenue and expenditure outcomes for the full year 2009 are

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

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Expected outcome for an item in 2009 = 100 X (actual realization in 2009-Q1) / average

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

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

that total domestic revenue and tax revenue targets are expected to be achieved. However,

there is likely to be shortfall in grants realization unless the subsequent disbursements are

significantly augmented. There is also expected shortfall in non-tax revenues.

Table-2.3.3 Government Fiscal Performance in the First Quarter of 2009

2009-Q1Actual

Average Q1 realizationas % of actual outcome

(Average ratio in Q1 in lastfive years 2004-2009)

2009ExpectedOutcome6

2009Budget

(1) (2) (3) (4) (5)1.Revenue and grants (2+5) 1142.2 4249.6 4582.22.Domestic Revenue (3+4) 1061.3 4001.6 3771.13.Tax Revenue (3.1+3.2) 977.2 3695.4 3390.6

3.1 Direct Tax (a to e) 308.2 1088.8

(a) Personal 140.3 25.8 544.8

(b) Corporate 115.0 25.2 456.4

(c) Capital Gains 6.2 29.5 21.2

(d) Payroll 30.1 69.4 43.4

(e) Other 16.5 71.5 23.1

3.2 Indirect Tax (3.2.1+3.2.2) 669.1 2606.6

3.2.1 Dom Tax on G&S 165.3 632.6

(a) Stamp Duties 5.1 22.4 22.9

(b) Excise Duties 40.3 21.2 189.9

(c) Dom Sales Tax 117.8 28.6 412.6

(e) Others 2.0 28.0 7.1

3.2.2 Tax on Ext Trade (a+b) 503.8 1974.0(a) Duty (i+ii) 310.7 1166.9

(i) Oil 195.1 27.5 710.2

(ii) Non-oil 115.6 25.3 456.7

(b) Sales tax on imp (i+ii) 193.1 807.1

(i) Oil 25.3 24.1 105.0

(ii) Non-oil 167.7 23.9 702.1

4. Nontax Revenue (a to d) 84.1 306.2 380.5(a) Govt Charges 56.9 35.5 160.3

(b) NTR from CRD 1.6 24.1 6.7

(c) NTR from CED 25.1 19.4 129.2

(d) Others 0.5 5.0 10.0

5. Grants 80.9 32.6 248.0 811.1

6 Estimated on the basis of the formula as explained in the text,

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2009-Q1Actual

Average Q1 realizationas % of actual outcome

(Average ratio in Q1 in lastfive years 2004-2009)

2009ExpectedOutcome7

2009Budget

(1) (2) (3) (4) (5)6. Exp & Net Lending (7+8) 1067.5 4468.1 5362.97. Current Exp (7.1+7.2+7.3) 709.2 2825.7 3838.0

7.1 Personnel Emoluments 252.9 26.6 949.3 1035.27.2 Other Charges 256.0 22.0 1165.7 1957.57.3 Interest (a+b) 200.3 710.7 845.3

(a) External 44.0 32.6 134.8 147.3(b) Domestic 156.4 27.1 575.9 698

8. Cap Exp & Net Lending 358.3 1642.4 1524.98.1 Capital Expenditure 375.3 1585.7 1468.2(a) Externally Financed 269.3 32.9 819.8

(b) GLF Capital 106.0 13.8 765.9

8.2 Net lending -17.0 56.7 56.79. Overall fiscal bal (1-6) 74.7 -218.5 -780.7

10. Primary Balance (9+7.3) 275.1 492.2 64.6

As regards expenditure, there is likely to be expenditure overrun of capital expenditure, whileactual current expenditure is expected to shoow some surplus over the budgeted expenditure.

Overall, it is expected to have a fiscal deficit of 218.5 million Dalasi (amounting to 0.9 percentoof GDP at current market prices) compared to budget estimate of fiscal deficit at 780.7 millionDalasi (amounting to 3.1 percent of GDP).

7 Estimated on the basis of the formula as explained in the text,

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2.4 Public Debt

(a) External Debt

The stock of external debt declined substantially at end-2007 following HIPC and MDRI debtrelief. At the end of 2006, prior to completion point, the stock of nominal external public debt was

US$676.7 million (133.1 percent of GDP). Multilateral creditors accounted for 84 percent of thisdebt. At end-2007, post-completion point, the stock of external public debt fell to US$299.4million (46.0 percent of GDP).

(b) Outstanding Domestic Debt

As on 28 February 2009, outstanding domestic debt stood at D5.9 billion (amounting to24.8% of GDP) compared to D5.5 billion (amounting to 24.3% of GDP) a year ago.

Treasury bills, accounting for 79.5% of total domestic debt, declined by 1.1% to D4.7billion at the end of February 2009.

At end-Feb 2009 the CBG provided 8% of interest bearing domestic debt, commercialbanks 63%, Parastatals 14%, Sukuk Al Salaam 2% and others 14%.

Outstanding Domestic Public Debt, 28 February 2009

Type of debt Million Dalasi Composition (in percentage)28 Feb 2008 28 Feb 2009 28 Feb 2008 28 Feb 2009

Treasury bills 4749 4696 86.6 79.5Sukuk Al-Salam 71 92 1.3 1.5Government Bonds 250 250 4.6 4.2Non-interest bearingTreasury Notes

415 873 7.6 14.8

Total 5485 5911 100.0 100.0

Composition of Interest Bearing Domestic Debt (in percentage)

Book Value Face Value

28 Feb 2008 28 Feb 2009 28 Feb 2008 28 Feb 2009By Holders

Central Bank 9 8 8 8Commercial Banks 56 64 56 63Parastatals 18 15 18 15Other Non Banks 18 13 18 14Total 100 100 100 100

By InstrumentsTreasury Bills 93 92 94 93Sukuk Al Salaam 2 2 1 2Government Bonds 5 6 5 5Total domestic debt (%) 100 100 100 100

Source: Banking Operations Department of the Central Bank of Gambia (CBG).

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2.5Money Supply in February 2009

Annual growth rate of broad money supply (M3) accelerated from 19.3% in January2009 to 20.4% in February 2009. On the contrary, annual growth rate of reserve moneydecelerated from 12.7% in January 2009 to 4.9% in February 2009.

On the supply side, 20.4% growth in money supply in February 2009 was supported by7.4% growth in currency, 30% growth in demand deposits, 5.6% growth in savingsdeposits and 44.9% growth in time deposits.

On the demand side, growth was mainly due to 41.5% growth in domestic credits, whilenet foreign assets declined by 10 percent over a year ago.

Domestic credit increased from D4.8 billion in Feb 2008 to D6.8 billion in Feb 2009,supported by 41.6% growth in government borrowing and 53.3% growth in credits to theprivate sector, while credits to public entities declined by 34.5% over a year ago.

Components of moneysupply

Feb 2008Mill. Dalasi

Feb 2009Mill. Dalasi

Compo-sition inFeb 2008

(in %)

Compo-sition inFeb 2009

(in %)

Annualgrowth inFeb 2009over Feb-

2008 (in %)1.Broad Money Supply (M3)(2+3) 8242.23 9924.91 100.0 100.0 20.42.Narrow Money (2.1+2.2) 4116.23 4971.49 49.9 50.1 20.82.1 Currency 1673.74 1796.85 20.3 18.1 7.42.2 Demand deposits (a+b) 2442.49 3174.64 29.6 32.0 30.0

(a) Private sector 2252.95 2692.91 27.3 27.1 19.5(b) Official 189.54 481.73 2.3 4.9 154.2

3.Quasi money (3.1+3.2) 4126.00 4953.42 50.1 49.9 20.1

3.1 Savings deposits (a+b) 2611.89 2759.36 31.7 27.8 5.6(a) Private sector 2567.32 2753.31 31.1 27.7 7.2(b) Official 44.57 6.05 0.5 0.1 -86.4

3.2 Time deposits (a+b) 1514.11 2194.06 18.4 22.1 44.9(a) Private sector 1187.78 1687.09 14.4 17.0 42.0(b) Official 326.33 506.97 4.0 5.1 55.4

Demands for money (1+2) 8242.23 9924.93 100.0 100.0 20.4

1.Net forign assets (1.1+1.2) 3769.22 3393.76 45.7 34.2 -10.0

1.1 Monetary Authorities 2830.31 2729.92 34.3 27.5 -3.5

1.2 Commercial banks 938.91 663.84 11.4 6.7 -29.32.Net Domestic Assets(2.1+2.2) 4473.01 6531.17 54.3 65.8 46.0

2.1 Domestic credit 4812.57 6809.44 58.4 68.6 41.5(a) Credits to governnment 1839.02 2604.04 22.3 26.2 41.6

(b) Credits to public entities 292.04 191.4 3.5 1.9 -34.5

(c) Credits to private sector 2498.22 3830.71 30.3 38.6 53.3

(d) Credits to forex bureau 183.29 183.29 2.2 1.8 0.0

2.2 Other items, net -339.56 -278.27 -4.1 -2.8 -18.0Source: Economic Research and Statistics Department of CBG.

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2.6 Commercial Banks Assets

The banking industry remains sound. Total industry assets increased by 19.5% to D12.5billion year-on-year at end-Dec 2008, and stood at D12.3 billion at end-Jan 2009, up by14% over those at the end-Jan 2008.

Gambian banks do not have large exposure to foreign assets or foreign liabilities. Atend-Jan 2009, foreign assets constituted only 9.2% of total assets (foreign exchange1.9%, balances abroad 6.4% and foreign investment 0.9%), down from 14.4% a yearago (foreign exchange 1.9%, balances abroad 11.7% and foreign investment 0.8%).

At end-Jan 2009, loans and advances to the public sector declined by 33.8% while thoseto the private sector increased by 49.4% over Jan-2008.

At end-Jan 2009, investments in government Treasury Bills increased by 10.2 percentwhile banks foreign investment increased by almost 40 percent.

The risk-weighted capital adequacy ratio stood at 35.9% in Dec 2008, well above thestatutory requirement of 8%.

Non-performing loans rose from 7.3% in Sep 2008 to 9.5% in Dec 2008, but wereadequately provisioned in compliance with the statutory requirements.

Commercial Banks Assets at the end-Feb 2009 (Million Dalasi)

Assets

Dec-08 Feb-08 Feb-09Composition (%)

Dec-08 Feb-08 Feb-09% changeOverFeb-08

1. Notes and coins 217.3 141.5 224.5 1.7 1.3 1.8 58.6

2. Foreign exchange 401.3 172.5 279.2 3.2 1.6 2.3 61.9

3. Local Bank balance 854.7 934.5 1,004.0 6.9 8.9 8.2 7.4ii. CBG 851.9 908.0 954.4 6.8 8.6 7.8 5.1

iii. Banks locally 2.8 26.5 49.6 0.0 0.3 0.4 87.1

4. Balances abroad 758.4 1,042.4 618.7 6.1 9.9 5.1 -40.6

5. Bills purchased 40.9 5.6 115.3 0.3 0.1 0.9 1974.5

6. Loans and advances 3,263.1 2,476.3 3,576.1 26.2 23.5 29.3 44.4

i. Public sector 325.7 155.1 88.7 2.6 1.5 0.7 -42.8

ii. Private sector 2,937.4 2,321.2 3,487.4 23.6 22.0 28.5 50.2

7. Investments 3,231.1 3,069.8 3,255.7 25.9 29.2 26.6 6.1

i. Govt Treasury Bills 2,949.5 2,793.5 2,950.9 23.7 26.5 24.1 5.6

ii. Others 139.9 135.0 182.5 1.1 1.3 1.5 35.2iii Foreign

Investments 141.6 141.3 122.3 1.1 1.3 1.0 -13.4

8. Fixed assets 840.1 579.9 868.0 6.7 5.5 7.1 49.7

9. Guarantees 1,435.8 1,088.7 1,360.5 11.5 10.3 11.1 25.0

10. Other assets 1,425.5 1,019.1 920.8 11.4 9.7 7.5 -9.6

11. Total assets (1 to 10) 12,468.2 10,530.3 12,222.8 100.0 100.0 100.0 16.112. Net Balance (11-9) 11,032.4 9,441.6 10,862.4 88.5 89.7 88.9 15.0

Source: Central Bank of Gambia.

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2.7Commercial Banks Liabilities

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities.At end-Jan 2009, external sector related liabilities constituted only 3.1% of total liabilities(non-residents deposits 0.9%, balances with banks abroad 1.6% and external debt0.6%), down from 4.1% a year ago (non-residents deposits 2%, balances with banks

abroad 1.5% and external debt 0.6%).

In January 2009 commercial banks total deposits increased by 21 percent over January

2008, contributed by a growth of 25.3 percent in demand deposits, 5.1 percent growth in

savings deposits and 42.5 percent growth in time deposits.

In January 2009 banks capital and reserves increased by 26 percent, bank balances

increased by 33.6% while borrowings declined by 38.5% over January 2008.

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Commercial Banks Liabilities at the end-Feb 2009 (Million Dalasi)LIABILITIES(in million dalasi)

Dec-08 Feb-08 Feb-09

Comp-sition (%)

Dec-08 Feb-08 Feb-09

%change

over Feb-2008

1. Capital and reserves 1,448.0 1,253.7 1,498.1 11.6 11.9 12.3 19.5

2. Demand deposits 3,286.7 2,442.5 3,174.6 26.4 23.2 26.0 30.0

i Residents 2,653.5 2,194.6 2,603.5 21.3 20.8 21.3 18.6

ii Non residents 39.5 58.3 89.4 0.3 0.6 0.7 53.3

iii Government entities 593.6 189.5 481.7 4.8 1.8 3.9 154.2

3. Savings deposits 2,737.9 2,611.9 2,759.4 22.0 24.8 22.6 5.6

i Residents 2,638.8 2,494.5 2,673.8 21.2 23.7 21.9 7.2

ii Non residents 75.0 72.8 79.5 0.6 0.7 0.7 9.1

iii Government entities 24.0 44.6 6.0 0.2 0.4 0.0 -86.4

4. Time deposits 1,938.9 1,514.1 2,194.1 15.6 14.4 18.0 44.9

i Residents 1,386.2 1,171.4 1,559.8 11.1 11.1 12.8 33.2

ii Non residents 18.1 16.3 127.2 0.1 0.2 1.0 678.6

iii Government entities 534.6 326.3 507.0 4.3 3.1 4.1 55.4

Total deposits 7,963.5 6,568.5 8,128.1 63.9 62.4 66.5 23.7

5. Bank Balances 137.0 134.3 163.1 1.1 1.3 1.3 21.4

i Head office & branches 86.7 14.2 121.3 0.7 0.1 1.0 755.4

ii Other banks abroad 50.3 120.1 41.7 0.4 1.1 0.3 -65.2

6. Borrowings from 414.6 293.0 193.4 3.3 2.8 1.6 -34.0

i CBG - - - 0.0 0.0 0.0

ii Other banks locally 12.0 10.0 - 0.1 0.1 0.0 -100.0

iii Head office & branches 201.1 124.7 120.9 1.6 1.2 1.0 -3.0

iv Other banks abroad 201.5 75.2 72.4 1.6 0.7 0.6 -3.7

v. Other sources - 83.1 - 0.0 0.8 0.0 -100.0

7. Guarantees 1,435.8 1,088.7 1,360.5 11.5 10.3 11.1 25.0

8. Other liabilities 1,069.3 1,192.1 879.8 8.6 11.3 7.2 -26.2

9. Total liabilities (1 to 8) 12,468.2 10,530.3 12,222.8 100.0 100.0 100.0 16.1

10. Net balance (9-7) 11,032.4 9,441.6 10,862.4 88.5 89.7 88.9 15.0

Source : Central Bank of TheGambia

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3. Recent Policy Developments and Issues3.1 IMF approves US$9.2 million Augmentation for PRGF

In February 2009, the IMF Executive Board has approved US$9.2 million Augmentation andUS$7.5 million disbursement for the Gambia under the Poverty Reduction Growth Facility(PRGF) Arrangement to help mitigate the impact of the global slowdown

The IMF has complemented the Gambian authorities for the satisfactory implementation of thePRGF-supported program and their commitment to prudent economic policies, which havecontributed to robust growth and moderate inflation. Nevertheless, The Gambia was not sparedfrom the adverse impact of the global economic crisis, which led to a decline in foreignexchange reserves and widening of the current account deficit as a result primarily of reducedincome from tourism and remittances.

The IMF appreciated the commitment of the authorities to achieve sustained growth and povertyreduction by maintaining fiscal discipline, reducing the still high debt level, and promoting privatesector development. The government will increase the share of budgetary resources allocatedto poverty reduction, in line with the priorities of the poverty reduction strategy, and fasterprogress toward achieving the Millennium Development Goals (MDGs). Fiscal policy is beingstrengthened to ensure long-term fiscal sustainability. Going forward, it will be important toimprove the revenue base, rationalize taxation, better align the budget with PRSP priorities, andfurther strengthen public financial management.

The IMF also appreciated the commitment of the Central Bank of the Gambia (CBG) to maintaina monetary policy designed to keep inflation at single-digit levels, and to rebuild internationalreserves for providing a stronger buffer against adverse external developments.

However, the IMF cautioned that the Gambia remains at high risk of debt distress, even afterreceiving HIPC and MDRI debt relief, due to high levels of debt in relation to exports andvulnerability to external shocks. They have requested the government to formulate a national

debt strategy to ensure long-term sustainability, and to rely on grants for financing the country'sdevelopment programs.

3.2 The Joint (Fund-Bank) Staff Advisory Note (JSAN) on PRSP

In October 2008 the Gambian National Planning Commission (NPC) completed the first AnnualProgress Report (APR) of the 2007 Poverty Reduction Strategy Paper (PRSP). The APR notesthat the countrys poverty rates are high and the poor remain highly vulnerable to exogenousshocks. As per the latest poverty survey, fifty eight percent of the households are poor. Thereare concerns that the high growth in recent years was concentrated in sectors such astelecommunication and tourism which had limited impact on the poverty reduction.

In February 2009 the staffs of the IMF and World Bank jointly prepared the Joint Staff AdvisoryNote (JSAN) on the PRSP-APR for The Gambia. The JSAN recommends the following prioritytasks by the government.

(a) developing a comprehensive agricultural sector strategy;(b) maintaining macro-economic stability;(c) prioritizing improvement of governance; and(d) refining PRSP performance indicators.

Gambia Monthly Economic Report April 2009

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Transcript of Gambia Monthly Economic Report April 2009