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