Domestic Debt Rises to D19 Billion

By Amie Sanneh

The Governor of Central Bank has said that as at year to end-June 2015, domestic debt rose to D19.1billion (49.6 percent of GDP), or 30.4 percent from a year earlier. He said treasury bills, which accounted for 69 percent of the domestic debt, increased by 9.9 percent whilst the stock of outstanding Sukuk AI Salaam (SAS) contracted by 4.5 percent.

The Governor of Central Bank Amadou Colley made these remarks on Wednesday, 6 August, 2015 during the Monetary Policy Committee (MPC) press briefing held at the Bank’s conference hall in Banjul.

Commenting on government fiscal operations, Governor Colley said the first half of 2015 indicates that total revenue and grants amounted to D5.23 billion (29.8 percent of GDP) compared to D4.34 billion (24.7 percent of GOP) in the corresponding period a year ago. Domestic revenue, comprising tax and non-tax revenue, amounted to D3.8 billion (21.8 percent of GDP), or an increase of 17.0 percent from the corresponding period in 2014, he said.

He added that Tax revenue increased to D3.46 billion, or 27.0 percent higher than the outturn in the corresponding period in 2014. Non-tax revenue, on the other hand, contracted to D630.0 million, or 33 percent, he said.

Governor Colley explained that Total expenditure and net lending amounted to 06. 1 Billion (34.5 percent of GDP) compared to D5.1 billion (28.8 percent of GDP) in the first half of 2014. Recurrent expenditure increased to D3.9 billion, or 17.1 percent from the outturn in the first half of 2014 attributed mainly to the 81 percent increase in interest payments, he said. Capital expenditure also rose to D2.5 billion, higher than the D1.72 billion in the first half of 2014, he added.

According to him, the overall budget deficit on cash basis, including grants, is estimated at 0829.4 million (5 percent of GOP), slightly higher than the deficit of D729.8 million (4 percent of GOP) in the first half of 2014. He added that the budget deficit, excluding grants is estimated at D2.23 billion (13 percent of GOP).

He said the International Monetary Fund (IMF) lowered its forecast for global economic growth for 2015 from what was predicted in the April 2015 World Economic Outlook. Global economic activity is now projected to grow by 3.3 percent in 2015 compared with 3.4 percent in 2014 and down from the estimate of 3.5 percent he said.

Speaking further, he said growth in the advanced economies is projected to expand from 1.8 percent in 2014 to 2.1 percent in 2015. According to him, the first quarter GOP, previously reported to have contracted by 0.2 percent was revised upward to a growth of 0.6 percent. The Euro area is forecast to grow by 1.5 percent in 2015 unchanged from the April 2015 forecast, said Governor Colley. He however said that the outlook for the region would depend on avoiding negative spillovers from the Greek debt crisis.

Growth in emerging markets and developing economies is projected to moderate from 4.6 percent in 2014 to 4.2 percent in 2015, he said.

Governor Colley stated that output growth in Sub-Saharan Africa is projected at 4.2 percent from 5.0 percent in 2014 owing to the part of the marked decline in commodity prices and rising geopolitical tensions in some countries.

“Price movements diverged with pronounced decline in the prices of sugar and milk products while cereals and edible oil prices firmed somewhat. Except for a lull in October 2014, the overall Food Price Index has declined every month since April 2014,” he said.

The CBG Governor explained that International oil prices moved within a relatively tight range between US$58 per barrel and US$62 per barrel throughout June 2015. On average, he said oil prices fell by 3.1 percent in June, but rose a significant 19 percent for the quarter. “Recently, prices dropped as global supplies remained plentiful,” he said.

On the domestic economy, Governor Colley said the Gambia Bureau of Statistics (GBOS) has revised downwards the real GOP growth estimate for The Gambia from an earlier estimate of 1.6 percent to 0.5 percent in 2014. This he continues has cited weaker growth of 3.3 percent in the transport and communication sectors than previously estimated. He added that growth in the services sector was thus revised to 5.2 percent, lower than the 8.1 percent in 2013 and earlier projection of 6.9 percent.

Agricultural output is estimated to have contracted by 8.4 percent in 2014 compared to the decline of 1.8 percent in 2013, he said. Growth of the industrial sector was estimated at 6 percent, higher than the 4.5 percent in 2013, he added.

Commenting on money and banking developments, he explained that in the year to end June 2015, money supply grew by 11.6 percent compared to 8.2 percent a year earlier. He further said that the increase in the growth of broad money was mainly the result of the faster pace of expansion of the net domestic assets (NDA) of the banking sector by 30.4 percent compared to 12.6 percent a year ago. The net foreign assets (NFA) of the banking sector, on the other hand, contracted by 40.1 percent from a smaller contraction of 2.5 percent in June 2014, said Governor Colley.

“Growth in reserve money decelerated to 11 .9 percent from 19.7 percent a year ago reflecting the contraction in the NFA of the CBG by 84.0 percent. The NDA of the CBG, on the other hand, rose by 134.7 percent, significantly higher than the 97.2 percent growth in June 2014. CBG’s net claims on government, the main driver of liquidity, rose to 04.3 billion, or 97.8 percent from a year ago,” he said.

CBG Governor noted that total assets of the banking industry increased to D29.04 billion in the year to end-June 2015, or 14.0 percent. However, he said gross loans and advances, representing 20 percent of total assets, declined to 05.81 billion or 3 percent. The ratio of non-performing loans to gross loans fell to 11.0 percent in June 2015 from 15.0 percent in June 2014 he said.

He noted that capital and reserves totaled to D3.95 billion, higher than the D3.41 billion in June 2014. Capital adequacy ratio averaged 38 percent and all the banks met the minimum capital adequacy requirement of 10 percent, he said. Deposit liabilities, he stated increased to D16.95 billion, or 12 percent from June 2014. The liquidity ratio stood at 86 percent, significantly higher than the statutory minimum requirement of 30.0 percent, he said

On Inflation outlook, he said Consumer price inflation, measured by the National Consumer Price Index (NCPI), accelerated to 7.2 percent in June 2015, from 5.4 percent in June 2014. “Food inflation increased to 9.1 percent from 6.2 percent whilst non-food inflation decreased slightly to 4.3 percent from 4.4 percent in June 2014. Core inflation, which excludes volatile food and energy prices, accelerated to 7.6 percent in June 2015 from 5.5 percent in June 2014,” he said.

According to him, the MPC is concerned that consumer price inflation continue to exceed the target of 5 percent and inflation is forecast to remain at elevated levels. “Failure to act against these heightened pressures may cause prices to accelerate further and the high inflation expectations to become more entrenched,” he noted.

Against this backdrop, the MPC has decided to continue the tight monetary policy stance by: (i) Keeping the policy rate unchanged at 23 percent; and (ii) maintain the reserve requirement at 15 percent of deposit liabilities, but to eliminate cash-in-vault of commercial banks as a reserve asset for the calculation of cash reserve requirement (CRR) with effect from September 01, 2015, Governor Colley said. The MPC would continue to monitor domestic and international developments and take action as appropriate he concluded.

The next meeting of the Monetary Policy will be held in October 2015.