Gambia Quarterly Eco Bulletin June 2009- Part Two

8/14/2019 Gambia Quarterly Eco Bulletin June 2009- Part Two

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The Gambia Monthly Economic Bulletin- June 2009

THE GAMBIA QUARTERLY

ECONOMIC BULLETIN1

PART-TWO

June 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 team

comprising Tamsir Cham, Director; Momodou Taal, Principal Economist, Amie Khan, Senior Economist,

and Ceesay Chiel, 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 be addressed to: Either Tamsir Cham ([email protected]) or

Tarun Das ([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

countries

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Poverty Ratio (% of peoplebelow One-US$) (2000)

Percent 59 7 out of 59 countries

Source:http://www.nationmaster.com

2.3 Consumer Price Index and Inflation

As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflationaccelerated significantly from 1.6% in May 2008 to 5.9% in May 2009, and the 12-monthaverage inflation rate accelerated to 5.8% in May 2009 from 4.9% a year ago.

Food and drinks (with weights of 55.2% in overall CPI) recorded average inflation of7.1% in May 2009, up from 1.9% a year ago, and contributed 70.8% to overall inflation inMay 2009.

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

Among other groups, in May 2009, clothing and textiles recorded annual inflation of

4.7%, housing and utilities 5.5%, restaurants and hotels 5.8% and house rent 3.1%.

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

Items WeightsWi (%)

May-2008Index

May-2009Index

Inflation(%)

Wi (CPIi1CPIi0)

Contribution2 (%)

Overall 100.0 113.81 120.51 5.9 652.2 100.0Food 55.2 117.39 125.75 7.1 461.5 70.8Tobacco 0.7 104.30 106.13 1.8 1.3 0.2Clothing 11.3 106.25 111.2 4.7 55.7 8.5Utilities 3.4 115.77 122.11 5.5 21.6 3.3Furnishing 5.2 111.52 114.97 3.1 18.1 2.8

Health 1.0 101.04 101.77 0.7 0.7 0.1Transport 4.4 118.86 119.95 0.9 4.8 0.7Telecom 3.0 101.54 101.98 0.4 1.3 0.2Recreation 8.0 103.94 104.67 0.7 5.8 0.9Education 1.5 101.87 102.25 0.4 0.6 0.1Hotels 0.4 109.89 116.3 5.8 2.3 0.4Misc. 5.9 112.56 125.79 11.8 78.4 12.0non-food 44.8 109.08 114.03 4.5 221.7 29.2

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

2Contribution 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 May 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 May 2009 (%)

Food

70%

Clothing

9%

Utilities

3%

Furnishing

3%

Transport

1%Others

14%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

07-Ja

Mar

May

Jul

Sp

Nv

08-Ja

Mar

May

Jul

Sp

Nv

09-Ja

Mar

May

Food

All

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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

May2.76.61.65.9

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 June-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 CPI variation for a month over the previous month

in 2009 will be the average CPI variation for the month over the previous month in lasttwo years (2008 and 2007). Thus, June 2009 CPI is estimated by the following formula:

Projected CPI for June 2009 = May 2009 CPI + (June 2008 CPI + June 2007 CPI May 2008CPI May 2007 CPI)/ 2. CPI for the subsequent months is projected by the similar formula.

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

Projected CPI for June 2009 = Actual CPI for May 2009 + (June 2008 CPI May 2008 CPI).CPI for the subsequent months is projected by the similar formula.

(3) Alternative-3: Average of inflation rates underAlternatives 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 4.3 percent.

Table-2.5: Projections of CPI inflation during June-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 6.7Apr 111.64 113.21 120.36 120.36 6.3 1.4 6.3 6.3 6.3May 112.05 113.83 120.51 120.51 6.6 1.6 5.9 5.9 5.9Jun 111.98 114.48 120.80 121.16 6.4 2.2 5.5 5.8 5.7July 111.95 116.21 121.65 122.89 6.3 3.8 4.7 5.7 5.2Aug 112.09 117.65 122.44 124.33 6.4 5.0 4.1 5.7 4.9Sep 111.86 118.96 122.98 125.64 6.0 6.3 3.4 5.6 4.5Oct 111.95 119.29 123.19 125.97 6.0 6.6 3.3 5.6 4.4Nov 112.13 119.54 123.41 126.22 6.0 6.6 3.2 5.6 4.4Dec 112.26 119.93 123.67 126.61 6.0 6.8 3.1 5.6 4.3

Q1 107.7 112.5 120.2 120.2 2.8 4.4 6.9 6.9 6.9

Q2 111.9 113.8 120.6 120.7 6.4 1.7 5.9 6.0 6.0Q3 112.0 117.6 122.4 124.3 6.2 5.0 4.0 5.7 4.9Q4 112.1 119.6 123.4 126.3 6.0 6.7 3.2 5.6 4.4

2.6Government Fiscal Performance in Jan-June 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 half of 2009 (i.e. Jan-June 2009) and Jan-June2008 respectively. Columns (7) and (8) indicate annual percentage changes of major itemsof revenues and expenditure in Jan-June 2009 compared with those in Jan-June 2008.

It may be observed from the table that, in terms of percentage increases, the governmentsfiscal performance has been mixed in Jan-June 2009 compared with that in Jan-June 2008.

In Jan-June 2008 total revenues and grants declined by 1.2%, as tax revenues decreasedby 3.8% and non-tax revenues declined by 2.3% over Jan-June 2007. On contrast, Jan-June 2009 has witnessed 15.5% increase in total revenue and grants aided by 13.3%increase in taxes, 8.9% increase in non-tax revenues and 64% increase in grants.

During Jan-June 2009, total expenditures and net lending has increased by 20.4% over Jan-June 2008 due to 18% increase in personnel emoluments, 55.2% increase of capitalexpenditure and 6.3% increase by interest payments over Jan-June 2008.

Overall, there is a fiscal deficit of D197.7 million, and basic surplus of D70.2 million in Jan-June 2009, compared to a fiscal deficit of D86 million and basic surplus of D70.2 million inJan-June 2008.

Table-2.6.1 Govt Financial Performance in Jan-June2009 compared with Jan-June2008

Items2008Actual

Mln Dal.

2008 BEMln Dal.

2009 BEMln. Dal.

2009Jan-June

Actual

2008Jan-June

Actual

% change overPrev. period

2009Jan-June

2008Jan-June

(1) (2) (3) (4) (5) (6) (7) (8)Revenue and grants 3644.6 4475.5 4582.1 2215.9 1918.5 15.5 -1.2

Domestic Revenue 3479.0 3770.9 3771.0 2054.6 1820.0 12.9 -3.8Tax Revenue 3161.3 3362.6 3390.5 1849.0 1631.2 13.3 -0.3Nontax Revenue 317.7 408.3 380.5 205.6 188.8 8.9 -26.3

Grants 165.6 704.7 811.1 161.3 98.5 63.7 102.5Exp & Net Lending 4134.8 5016.0 5362.9 2413.6 2004.6 20.4 14.7

Current Expenditure 3011.4 2683.2 3838.0 1640.5 1543.8 6.3 29.3Personnel Emoluments 905.5 917.5 1035.2 530.5 449.7 18.0 34.0

Other Charges 1397.5 1143.4 1957.5 701.1 709.6 -1.2 57.7

Interest 708.4 622.3 845.3 408.9 384.5 6.3 -5.9External 153.5 72.3 147.3 97.6 79.5 22.7 -23.5Domestic 554.9 550.0 698.0 311.2 305.0 2.1 0.1

Cap Exp & Net Lending 1123.4 2332.8 1524.9 773.1 460.7 67.8 -16.7

Capital Expenditure 1016.6 2223.2 1468.2 613.8 395.6 55.2 -18.9Net Lending 106.8 109.6 56.7 159.2 65.2 144.4 -0.8

Overall Bal Inc. grants -490.2 -540.4 -780.8 -197.7 -86.0 129.7 -144.4Basic balance -155.5 259.3 -267.8 158.2 70.2 125.3 -88.1Basic Primary Bal 552.9 881.6 577.5 567.1 454.7 24.7 -54.5

Nominal GDP (IMP Prg) 17959 17859 19904 19904 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-June 2009 and Jan-June 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-June 2009 than those in Jan-June 2008.

Columns (7) and (8) of Table-2.6.2 present the major item-wise performance of revenuesand expenditure in Jan-June 2009 and Jan-June 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 revenues and expenditures havealso performed better in Jan-June 2009 than those in Jan-June 2008.

The revenue and expenditure ratios to GDP are also observed to be on track in Jan-June2009 as compared with the 2009 budget estimates (given in column-5).

Table-2 .6.2 Govt Financial Performance in Jan-June2009 compared with Jan-June2008

Items

2009Jan-Jun

as % ofBudget

2008Jan-Jun

as % ofBudget

2008Jan-Jun

as % ofactual

2009 BEFull Year

as % ofGDP

2008 ACFull Year

as % ofGDP

2009Jan-Jun

as % ofGDP

2008Jan-Jun

as % ofGDP

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

Revenue and grants 48.4 42.9 52.6 23.0 20.3 11.1 10.7

Domestic Revenue 54.5 48.3 52.3 18.9 19.4 10.3 10.2

Tax Revenue 54.5 48.5 51.6 17.0 17.6 9.3 9.1

Nontax Revenue 54.0 46.2 59.4 1.9 1.8 1.0 1.1

Grants 19.9 14.0 59.5 4.1 0.9 0.8 0.6

Exp & Net Lending 45.0 40.0 48.5 26.9 23.0 12.1 11.2

Current Expenditure 42.7 57.5 51.3 19.3 16.8 8.2 8.6

Personnel Emoluments 51.2 49.0 49.7 5.2 5.0 2.7 2.5

Other Charges 35.8 62.1 50.8 9.8 7.8 3.5 4.0

Interest 48.4 61.8 54.3 4.2 3.9 2.1 2.2External 66.3 110.0 51.8 0.7 0.9 0.5 0.4

Domestic 44.6 55.4 55.0 3.5 3.1 1.6 1.7

Cap Exp & Net Lending 50.7 19.7 41.0 7.7 6.3 3.9 2.6

Capital Expenditure 41.8 17.8 38.9 7.4 5.7 3.1 2.2

Net Lending 281.0 59.4 61.0 0.3 0.6 0.8 0.4

Overall BalInc.grants3

25.3 15.9 17.6 -3.9 -2.7 -1.0 -0.5

Basic balance4 -59.1 27.1 -45.2 -1.3 -0.9 0.8 0.4

Basic Prim. Balance5 98.2 51.6 82.2 2.9 3.1 2.8 2.5

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

2.7 Projection of Fiscal Outturn for the Year 2009

Column (2) of the Table-2.6.3 below presents detailed item-wise revenues and expenditure inJan-June 2009. We have estimated the ratios of actual realization for any item in Jan-June to

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

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the final 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 theyear) for these five years are presented in column (3) of the Table-2.6.3. Taking these ratios asnorms to take care of seasonality, expected revenue and expenditure outcomes for the full year2009 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-June 2009) /average realization ratio (in percentage) in Jan-June in the last five years (2004-2008)

Comparison of the expected outcome with the budget estimates given in Column (5) leads tothe following conclusions:

(a) Total domestic revenue and tax revenue targets as given in the Appropriation Budget for2009 are not expected to be realized by actual collections in 2009.

(b) There is likely to be shortfall in grants realization unless the subsequent disbursementsare 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 D1118 million (amounting to 5.6% ofnominal GDP under IMF Program estimate) compared to budget estimate of fiscal deficitat D780.7 million (amounting to 3.9 percent of GDP).

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

Items 2009-Jan-June

Actual

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

2004-Ja-Jun

2005-Ja-Jun

2006-Ja-Jun

2007-Ja-Jun

2008-Ja-Jun

Average

2004-2009

2009Proj.Out-turn6

2009Budget

Esti-mate

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)1.Rev & grants (2+5) 2215.9 55.7 52.6 51.2 53.0 51.7 4473.1 4582.22.Dom. Revenue (3+4) 2054.6 52.4 51.8 51.5 54.6 52.5 3876.1 3771.13.Tax Rev (3.1+3.2) 1849.0 52.7 52.1 52.2 53.6 51.9 3506.2 3390.63.1 Direct Tax (a to e) 544.0 58.8 53.4 56.0 59.3 52.8 940.8

(a) Personal 230.9 61.3 64.0 59.2 45.5 57.2 57.4 402.1(b) Corporate 247.8 56.0 45.3 53.7 66.4 50.9 54.5 454.9(c) Capital Gains 12.0 63.8 56.5 40.5 66.3 34.9 52.4 23.0(d) Payroll 35.3 85.3 86.2 87.6 89.0 71.2 83.8 42.2(e) Other 17.9 - 93.5 95.5 98.0 97.1 96.0 18.6

6 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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2.6.3 Government Financial and Fiscal Performance in Jan-June 2009 and Expected Outturn for 2009

Items 2009Jan-June

Actual

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

2004-Ja-Jun

2005-Ja-Jun

2006-Ja-Jun

2007-Ja-Jun

2008-Ja-Jun

Average

2004-2009

2009Proj.Out-turn7

2009Budget

Esti-mate

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

3.2 Indirect Tax 1305.0 50.5 51.5 50.6 51.3 51.3 2565.4

3.2.1 Dom Tax on G&S 312.7 50.8 56.3 51.4 55.8 56.3 584.1(a) Stamp Duties 9.0 58.1 48.3 60.2 53.2 73.9 58.7 15.3(b) Excise Duties 80.6 50.9 45.7 47.2 49.4 53.2 49.3 163.6(c) Dom Sales Tax 223.1 50.5 58.4 52.3 58.3 55.9 55.1 405.1

3.2.2 Tax on Ext Trade 992.3 50.4 50.1 50.3 49.8 49.0 1981.3(a) Duty (i+ii) 603.1 51.9 51.2 54.7 48.6 49.3 1176.3

(i) Oil 361.7 59.5 44.6 60.6 46.9 45.7 51.4 703.1(ii) Non-oil 241.3 49.5 53.7 51.3 49.5 51.1 51.0 473.2

(b) Sale tax on imp (i+ii) 389.2 48.6 48.9 45.3 51.0 48.7 805.1(i) Oil 63.9 51.3 47.3 49.8 51.5 51.7 50.4 126.9(ii) Non-oil 325.3 48.1 49.3 43.9 50.9 47.6 48.0 678.2

4. Nontax Rev (a to d) 205.6 49.7 49.7 44.1 61.6 59.4 52.9 369.8 380.5(a) Govt Charges 107.3 48.2 62.6 60.9 74.6 78.8 65.0 165.0(b) NTR from CRD 2.1 - 65.3 66.1 57.7 54.6 60.9 3.5(c) NTR from CED 51.0 - 50.4 - 45.5 51.5 49.1 103.7(d) Others 45.2 55.0 37.2 50.0 46.1 43.3 46.3 97.6

5. Grants 161.3 70.2 61.6 45.3 25.0 40.3 48.5 597.0 811.16. Exp & Net Lend (7+8) 2413.6 57.0 54.8 54.0 48.1 47.5 5590.9 5362.97. Cur. .Exp (7.1 to 7.3) 1640.5 46.4 53.4 54.1 46.2 49.9 3314.4 3838.07.1 Pers. Emoluments 530.5 47.6 49.6 48.0 49.3 45.8 48.0 1104.1 1035.2

7.2 Other Charges 701.1 44.0 47.2 53.5 41.2 50.8 47.3 1481.5 1957.57.3 Interest (a+b) 408.9 49.1 59.1 59.1 50.2 53.9 728.8 845.3

(a) External 97.6 54.4 54.7 50.6 45.0 51.8 51.3 165.0 147.3(b) Domestic 311.2 47.2 60.3 61.9 52.2 54.5 55.2 563.8 698

8. Cap Exp & Net Lend. 773.1 70.8 54.0 53.9 52.8 41.0 2276.5 1524.9

8.1 Capital Exp. (a+b) 613.8 70.3 53.8 56.1 50.1 38.9 2006.0 1468.2(a) Ext. Financed (i+ii) 355.8 74.3 54.5 57.5 57.1 50.4 58.7 1558.0(i) Loans 194.5 74.5 53.8 59.1 67.7 46.0 961.0

(ii) Grants 161.3 73.8 58.3 45.3 25.0 59.5 597.0(b) GLF Capital 258.0 31.2 44.3 28.7 22.1 27.5 30.7 448.0

8.2 Net lending 159.2 43.1 44.6 - 86.8 61.0 58.9 270.5 56.79. Overall fis. bal (1-6) -197.6 -1118 -780.710. Basic balance 158.2 440.1 -267.711. Basic Primary Bal. 567.0 1168.9 577.6

Memorandum Items: As percentage of IMF Program Nominal GDP (equal to D19904 million)

12. Overall fis. bal (1-6) -1.0 -5.6 -3.913. Basic balance 0.8 2.2 -1.314. Basic Primary Bal. 2.8 5.9 2.9

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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2.8 External Debt

As per the latest Joint Fund-Bank Debt Sustainability Analysis (DSA)8, 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 92.9 Domestic Debt and Treasury Bills Outstanding

8 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 May 2009, outstanding domestic debt stood at D5.6 billion (amounting to28.4% of GDP), down by 5.5% from the outstanding domestic debt at D6 billion(amounting to 33.3% of GDP) a year ago.

The share of Treasury bills increased from 80.4% at the end of May 2008 to 84.5% at theend of May 2009, share of Sukuk Al-Salam from 0.8% to 1.4% 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 14.6% to9.7% over the period

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

30 May2008

30 May2009

% change inApril 09

over April 2008

Composition (inpercentage)

30 May2008

30 May2009

Treasury bills 4806 4772 -0.7 80.4 84.5

Sukuk Al-Salam 47 76 61.5 0.8 1.4Government Bonds 250 250 0.0 4.2 4.4

NIB Treasury Notes 873 547 -37.4 14.6 9.7

Total 5977 5645 -5.5 100 100

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

As % of nominalGDP

33.3 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 27 313. 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: Central Bank of Gambia

Holders of Domestic Debt

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As regards holders, commercial banks held 65% followed by parastatals 21%, other non-banks14% and CBG 5.4% at the end of May 2009.

Instruments of Debt

At end May 2009, Treasury Bills were the major instrument accounting for 93% of interest

bearing domestic debt, followed by government bonds (5.4%) and Sukuk Al Salam(1.6%).Commercial banks were the major purchasers of Treasury Bills (68%) followed byParastatals (17%) and other non-banks (15%) at the end of May 2009.

PERCENTAGE OF INTEREST-BEARING DOMESTIC DEBT BY HOLDER30 May 2008 30 May 2008 30 May 2009 30 May 2009Face Value Book Value Face Value Book Value

Central Bank 5.1% 5.6% 4.9% 5.4%Comm Banks 59.2% 59.0% 64.8% 64.9%Parastatals 20.3% 19.8% 21.2% 21.1%Other Non Banks 15.4% 15.6% 14.0% 14.1%Total 100.0% 100.0% 100.0% 100.0%

DEBT INSTRUMENT AS PERCENTAGE OF INTEREST-BEARING DOMESTIC DEBT -30 May 2008 30 May 2008 30 May 2009 30 May 2009Face Value Book Value Face Value Book Value

Treasury Bills 94.2% 93.6% 93.6% 93.0%Sukuk Al Salaam 0.9% 1.0% 1.5% 1.6%Government Bonds 4.9% 5.4% 4.9% 5.4%Total 100.0% 100.0% 100.0% 100.0%

PERCENTAGE OF TOTAL TREASURY BILLS BY HOLDER - 30 May 200930 May 2008 30 May 2008 30 May 2009 30 May 2009Face Value Book Value Face Value Book Value

Central Bank 0.2% 0.2% 0.0% 0.0%

Comm Banks 61.9% 62.0% 67.7% 68.1%Parastatals 21.6% 21.1% 17.4% 16.9%Other Non Banks 16.3% 16.7% 14.9% 15.0%Total 100.0% 100.0% 100.0% 100.0%

PERCENTAGE OF TOTAL SUKUK AL SALAAM BILLS BY HOLDER - 30 May 200930 May 2008 30 May 2008 30 May 2009 30 May 2009Face Value Book Value Face Value Book Value

Central Bank 0.0% 0.0% 0.0% 0.0%Comm Banks 100.0% 100.0% 92.6% 92.6%Parastatals 0.0% 0.0% 0.0% 0.0%Other Non Banks 0.0% 0.0% 7.4% 7.4%Total 100.0% 100.0% 100.0% 100.0%

Source: Central Bank of Gambia

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2.10 Treasury Bills Yields

Yields on treasury bills fluctuated widely in recent months. Despite significant decline ofCPI inflation from 7% in January 2009 to 5.9% in May 2009, Average yield on the 91-dayincreased from 10.5% in Jan 2009 to 12.5% in May 2009, yield of 182-day billsincreased from 12.1% to 13.8% and that of 364-day bills increased from 14.4% to 15.3%

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 13.0 12,.5 13.8 15.3Jun 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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2.11 Money Supply in May 2009

Annual growth rate of broad money supply (M3) accelerated from 7.5% in May 2008 to17.3% in May 2009.

On the supply side, 17.3% growth in money supply in May 2009 was supported by18.1% growth in currency, 10.4% growth in demand deposits, 10.8% growth in savingsdeposits and 38.1% growth in time deposits.

On the demand side, growth was mainly due to 35% growth in domestic credits, whilenet foreign assets decreased by 6.1% over a year ago.

Domestic credit increased from D6.1 billion in May 2008 to D7 billion in May 2009,supported by 44% growth in government borrowing, 67% growth in credits to publicentities and 33.3% growth in credits to the private sector, over a year ago.

Table-2.10: Money Supply in May 2009

Components May 2007Mill.D.

May 2008Mill.D.

May2009Mill.D.

May2008% Share

May2009% Share

May2008% change

overMay2007

May2009% change

overMay2008

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

7982.95 8580.60 10063.47 100.0 100.0 7.5 17.3

2.Narrow Money (2.1+2.2) 4166.13 4360.90 4929.14 50.8 49.0 4.7 13.0

2.1 Currency 1721.53 1495.11 1765.32 17.4 17.5 -13.2 18.1

2.2 Demand deposits (a+b) 2444.6 2865.79 3163.82 33.4 31.4 17.2 10.4

(a) Private sector 2226.34 2553.18 2636.51 29.8 26.2 14.7 3.3

(b) Official 218.26 312.61 527.31 3.6 5.2 43.2 68.7

3.Quasi money (3.1+3.2) 3816.82 4219.70 5134.33 49.2 51.0 10.6 21.7

3.1 Savings deposits (a+b) 2656.37 2534.74 2807.56 29.5 27.9 -4.6 10.8

(a) Private sector 2652.32 2526.35 2795.28 29.4 27.8 -4.7 10.6

(b) Official 4.05 8.39 12.28 0.1 0.1 107.2 46.4

3.2 Time deposits (a+b) 1160.45 1684.96 2326.77 19.6 23.1 45.2 38.1

(a) Private sector 756.41 1275.15 1673.49 14.9 16.6 68.6 31.2

(b) Official 404.04 409.81 653.28 4.8 6.5 1.4 59.4

Demands for money (1+2) 7982.96 8580.6 10063.47 100.0 100.0 7.5 17.3

1.Net foreign assets (1.1+1.2) 4657.68 3557.09 3341.49 41.5 33.2 -23.6 -6.1

1.1 Monetary Authorities 2626.1 2644.07 2656.77 30.8 26.4 0.7 0.5

1.2 Commercial banks 2031.58 913.02 684.72 10.6 6.8 -55.1 -25.0

2.Net Domestic Assets(2.1+2.2)

3325.28 5023.51 6721.98 58.5 66.8 51.1 33.8

2.1 Domestic credit 4078.76 5184.13 7000.52 60.4 69.6 27.1 35.0

(a) Credits to government 1471.47 1895.83 2731.16 22.1 27.1 28.8 44.1

(b) Credits to public entities 197.52 385.71 645.3 4.5 6.4 95.3 67.3

(c) Credits to private sector 2226.48 2719.3 3624.06 31.7 36.0 22.1 33.3

(d) Credits to forex bureau 183.29 183.29 0 2.1 0.0 0.0 -100.0

2.2 Other items, net -753.48 -160.62 -278.54 -1.9 -2.8 -78.7 73.4

Source: Economic Research and Statistics Department of CBG.

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2.12 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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2.13 Commercial Banks Assets

The banking industry remains sound. Total industry assets increased by 16.2% on year-on-year basis from D11.1 billion at end-May 2008 to D12.9 billion at end-May 2009.

Gambian banks do not have large exposure to foreign assets or foreign liabilities. Atend- May 2009, foreign assets constituted only 7.5% of total assets (foreign exchange1.4%, balances abroad 5.4% and foreign investment 0.7%), down from 11.7% a yearago (foreign exchange 1.8%, balances abroad 8.9% and foreign investment 1%).

At end- May 2009, loans and advances to the public sector increased by 125.3%, whilethose to the private sector increased by 20.6% over May-2008.

At end- May 2009, investments in government Treasury Bills by the banks remainedinvariant while banks other investment increased by 67% over May 2008.

The Banking sector continues to function efficiently with sufficient capital and liquidity.

The industrys risk-weighted capital adequacy ratio stood at 34.84% in March 2009,significantly 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) declinedfrom 2.10% in March 2008 to 1.43% in 2009.

Table-2.13: Commercial Banks Assets at the end-May 2009 (Million Dalasi)Assets May-2007 May-2008 May-2009 Composition (%) % ch. My08 % ch. My09

May-2008 May-2009 over My07 over My08

1. Notes and coins 146.8 163.6 161.4 1.5 1.2 11.4 -1.3

2. Foreign exchange 150.9 201.7 181.7 1.8 1.4 33.7 -9.93. Local Bank balance 842.8 897.5 879.8 8.1 6.8 6.5 -2.0

ii. CBG 838.4 879.7 872.2 7.9 6.7 4.9 -0.9

iii. Banks locally 4.4 17.8 7.6 0.2 0.1 304.2 -57.3

4. Balances abroad 1,972.1 986.6 695.3 8.9 5.4 -50.0 -29.5

5. Bills purchased 13.7 19.3 148.6 0.2 1.1 40.8 670.1

6. Loans and advances 2,101.1 2,747.8 3,724.0 24.7 28.8 30.8 35.5

i. Public sector 60.6 248.8 560.6 2.2 4.3 310.5 125.3

ii. Private sector 2,040.5 2,499.0 3,163.4 22.5 24.5 22.5 26.6

7. Investments 2,436.7 3,290.7 3,371.2 29.6 26.1 35.0 2.4

i. Govt Treasury Bills 2,225.3 3,015.1 3,015.0 27.1 23.3 35.5 0.0

ii. Others 137.9 160.6 268.2 1.4 2.1 16.4 67.0

iii Foreign Investment 73.5 115.0 88.0 1.0 0.7 56.5 -23.5

8. Fixed assets 432.6 661.9 907.1 6.0 7.0 53.0 37.1

9. Guarantees 1,180.8 1,269.9 1,844.7 11.4 14.3 7.5 45.3

10. Other assets 711.6 882.9 1,009.8 7.9 7.8 24.1 14.4

11. Total assets (1 to 1 9,989.2 11,121.9 12,923.6 100.0 100.0 11.3 16.2

12. Net Balance (11-9) 8,808.4 9,852.0 11,078.9 88.6 85.7 11.8 12.5

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2.14 Commercial Banks Liabilities

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities.At end-May 2009, external sector related liabilities constituted only 1.5% of total liabilities(non-residents deposits 1.3%, balances with banks abroad 0% and external debt 0.2%),down from 2.8% a year ago (non-residents deposits 0.9%, balances with banks abroad0.8% and external debt 1.1%).

In May 2009 banks total deposits increased by 17.1% over May 2008, aided by a growthof 10.4% in demand deposits, 10.8% in savings deposits and 38.1% in time deposits.

In May 2009 banks capital and reserves increased by 9.3%, while bank balancesdecreased by 10.3% and borrowings declined by 35.1% over May 2008.

At end May 2009, direct contingent liabilities (i.e. guarantees) of banks increased by45.3% over end-May 2008 and constituted 14.3% of total liabilities.

Table-2.13: Commercial Banks Liabilities at the end-May 2009 (MillionDalasi)LIABILITIES (IN D'000) May-2007 May-2008 May-2009 Composition (%) % ch. My08 % ch. My09

May-2008 May-2009 over My07 over My08

1. Capital and reserves 1,123.3 1,354.7 1,481.3 12.2 11.5 20.6 9.3

2. Demand deposits 2,444.6 2,865.8 3,163.8 25.8 24.5 17.2 10.4

i Residents 2,174.7 2,537.2 2,613.1 22.8 20.2 16.7 3.0

ii Non residents 51.6 15.9 23.4 0.1 0.2 -69.1 47.1

iii Government entities 218.3 312.6 527.3 2.8 4.1 43.2 68.7

3. Savings deposits 2,656.4 2,534.7 2,807.6 22.8 21.7 -4.6 10.8

i Residents 2,573.9 2,456.2 2,718.1 22.1 21.0 -4.6 10.7

ii Non residents 78.4 70.1 77.2 0.6 0.6 -10.6 10.0


4. Time deposits 1,160.5 1,685.0 2,326.8 15.1 18.0 45.2 38.1

i Residents 741.3 1,258.4 1,613.3 11.3 12.5 69.8 28.2

ii Non residents 15.1 16.7 60.2 0.2 0.5 10.9 259.7


Total deposits 6,261.4 7,085.5 8,298.2 63.7 64.2 13.2 17.1

5. Bank Balances 99.7 149.3 133.9 1.3 1.0 49.7 -10.3

i Head office & branche 93.3 52.5 129.0 0.5 1.0 -43.7 145.7

ii Other banks abroad 6.5 91.7 4.9 0.8 0.0 1322.3 -94.7

iii. Banks locally - 5.0 - 0.0 0.0 - -100.0

6. Borrowings from 75.2 241.0 156.3 2.2 1.2 220.4 -35.1

i Cent. bank of Gambia - - - 0.0 0.0

ii Other banks locally 10.0 - 10.0 0.0 0.1

iii Head office & branch 65.2 113.7 124.3 1.0 1.0 74.3 9.4iv Other banks abroad - 127.3 22.0 1.1 0.2 -82.7

v. Other sources - - - 0.0 0.0

7. Guarantees 1,180.8 1,269.9 1,844.7 11.4 14.3 7.5 45.3

8. Other liabilities 1,248.8 1,021.5 1,009.1 9.2 7.8 -18.2 -1.2

9. Total liabilities (1 to 8 9,989.2 11,121.9 12,923.6 100.0 100.0 11.3 16.2

10. Net balance (9-7) 8,808.4 9,852.0 11,078.9 88.6 85.7 11.8 12.5

Source: Central Bank of Gambia.

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2.15Interest 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 wide

interest 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 7

Time 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 9Deposit 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 7.6

Time deposits (12 month) 1.5 1.5 6 12 11 6 7 5.9 6.6Some 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)

2.16Balance of Payments (BOP) and Foreign Exchange Reserves

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(i) BOP Situation in 2008

(a) Overall BOP outcome in 2008 was not as bad as they were anticipated earlier. Year endforeign exchange reserves at US$125.2 million were still equal to 5.7 months of c.i.f. imports

compared to US159.4 million equal to 6.2 months at end-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 of D741.7 million ($29.8million), amounting to 3.6 percent of GDP in 2007, reflecting the deterioration in both thecurrent and the capital and financial accounts. The Net Usable Reserve of the CBG stood atUS$95.6 million at end-March 2009 and was above the IMF Program target (floor) by US$3.6million.

(c) The goods account deficit improved from a deficit of D3.52 billion, amounting to 17.2 percentof GDP in 2007 to a deficit of D2.92 billion, amounting to 12.8 percent of GDP in 2008, or adecline by 17.14%.

(d) Exports of goods at D3.18 billion amounted to 14% of GDP in 2008 compared to D3.29 billionamounting to 16.1% of GDP- a decline by only 3.4%. However, due to appreciation ofaverage exchange rate of dalasi per US$, goods exports in terms of US$ increased fromUS$132.2 million in 2007 to US$141.6 in 2008.

(e) The c.i.f. import bill declined by 10.1% from D7.43 billion, amounting to 36.4 percent of 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 to7.2 percent of GDP, in 2007 to (-) D1.11 billion, amounting to 4.9 percent of GDP in 2008.

(ii) BOP Situation in 2009

Provisional balance of payments estimates for the first quarter of 2009 indicate an overall deficitof D468.9 million (US $17.9 million) compared to D7.42 million (US $0.34 million) in the firstquarter of 2008. The current account deficit, including official transfers, amounted to D234.3million compared to a surplus of D4.94 million a year ago. The capital and financial accountwidened from a deficit of D12.36 million in the fourth quarter of 2008 to D234.53 million in the firstquarter of 2009.

Revised balance of payments projections by the CBG indicate an overall deficit of D13.8 million(US$0.5 million) in 2009 compared to D811.30 million (US$30.3 million) in 2008. The currentaccount deficit, including official transfers is expected to widen to D3.8 billion (19% of GDP) in2009 from D3.6 billion (17.8% of GDP) in 2008. The capital and financial account balance isexpected to improve from a surplus of D2.7 billion in 2008 to D3.8 billion in 2009.

(iii) Foreign Exchange Reserves

The volume of transactions in the inter-bank foreign exchange market totaled D33.3 billion(US$1.4 billion) in January-May 2009 compared to D36.5 billion (US$1.7 billion) a year ago. Atend-May 2009, gross international reserves stood at D2.6 billion (US$119.7 million) equivalent to4.0 months of import cover.

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Table 2.16 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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2.17 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 32.89 252.85Feb 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 19.27 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 33.28 258.31

Dec 40.14 26.54 22.94 35.67 259.152009 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

July 10 43.73 26.63 24.50 37.50 274.00

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 8.4

Apr -1.5 32.0 19.0 11.6 9.8

May -0.1 29.7 16.9 12.4 4.3

July 10 5.0 27.1 23.1 16.4 9.1


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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 are 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

2009Net 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 acumulative 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 tomeet 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 outstandinghaving original maturity exceeding one year.

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Gambia Quarterly Eco Bulletin June 2009- Part Two

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