The Gambia Monthly Economic Bulletin- August 2010

THE GAMBIA MONTHLY ECONOMIC BULLETIN1
August 2010

Institutional Support Project for Economic and Financial Governance (ISPEFG) Ministry of Finance (MOF) The Republic of Gambia The Quadrangle, Banjul, the Gambia

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The Gambia Monthly Economic Bulletin provides an update on the recent economic developments and policies in the Republic of the Gambia. This Bulletin has been prepared, under the overall guidance of the Honorable Permanent Secretary Mr. Serign Cham, by a research team comprising Tarun Das, Macroeconomic Adviser (ISPEFG); Momodou Taal, Acting Director; Lamin Camara, Principal Economist and Ms. Ceesay Chiel and Alhagi Jalllow, Economists in the Statistics and Special Studies Division (SSSD), Ministry of Finance; with key inputs from the Central Bank of Gambia (CBG), the Gambian Bureau of Statistics (GBOS), and the Gambian Revenue Authority (GRA). It may also be noted that the views expressed in this Bulletin solely indicate the views of the Research Team, which need not necessarily imply the views of the MOF, the other budgetary agencies or the organizations they are associated with. Any questions and feedback can be addressed to: Tarun Das (das.tarun@hotmail.com)

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The Gambia Monthly Economic Bulletin- August 2010

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 December Items (Year) Units Value Rank in the World from top in descending order Area (2009) Sq. km. 11,300 171 out of 248 countries Population (2008) Million 1.735 148 out of 241 countries GDP PPP (2006) Million US$ 2061 184 out of 229 countries GDP Nominal (2006) Million US$ 511 199 out of 229 countries GDP PPP per capita (2006) US$ 1921 140 out of 169 countries GDP per capita (2006) US$ 329 192 out of 207 countries Poverty Ratio (% of people Percent 59 7 out of 95 countries below One-US$ per day) (2004)

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The Gambia Monthly Economic Bulletin- August 2010 Source: http://www.nationmaster.com

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The Gambia Monthly Economic Bulletin- August 2010

Contents Items
Basic Facts about the Gambia Contents ISPEFG Project/ Research Team and Document History Highlights At a Glance 1. Global Economic Outlook 1.1Global recovery is stronger than expected but risks rise 1.2Global inflation pressures are generally subdued but diverge 2. Current State of the Gambian Economy 2.1 Overall and Sectoral GDP Growth Rates 2.2 Consumer Price Index (CPI) and Inflation 2.3 Projection of CPI inflation for the year 2010 2.4 Producers Price Index (PPI) 2.5 Government Fiscal Performance 2.6 Expected Fiscal Outturn for the Year 2010 2.7 Domestic Debt and Outstanding Treasury Bills 2.8 Treasury Bills Yields 2.9 Money Supply 2.10 Performance of Commercial Banks 2.11 Commercial Banks’ Assets 2.12 Commercial Banks’ Liabilities 2.13 Interest Rates and Central Bank’s Policy Rates 2.14 BOP, Foreign Exchange Reserves and Exchange Rates 2.15 Exchange Rates 3. Recent Policy Developments and Development Issues 3.1 Budget Call Circular for Preparation of 2011 Budget 3.2 IMF Technical Assistance Missions on VAT Tax Administration and Public Financial Management (PFM) Reforms

Page
2 3 4 5-6 7 8-12 8 10 13-29 13 15 17 18 19 20 22 24 25 26 27 28 29 30 32 33-36 33 36

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The Gambia Monthly Economic Bulletin- August 2010

ISPEFG Project and Monthly Economic Bulletin Research Team Project Supervisor Acting Project Coordinator Acting Director (SSSD) Principal Economist (SSSD) Economist (SSSD) Economist (SSSD) Technical Assistants: Macroeconomic Adviser Debt Adviser Fiscal/ Financial Adviser Honorable Mr. Serign Cham, Permanent Secretary Mr. Mod Lamin Ceesay, Deputy Permanent Secretary Mr. Momodou Taal Mr. Lamin Camara Ms. Ceesay Chilel Mr. Alhagie Jallow Dr. Tarun Das Mr. Adam Aikuta Mr. Dan Mwanje

Document History: This report is an update of the following reports prepared by the Research Team: The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009. The Gambia Monthly Economic Abstract, pp.1-16, 31 March 2009. The Gambia Monthly Economic Bulletin, pp.1-40, 30 April 2009. The Gambia Monthly Economic Abstract, pp.1-16, 30 April 2009. The Gambia Monthly Economic Bulletin, pp.1-39, 31 May 2009. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009. The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, June 2009. The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, June 2009. 9. The Gambia Monthly Economic Abstract, pp.1-16, June 2009. 10. The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, July 2009. 11. The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, July 2009. 12. The Gambia Monthly Economic Abstract, pp.1-16, July 2009. 13. The Gambia Monthly Economic Abstract, pp.1-16, August 2009. 14. The Gambia Monthly Economic Abstract, pp.1-16, September 2009. 15. The Gambia Monthly Economic Bulletin, pp.1-25, October 2009. 16. The Gambia Monthly Economic Bulletin, pp.1-37, November 2009. 17. The Gambia Monthly Economic Bulletin, pp.1-37, December 2009. 18. The Gambia Monthly Economic Bulletin, pp.1-36, January 2010. 19. The Gambia Monthly Economic Bulletin, pp.1-40, February 2010. 20. The Gambia Monthly Economic Bulletin, pp.1-40, March 2010. 21. The Gambia Monthly Economic Bulletin, pp.1-31, June 2010. 22. The Gambia Monthly Economic Bulletin, pp.1-36, July 2010.
1. 2. 3. 4. 5. 6. 7. 8.

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The Gambia Monthly Economic Bulletin- August 2010
HIGHLIGHTS Global Economic Recovery Is Stronger than Expected, but Speed Varies and Risks Rise The global economic recovery is stronger than expected, but there is greater risk for sustainability and the recovery is uneven across regions. As per the IMF World Economic Outlook (WEO) Update July 2010, world output is expected to grow by 4.6% in 2010 followed by 4.3% in 2011. IMF projects continual global recovery, but cautioned that renewed financial turbulence and euro area problems cloud the outlook, and advised fiscal consolidation based on credible mediumterm plans. • Sub-Saharan Africa has weathered the global crisis well and is expected to recover rapidly from the slowdown in 2009. Although some middle-income and oil-exporting economies were hit hard by the collapse in export and commodity markets, the region managed to grow by 2.2% in 2009. Its growth is projected to accelerate to 5% in 2010 and further to 5.9% in 2011. Global Inflation Pressures are Subdued and Oil Prices are Moderate

• The global recession caused a large drop in inflation. Commodity prices have started to rebound due

to higher demand after the global economic recovery. But, the still-low levels of capacity utilization and well-anchored inflation expectations are expected to keep inflation low and subdued in 2010. Average Brent crude oil prices reached the peak level at $84.98 per barrel in April 2010, but started declining since then and stood at US$74.74 in July 2010, compared to US$68.50 a year ago. In line with futures market developments, the IMF’s baseline petroleum price projection has been revised down to $75.3 a barrel for 2010 and $77.5 a barrel for 2011.

Impact on the Gambian Economy

• Global recession had adverse impact on the Gambian economy in 2008 leading to decline of exports

and remittances and decline of manufacturing production, distributive trade, transport and telecom. However, thanks to bumper crops and very good performance by electricity, telecom and financial sectors, the real GDP growth improved from 6% in 2007 to 6.3% in 2008.

• As per revised estimates by GBOS, real GDP growth in 2009 is estimated to be 5.6% supported by a

growth of 9.8% in agriculture, 2.1% by industry and 4.3% in services production. With expected normal monsoons, real GDP growth in 2010 is projected to be 5% aided by a growth of 4.6% in agriculture, 5.1% by industrial production and 4.9% in services production.

CPI Inflation

• Annual point-to-point CPI inflation accelerated significantly from 4% (food 4.1% and non-food 3.8%)

in July 2009 to 6.2% (food 8.2% and non-food 2.9%) in July 2010. However, the 12-month average inflation rate decelerated from 6.1% in July 2009 to 3.6% in July 2010. Among other groups, transport recorded an inflation of 24.3%, clothing 2%, utilities 1.9%, restaurants and hotels 9% and miscellaneous items 7.1% in July 2010.

Government Fiscal Performance

Government’s fiscal performance was not satisfactory in Jan-July 2010 compared with Jan-July 2009. Tax revenues declined by 0.6% in Jan-July 2010 over Jan-July 2009 compared with a growth of 16.2% in Jan-July 2009 over Jan-July 2008. However, there was better performance of non-tax revenues in Jan-July 2010 than in Jan-July 2009.

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The Gambia Monthly Economic Bulletin- August 2010 •
Despite significant contraction of expenditure, fiscal balance was negative at (-) 0.1% of GDP and overall fiscal deficit at 1.6% of GDP in Jan-July 2010 was significantly higher than the budget target at 1% of GDP for the year 2010. • Domestic Debt and Treasury Bills Yields

Including CBG support, the total outstanding domestic debt increased to D7.7 billion (27.6% of GDP) at end-June 2010, from D6.8 billion (27.1% of GDP) a year ago. Outstanding Treasury bills increased by 7.1% to D5.2 billion and accounted for 67.7% of the stock (including TMA overdraft).

• Yields on treasury bills fluctuated widely in recent months. In view of the declining trend of inflation

rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, average yields of the 91-day, 182-day and 364-day bills had
declining trend since then and fell from 11%, 12.9% and 14.3% respectively in December 2009 to 9.3%, 10.4% and 12.9% respectively in June 2010.

Money Supply and Commercial Banks Performance

• Broad money supply (M2) recorded an annual growth of 21% in June 2010, compared to 21.2% a

year ago. While quasi money increased by a faster pace of 29%, narrow money increased by 12.5%. On the supply side, growth of broad money in June 2010 was supported by 9.6% growth in currency in circulation outside banks, 14.1% growth in demand deposits, 15.9% growth in savings deposits and significant growth of 45.3% in time deposits.

• On the demand side, growth was due to 5.9% growth in net foreign assets and 27.1% growth in net

domestic assets over a year. Domestic credits increased by 23.7% from D6.9 billion in June 2009 to D8.6 billion in June 2010, supported by 28.4% growth in government borrowing and 29.6% growth in credits to the private sector, while credits to public entities declined by 15.8% over one year. capital and reserves. The industry’s total assets increased to D15.6 billion in June 2010, up by 18.4% over a year, and the asset quality is satisfactory.

.

(a) The banking industry continues to show increasing signs of resilience with growth in assets,

• The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to 18.7% in
March 2010 and was well above the statutory norm at 8%. However, nonperforming loans as a ratio of gross loans deteriorated from 12.0% in December 2009 to 16.9% in March 2010.

Balance of Payments, Foreign Exchange Reserves and Exchange Rate • Revised BOP estimates for 2009 indicate a decline in the overall balance from a surplus of US$23.35 million in 2008 to a deficit of US$6.79 million. While the current account improved to a surplus of US$63.29 million relative to a deficit of US$12.35 million in 2008, the capital and financial account balance recorded a deficit over the period relative to the surplus recorded a year ago. • The year 2010 has started with a significant improvement in the overall BOP situation as compared with that in the first quarter of 2009. Current account recorded a surplus of D642 million in 2010-Q1 compared to a deficit of (-) D108 million in 2009-Q1, and the overall balance of payments showed a surplus of D746 million in 2010-Q1 compared with a deficit at (-)D859 in 2009Q1. • At end-April 2010, gross international reserves, including the SDR allocations, stood at US$178.63 million, equivalent to 7.0 months of import cover.

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The Gambia Monthly Economic Bulletin- August 2010 • Over one year, in July 2010 Dalasi depreciated against US$ by 4.6%, against SEK by 4.5%, against
CHF by 2.5% and against CFA by 1.5%, while it appreciated against Euro by 2.8% and against the UK£ marginally by 0.2%.

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The Gambia Monthly Economic Bulletin- August 2010

At a Glance- August 2010
Economic Indicators Real GDP (MP) Growth rate (%) CPI inflation (%) Brent crude oil price (US$/ brl)
Growth rate (%) of Domestic Revenue Growth rate (%) of Exp & Net Lending Revenue & grants as % of GDP Exp & Net Lending as % of GDP Overall fiscal bal. as % of GDP Basic balance as % of GDP Basic Primary bal. as % of GDP

Latest Reference Period 2009

July 2010 July 2010 Jan-July 2010 Jan-July 2010 Jan-July 2010 Jan-July 2010 Jan-July 2010 Jan-July 2010 Jan-July 2010
End-June 2010

Status in the latest reference period Overall 5.6 Agriculture 9.8 Industry 2.1 Services 4.3 Overall 6.2 Food 8.2 Non-food 2.9 Average US$74.74
1.6 9.4 10.1 11.7 (-) 1.6 (-) 0.1 1.7

Status in the Corresponding period a year ago Overall 6.3 Agriculture 26.6 Industry (-) 1.2 Services 4.2 Overall 4.0 Food 4.1 Non-food 3.8 Average US$68.50
14.7 26.6 10.6 11.8 (-) 1.3 (-) 0.4 1.4

Outlook for 2010 Overall 5.0 Agriculture 4.6 Industry 5.1 Services 4.9 Expected to remain moderate around 5 percent. May stabilize around US$75 in 2010
The budget for 2010 has targeted overall fiscal deficit at (-) 1.1% of GDP and basic balance at nil. Zero basic balance may not be achieved unless revenue realization improves significantly in the subsequent months. Government has taken fiscal measures in June 2010 for additional revenue realizations.

Domestic debt as % of GDP Yield on 91-days TBs (%) Yield on 182days TBs (%) Yield on 364days TBs (%) GR of Money supply (M2) (%) Banks’ assets (Billion Dalasi) CBG policy rate (%) Overall BOP Balance (Mln $) Current A/C Balance (Mln $) Capital-Fin. A/C Balance (Mln $) Dalasi/ UK£ Dalasi/ US$ Dalasi/ Euro

27.6

27.1 13.0 13.8 15.6 21.2 13.20 16 (-) 32.8 (-) 4.1 (-) 28.7

Likely to decline at the end of December 2010. Yields may come down further as CPI inflation is moderate. Money growth rate is likely to remain high. Likely to increase MPC reduced policy rate to 14% in Dec 2009. BOP situation is likely to remain comfortable in 2010 due to revival of exports, tourist income, remittances and foreign investment. Dalasi is expected to depreciate against major currencies in 2010.

June 2010 June 2010 June 2010 June 2010 End-June 2010 June 2010 2010-Q1 2010-Q1 2010-Q1 End-Jul 2010 End-Jul 2010 End-Jul 2010

9.3 10.4 12.9
21.0 15.63 14 27.7 23.8 3.9

43.20 28.03 36.97

43.31 26.79 38.08

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The Gambia Monthly Economic Bulletin- August 2010 1. Global Economic Outlook 1.1 World Recovery Continues, But Risks Increase, Says IMF Global economic recovery is stronger than expected, but the speed is uneven across countries and regions. As per the IMF World Economic Outlook (WEO) Update2, April 2010, world output is expected to grow by 4.6% in 2010 followed by 4.3% in 2011. IMF forecasts continuing global recovery, but cautioned that renewed financial turbulence and euro area problems cloud the outlook. IMF advised countries to continue with “implementation of policies to rebuild confidence and stability, particularly in the euro area. More generally, policy efforts in advanced economies should focus on credible fiscal consolidation, notably measures that enhance medium-run growth prospects, such as reforms to entitlement and tax systems. Supported by accommodative monetary conditions, fiscal actions should be complemented by financial sector reform and structural reforms to enhance growth and competitiveness. Policies in emerging economies should also help rebalance global demand, including through structural reforms and, in some cases, greater exchange rate flexibility.” Global activity in terms of trade, production and retail sales has rebounded. Employment continues to contract in advanced economies but is expanding in emerging economies, helped by strong potential growth. Industrial confidence has returned to pre-crisis levels, but household confidence in advanced economies continues to lag due to subdued employment. Emerging and Developing Economies: Activity in emerging and developing economies is leading the global recovery. In key emerging Asian economies, particularly in China and India, output already exceeds pre-crisis levels by a wide margin, and the output growth in these countries, averaging about 10% in Q2–Q4 of 2009, is outpacing estimates of full-capacity (potential) output growth. Sub-Saharan Africa: Sub-Saharan Africa has weathered the global crisis well and is expected to recover rapidly from the slowdown in 2009. Although some oil-exporting economies were hit hard by the collapse in export and commodity markets, the region managed to grow by 2.2% in 2009. Its growth is projected to accelerate to 5% in 2010 and to 5.9% in 2011. The region’s quick recovery is due to the relatively limited integration of the most low-income economies into the global economy and the limited impact on their terms of trade, the rapid normalization in global trade and commodity prices, and the use of countercyclical fiscal policies. Remittances and official aid flows have also been less adversely affected than anticipated by the recessions in advanced economies. Banking sectors, in general, remained resilient, and private capital inflows resumed into the region’s more integrated economies. Shocks from the global crisis hit sub-Saharan Africa mainly through the trade channel. Reflecting their greater openness to trade, the region’s middleincome economies like the South Africa were among the hardest hit.

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World Economic Outlook: Update, Restoring Confidence without Harming Recovery, IMF, Washington D.C., 7 July 2010.

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The Gambia Monthly Economic Bulletin- August 2010

Table-2.1 World Economic Outlook, Update, July 2010

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The Gambia Monthly Economic Bulletin- August 2010

1.2 Inflation Pressures Are Generally Subdued but Diverge
Inflation pressures are expected to remain subdued in advanced economies. The still-low levels of capacity utilization and well anchored inflation expectations should contain inflation pressures in advanced economies, where headline inflation is expected to remain around 1¼-1½ percent in 2010 and 2011. In a number of advanced economies, the risks of deflation remain pertinent in light of the relatively weak outlook for growth and the persistence of considerable economic slack. In contrast, in emerging and developing economies, inflation is expected to edge up to 6¼ percent in 2010 before subsiding to 5 percent Inflation pressures are projected to remain low, held down by high unemployment rates and excess capacity. Inflation has been higher and more volatile in emerging economies, and inflation pressures could resurface more easily there than in advanced economies.

Commodity prices are rebounding Commodity prices have started to rebound due to higher demand after the global economic recovery (Table 1.2). Average Brent crude oil prices reached peak level at $84.98 per barrel in April 2010, but started declining since then and stood at US$74.74 in July 2010, compared to US$68.50 a year ago. Looking ahead, commodity prices are expected to rise a bit further supported by the strength of global demand, especially from emerging economies. However, this upward pressure is expected to be modest, given the above-average inventory levels and substantial spare capacity in many commodity sectors. In line with futures market developments, the IMF’s baseline petroleum price projection has been revised down to $75.3 a barrel for 2010 and $77.5 a barrel for 2011 (from $80 and $83, respectively, in the April 2010 WEO). Projections for the non-fuel commodity price index have remained broadly unchanged, partly reflecting stronger-than expected market conditions through April 2010.

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The Gambia Monthly Economic Bulletin- August 2010 Table-1.2 Trends of World Commodity Prices

Source: World Bank Pink Sheet August 2010

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The Gambia Monthly Economic Bulletin- August 2010

Source: World Bank Pink Sheet August 2010

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The Gambia Monthly Economic Bulletin- August 2010 2. Current State of the Gambian Economy 2.1 Overall and Sectoral GDP Growth Rates • The sharp decline in global economic activity had adverse impact on the Gambian economy in 2008 leading to decline of exports and remittances and decline of manufacturing production, wholesale and retail trade, transport and telecom (Table-2.1). However, thanks to bumper crops contributed by favorable monsoon at home and high international prices of food grains, and very good performance by electricity, telecom and financial sectors, the real GDP growth at constant 2004 market prices improved from 6% in 2007 to 6.3% in 2008 (Table-2.1 and Figure-2.1). As per the Revised Estimates of the GBOS, real GDP growth in 2009 at constant market prices is estimated to be 5.6% supported by a growth of 9.8% in agricultural production, 2.1% by industrial production and 4.3% in services production. With expected normal monsoons, agricultural production is expected to perform well in 2010. However, given the high base already achieved, the agricultural growth is likely to decelerate. Consequently, real GDP growth in 2010 at constant market prices is projected to be 5% supported by a growth of 4.6% in agricultural production, 5.1% by industrial production and 4.9% in services production. Share of agriculture in GDP at constant factor cost increased from 21.6% in 2007 to 26.2% in 2010, while share of industry declined from 14.7% to 13% and that of services declined from 63.7% to 60.7% during the same period. Increase of agricultural share was contributed by increase in share of crops, while decline in industrial share was due to decline in shares of manufacturing and construction, and decline of services share was mainly due to decline of share of wholesale and retail trade, hotels and restaurants, and transport and communications.

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The Gambia Monthly Economic Bulletin- August 2010 Figure-2.1: Trends of sectoral growth rates during 2001-2010 (in percentage)

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2007-2010 (in %)
Items GDP at 2004 basic price Agriculture and allied

Sectoral Growth Rates (in percentage) 2007 2008 2009 2010 Actual Actual Actual Proj.

Sectoral Shares in GDP-FC (in percentage) 2007 2008 2009 2010 Actual Actual Actual Proj.

6.0 6.3 5.6 5.0 107.5 105.6 105.7 105.9 -1.9 26.6 9.8 4.6 21.6 25.3 26.3 26.2 -- Crops -15.2 55.2 14.3 4.6 9.5 13.6 14.8 14.8 -- Livestock 11.9 4.3 4.5 4.5 9.4 9.0 8.9 8.9 -- Forestry -4.0 1.0 0.7 2.0 0.6 0.6 0.5 0.5 -- Fishing 18.0 3.5 5.1 5.5 2.1 2.0 2.0 2.0 Industry 2.5 -1.2 2.1 5.1 14.7 13.4 13.0 13.0 -- Mining and quarrying -14.1 8.8 12.0 10.0 1.9 1.9 2.1 2.2 -- Manufacturing 3.9 -8.3 -2.8 3.2 7.0 5.9 5.4 5.4 -- Electricity, gas, water 59.1 1.7 6.2 10.0 1.6 1.5 1.5 1.6 -- Construction -4.3 5.0 3.0 1.0 4.2 4.1 4.0 3.8 Services 8.3 4.2 4.3 4.9 63.7 61.3 60.7 60.7 -- Wholesale/retail trade 9.7 -2.3 6.0 1.0 29.5 26.6 26.7 25.7 -- Hotels/ restaurants 14.3 2.9 -26.8 3.7 3.9 3.7 2.6 2.6 -- Transport / telecom 7.0 -8.0 5.0 7.6 13.0 11.0 11.0 11.3 -- Financial -0.9 28.2 13.2 8.0 7.0 8.3 9.0 9.2 -- Real est., business 1.4 0.0 2.5 0.1 3.3 3.0 3.0 2.8 -- Public administration 12.9 42.1 2.0 8.5 2.8 3.7 3.6 3.7 -- Education -6.4 38.2 2.7 16.7 1.4 1.8 1.8 2.0 -- Health 28.3 25.4 8.0 15.7 2.0 2.3 2.4 2.6 -- Other services 67.4 8.9 2.8 11.0 0.7 0.7 0.7 0.7 GDP at FC 5.1 8.3 5.4 4.8 100.0 100.0 100.0 100.0 GDP at Basic Price 5.6 8.4 5.1 5.0 96.6 96.7 96.4 96.6 Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2009 and projections for 2010 are made by the Research Team.

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The Gambia Monthly Economic Bulletin- August 2010 2.2 Consumer Price Index and Inflation • As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflation accelerated significantly from 4% in July 2009 to 6.2% in July 2010. However, the 12month average inflation rate decelerated from 6.1% in July 2009 to 3.6% in July 2010. Food and drinks (with weights of 55.1% in overall CPI) recorded an annual point-to-point inflation rate of 8.2% in July 2010, up from 4.1% a year ago, and contributed 70.7% to overall inflation in July 2010. Non-food items (with weights of 44.9% in overall CPI) recorded annual inflation rate of 2.9% in July 2010, down from 3.8% a year ago and contributed 29.3% to total inflation. Among other groups, transport recorded an inflation of 24.3%, clothing 2%, utilities 1.9%, restaurants and hotels 9% and miscellaneous items 7.1% in July 2010.
Weights Wi (%) 100.0 55.1 0.7 11.2 3.4 5.2 1.2 4.4 3.0 8.1 1.5 0.4 5.9 44.9

• •

Table-2.2 CPI Inflation Rates in July 2010 (in percentage) July 2009 July 2010 Inflation Contributio Wi (CPIi1 – Index Index (%) CPIi0) n3 (%) Overall 120.84 128.32 6.19 804.9 100.0 Food 125.96 136.29 8.20 568.7 70.7 Tobacco 106.26 106.91 0.61 0.4 0.1 Clothing 111.46 113.68 1.99 25.0 3.1 Utilities 122.40 124.76 1.93 8.0 1.0 Furnishing 115.45 116.71 1.09 6.6 0.8 Health 101.80 101.83 0.03 0.0 0.0 Transport 119.95 149.12 24.32 128.4 16.0 Telecom 102.02 102.54 0.51 1.5 0.2 Recreation 104.95 105.97 0.97 8.2 1.0 Education 102.27 102.95 0.66 1.0 0.1 Hotels 116.73 127.29 9.05 3.8 0.5 Misc. 126.22 135.18 7.10 53.1 6.6 Non-food 114.53 117.89 2.93 151.0 29.3 Source of basic data: Gambian Bureau of Statistics (GBOS). http://www.gbos.gm
Items

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Contribution of an item to overall inflation is estimated by the following formula: Contribution of Item (i) = Wi (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 = Σ Wi For example, contribution of food to overall inflation is estimated as 100 X 588.7 / 804.9 = 73.3%.

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The Gambia Monthly Economic Bulletin- August 2010

30.0 25.0 20.0 15.0 10.0 5.0 0.0
cc o g l O ve ra l F oo d th in T ob a C lo U t il

24.3

6.2

8.2 0.6 2.0 1.9 1.1 0.0 0.5 1.0 0.7

9.0

7.1 2.9

iti es F ur ni sh in g H e al th T ra ns p or t T el ec om R e cr e at io n E du ca tio n

H o

M

Series1

Contribution to Inflation in J uly 2010 (%)
Recreation Other 1% Utility9% 1% Transport 16%

Clothing 3% Food 70%

12.0 10.0 8.0 6.0 4.0 2.0 Nv Nv Nv 07-J a 08-J a 09-J a 10-J a 0.0 J ul Mar Sp May Mar Mar J ul J ul May May Mar Sp Sp May

Food

Non-Food

All

18

no

nfo od

ls te

is c.

Food Clothing Transport Utility Other Recreation

The Gambia Monthly Economic Bulletin- August 2010 2.3 Projection of CPI inflation for the year 2010 On the basis of CPI trends until July 2010 and monthly seasonality, we have made three alternative projections of inflation rates for the year 2010, under the following assumptions: (1) Alternative-1: It is assumed that the CPI variation for a month over the previous month in 2010 will be the average CPI variation for the month over the previous month in last two years (2009 and 2008). Thus, Aug 2010 CPI is estimated by the following formula: Projected CPI for Aug 2010 = July 2010 CPI + [Aug 2009 CPI – July 2009 CPI + Aug 2008 CPI– July 2008 CPI]/ 2. For subsequent months, CPI is projected by the similar formula. (2) Alternative-2: It is assumed that the variation of CPI for a month over the previous month in 2010 will be the same as that for the respective month over the previous month in 2009. For example, CPI for Aug 2010 is estimated by the following formula: Projected CPI for Aug 2010 = July 2010 CPI+ (Aug 2009 CPI – July 2009 CPI). For the subsequent months, CPI is projected by the similar formula. (3) Alternative-3: Average of inflation rates under Alternatives 1 and 2. Results are presented in Table 2.3 which indicates that inflation rate is expected to remain in the range of 3.6% to 6.5% during 2010, and the year-end 12-month average inflation rate is expected to be around 5.2%. Table-2.3: Projections of CPI inflation for the year 2010 (in percentage)
2007 Index Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 2008 Index 2009 Index 2010Alt1 2010Alt2 2008 Inf.rate 5.1 5.0 3.1 1.4 1.6 2.2 3.8 5.0 6.3 6.6 6.6 6.8 2009 Inf.rate 7.0 7.0 6.7 6.3 5.9 5.4 4.0 3.0 2.3 2.3 2.6 2.7 2010Alt1 3.6 3.8 4.0 4.1 4.1 4.5 6.2 6.6 6.9 6.9 6.7 6.6 2010Alt2 2010 Alt3

106.8 6 107.0 1 109.3 6 111.6 4 112.0 5 111.9 8 111.9 5 112.0 9 111.8 6 111.9 5 112.1 3 112.2

112.3 1 112.3 4 112.7 3 113.2 1 113.8 3 114.4 8 116.2 1 117.6 5 118.9 6 119.2 9 119.5 4 119.9

120.1 3 120.2 5 120.3 0
120.36 120.51 120.61 120.84 121.15 121.75 121.99

124.4 2 124.7 8 125.0 8 125.3 0 125.5 0 126.0 2 128.3 2
129.20 130.15 130.44

124.4 2 124.7 8 125.0 8 125.3 0 125.5 0 126.0 2 128.3 2
128.63 129.23 129.47 130.18 130.67

3.6 3.8 4.0 4.1 4.1 4.5 6.2 6.2 6.1 6.1 6.1 6.1

3.6 3.8 4.0 4.1 4.1 4.5 6.2 6.4 6.5 6.5 6.4 6.3

122.7 123.1

130.9 2 131.3

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The Gambia Monthly Economic Bulletin- August 2010 6 107.7 111.9 112.0 112.1 110.9 3 112.5 113.8 117.6 119.6 115.9 9 120.2 120.5 121.2 122.6 121.1 6 124.8 125.6 129.2 130.9 127.6

Q1 Q2 Q3 Q4
Ave

124.8 125.6 128.7 130.1 127.3

4.4 1.7 5.0 6.7 4.5

6.9 5.8 3.1 2.5

3.8 4.2 6.6 6.7

4.6

5.3

3.8 4.2 6.2 6.1 5.1

3.8 4.2 6.4 6.4 5.2

Note: Projections are made by the Research Team. Alternative projections 1, 2 and 3 are defined in the text above.

2.4 Producer Price Index (PPP) for March 2010 Starting with March 2010 the GBOS has decided to prepare and publish the Producer Price Index (PPI) on quarterly basis. The PPI indicates the average increase of basic producer price for domestic industries and excludes prices of exports. The definition and concepts employed by GBOS are in conformity with other International Economic Standard; but adapted to Gambia specification (ISIC, Rev 3.1 of 1990). The basket of goods and services are drawn from the list of manufacturing establishments covered during the 2005/2006 Economic Census comprising of 108 large manufacturing enterprises employing at least 10 people, whose output is mainly sold on the domestic market or for export. Currently, the PPI covers 182 items of goods and services, out of which 32% are food and 68% are non-food. The point of pricing is the establishment and the price is the selling price received by the producer for the selected product as it leaves the factory gate. Thus the PPI is not affected by changes in taxes and duties, and prices quoted are exclusive of all taxes on products but inclusive of subsidies. As indicated in Table-2.4, the overall annual inflation in terms of PPI was 9.9% in March 2010 contributed by 10.9% inflation in food products and 11.9% inflation in non-food products. Table-2.4: Producer Price Index (Base 2009=100)

20

The Gambia Monthly Economic Bulletin- August 2010

21

The Gambia Monthly Economic Bulletin- August 2010 2.5 Government Fiscal Performance in January-July 2010 • Columns (4), (5) and (6) of Table-2.5.1 present major item-wise revenue realization and expenditure of the government in the first 7 months (i.e. Jan-July) of 2008, 2009 and 2010 respectively. Columns (7) and (8) indicate annual percentage changes of major items of revenues and expenditure in Jan-July 2009 and Jan-July 2010 respectively over those in the corresponding period of the previous year. • Government’s fiscal performance was not satisfactory in Jan-July 2010 compared with Jan-July 2009. Tax revenues declined by 0.6% in Jan-July 2010 over Jan-July 2009 compared with a growth of 16.2% in Jan-July 2009 over Jan-July 2008. However, there was better performance of non-tax revenues in Jan-July 2010 than in Jan-July 2009. • In Jan-July 2010, total expenditures & net lending increased by 9.4% over Jan-July 2009 compared to 26.6% growth in Jan-July 2009. Overall there was a fiscal deficit of (-) D465.8 million in Jan-July 2010, higher than fiscal deficit of (-) D322.6 million in Jan-July 2009. • Despite significant contraction of expenditure, Basic Balance was in deficit at (-)D22.1 million in Jan-July 2010 mainly due to shortfalls in corporate taxes and domestic sales tax. However, Basic Primary Surplus at D480 million in Jan-July 2010 was higher than that at D365 million in Jan-July 2009. Table-2.5.1 Government Financial Performance in Jan-July 2010 (Million Dalasi)
Items 2009 Actual 2010 Budget 2008 Jan-July 2009 Jan-July 2010 Jan-July
Ja-Jul-09 % ch over Ja-Jul 08 Ja-Jul-10 % ch over Ja-Jul-09

(1) (2) (3) (4) (5) (6) (7) (8) Revenue and grants 4893.0 5474.1 2215.4 2724.5 2867.6 23.0 5.3 Domestic Revenue 3904.9 4413.2 2115.8 2427.2 2466.6 14.7 1.6 Tax Revenue 3517.5 3991.3 1885.5 2190.5 2177.6 16.2 -0.6 Nontax Revenue 387.4 421.9 230.4 236.7 289.0 2.7 22.1 Grants 988.1 1061.0 99.5 297.4 401.0 198.8 34.9 Exp & Net Lending 5631.9 5769.7 2406.8 3047.1 3333.5 26.6 9.4 Current Expenditure 3625.1 4013.7 1854.2 2099.0 2238.3 13.2 6.6 Personnel Emoluments 1191.8 1499.3 533.0 649.9 816.7 21.9 25.7 Other Charges 1691.9 1752.0 865.3 980.7 919.8 13.3 -6.2 Interest 741.4 762.4 455.8 468.5 501.8 2.8 7.1 External 153.2 176.3 101.2 100.4 108.8 -0.8 8.3 Domestic 588.3 586.1 354.6 368.1 393.0 3.8 6.8 Cap Exp & Net Lending 2006.8 1756.0 552.6 948.1 1095.2 71.6 15.5 Capital Expenditure 1889.1 1692.0 471.6 855.4 1106.2 81.4 29.3 Externally financed 1300.1 1360.0 290.7 516.9 844.7 77.8 63.4 Net Lending 117.7 64.0 81.0 92.7 -11.0 14.4 -111.9 Overall Fiscal Balance -739.0 -295.6 -191.5 -322.6 -465.8 68.5 44.4 Basic Balance -427.0 3.4 -0.3 -103.0 -22.1 34,155.3 -78.5 Basic Primary Balance 314.5 765.8 455.5 365.4 479.7 -19.8 31.3 Nominal GDP (GBOS) 25805 28425 25805 28425 12.3 10.2 22978 Source: Statistics and Special Studies Unit, MOF. Notes: (1) Overall balance = (Revenue and Grants) minus (Expenditure and Net Lending); (2) Basic Balance = (Domestic Rev) less (Exp. and Net Lending excluding externally financed capital exp) and (3) Basic Primary Balance = Basic Balance plus interest payments

22

The Gambia Monthly Economic Bulletin- August 2010

Government has taken a number of fiscal measures since June 2010 to improve fiscal balance. These include (a) Reinstating the collection of domestic excise taxes, including GMD 11 per liter on beer; (b) Reforming the mechanism for setting retail prices for petroleum fuels, which incorporates a GMD 5 per liter increase on premium motor spirits and GMD1 per liter on diesel and a general sales tax of 15 percent on all petroleum based fuels; (c) a freeze on non-priority hiring in the public sector; and (d) reducing the monthly cash allocations to spending agencies in line with the requirements to achieve a cumulative basic balance of D265.1 million by end-September 2010. • Column (2) to (6) of Table-2.5.2 indicates the item-wise fiscal performance of the government, as percentage of GDP, for 2009-outturn, 2010-Budget, Jan-July 2008, Jan-July 2009 and Jan-July 2010 outturn respectively. It is observed from the table that in terms of percentages of GDP the fiscal performance in Jan-July 2010 is not satisfactory. The 2010 Budget has targeted at zero basic balance as per commitment under the IMF ECF funded Program. But, there was a Basic deficit at (-) 0.1% of GDP in Jan-July 2010. • The Budget for 2010 has targeted total revenue and grants at 19.3% of GDP (higher than 19% in 2009-Outturn) and total expenditure and net lending at 20.3% of GDP (lower than 21.8% of GDP in 2009-Outturn) resulting in an overall fiscal deficit at 1% of GDP (compared to fiscal deficit of 2.9% of GDP recorded in 2009-Outturn). Significant reduction in total expenditure is sought to be achieved through drastic cut in capital expenditure from 7.3% of GDP in 2009-Outturn to 6% of GDP in 2010 Budget. Such a cut in capital expenditure may be good to maintain fiscal sustainability, but may affect adversely development activities unless funds are supplemented by donors’ aid. Table-2.5.2 Government Financial Performance in 2009 and Jan-July 2010 (As % of GDP at current market prices) 2010 2009 2010 2008 2009 Items

(1) Revenue and grants Domestic Revenue Tax Revenue Nontax Revenue Grants Exp & Net Lending Current Expenditure Personnel Emoluments Other Charges Interest External Domestic Cap Exp & Net Lending Capital Expenditure Externally financed Net Lending

Overall Bal Inc. grants Basic Balance Basic Primary Balance

Actual (2) 19.0 15.1 13.6 1.5 3.8 21.8 14.0 4.6 6.6 2.9 0.6 2.3 7.8 7.3 5.0 0.5 -2.9 -1.7 1.2

Budget (3) 19.3 15.5 14.0 1.5 3.7 20.3 14.1 5.3 6.2 2.7 0.6 2.1 6.2 6.0 4.8 0.2 -1.0 0.0 2.7

Jan-July (4) 9.6 9.2 8.2 1.0 0.4 10.5 8.1 2.3 3.8 2.0 0.4 1.5 2.4 2.1 1.3 0.4 -0.8 0.0 2.0

Jan-July (5) 10.6 9.4 8.5 0.9 1.2 11.8 8.1 2.5 3.8 1.8 0.4 1.4 3.7 3.3 2.0 0.4 -1.3 -0.4 1.4

Jan-July (6) 10.1 8.7 7.7 1.0 1.4 11.7 7.9 2.9 3.2 1.8 0.4 1.4 3.9 3.9 3.0 0.0 -1.6 -0.1 1.7

Source: Statistics and Special Studies Division, MOF. Notes: For definitions of overall fiscal, basic and primary balance, see footnotes in Table 2.5.1.

23

The Gambia Monthly Economic Bulletin- August 2010

2.6 Projection of Fiscal Outturn for the Year 2010
Column (2) of the Table-2.6 below presents detailed item-wise revenues and expenditure in Jan-July 2010. The ratios of actual realization for any item in Jan-July to the final outturn for the item during the last five years viz. 2005, 2006, 2007, 2008 and 2009 are presented in columns (3) to (7) respectively. Item-wise average ratios for Jan-July of these five years are presented in column (8). By taking these ratios as norms to take care of monthly seasonality over the year, expected revenue and expenditure outcomes for the full year 2010 are estimated by the following simple formula and are presented in column (9) of the Table-2.6. Expected outturn for an item in 2010 = 100 X (actual realization in Jan-July 2010) / average realization ratio (in percentage) in Jan-July in the last five years (2005-2009) Comparison of the expected outcome given in Column (9) with the budget estimates given in Column (10) leads to the following conclusions: (a) Tax revenue target given in the Budget 2010 will not be realized, unless tax revenue collections improve significantly in the subsequent months in 2010. (b) However, Non-tax revenue realization is expected to meet the budgeted targets. (c) Grants may also fall short of budget estimates unless their inflows and disbursement are augmented significantly in the subsequent months in 2010. (d) Both the current and capital expenditure are expected to remain within budget estimates. (e) It is a matter of serious concern that, despite significant expenditure cuts, the overall fiscal deficit is likely to be (-) D887 million (3.1% of GDP) compared to budgeted fiscal deficit at D296 million (1% of GDP). It is basically due to revenue shortfalls. (f) The Basic balance is likely to generate a deficit of (-) 0.7% of GDP compared to budget target of 0% of GDP. Basic Primary Surplus is likely to be 2.1% of GDP, lower than the Budgeted Primary Surplus at 2.7% of GDP.
2.6 Government Fiscal Performance in Jan-July 2010 and Expected Outturn for 2010 Items 2010JanJuly Actual (2) 2867.6 2466.6 2177.6 748.5 344.5 321.8 25.2 37.5 19.6 Ratio of Jan-July performance in Annual Outturn (in Percentage) 20052006200720082009JanJanJanJanJanJuly July July July July (3) 59.6 58.9 59.2 56.8 69.1 47.4 66.1 89.9 (4) 60.1 60.9 61.2 65.2 65.5 64.8 45.4 91.1 96.4 (5) 62.2 64.1 63.0 73.3 64.0 78.4 73.7 91.7 99.1 (6) 59.2 60.5 59.9 64.8 63.3 70.4 37.4 72.8 97.6 (7) 55.7 62.2 62.3 68.7 61.7 73.0 53.8 94.4 97.9 Ave. ratio JanJuly 20052009 (8) 2010 Proj. Outturn4 (9) 4469.7 4019.7 3560.3 1122.5 532.5 481.7 45.5 42.6 20.2
2010 Budget Estimate

(1) 1.Rev & grants (2+5) 2.Dom. Revenue (3+4) 3.Tax Rev (3.1+3.2) 3.1 Direct Tax (a to e) (a) Personal (b) Corporate (c) Capital Gains (d) Payroll (e) Other

(10) 5473.9 4412.9 3991.0 1185.0

94.4

64.7 66.8 55.3 88.0 97.1

2.6 Government Fiscal Performance in Jan-July 2010 and Expected Outturn for 2010
Items
4

2010Jan-

Ratio of Jan-July performance in Annual Outturn (in Percentage)

Ave. ratio

2010 Proj.

2010 Budget

Expected outturn for an item in 2010 = 100 X (actual realization in Jan 2010) / average realization ratio (in percentage) in Jan in the last five years (2005-2009).

24

The Gambia Monthly Economic Bulletin- August 2010
July Actual 2005JanJuly 2006JanJuly 2007JanJuly 2008JanJuly 2009JanJuly JanJuly 20052009 (8) Outturn5
Estimate

(1) (2) (3) (4) (5) (6) (7) (9) 3.2 Indirect Tax 1429.1 60.2 59.6 58.8 57.2 59.8 2437.8 3.2.1 Dom Tax on G&S 388.4 63.9 60.1 63.4 61.7 61.9 628.3 (a) Stamp Duties 13.5 57.8 73.7 65.0 77.9 60.3 66.9 20.2 (b) Excise Duties 88.0 52.4 54.1 54.6 59.0 59.8 56.0 157.1 (c) Dom Sales Tax 286.9 66.0 61.4 66.7 61.2 62.8 63.6 450.9 3.2.2 Tax on Ext Trade 1040.7 59.0 59.4 57.3 55.2 59.2 1809.6 (a) Duty (i+ii) 518.1 60.2 63.5 55.5 54.8 61.2 885.6 (i) Oil 224.7 55.2 67.9 51.1 51.7 65.8 58.3 385.1 (ii) Non-oil 293.4 62.1 61.0 57.9 56.3 55.7 58.6 500.5 (b) Sale tax on imp (i+ii) 522.6 57.8 54.6 59.1 55.6 56.2 924.0 (i) Oil 114.1 56.0 58.4 61.3 60.9 52.7 57.9 197.3 (ii) Non-oil 408.5 58.3 53.5 58.6 53.7 57.0 56.2 726.7 4. Nontax Rev (a to d) 289.0 56.4 72.3 65.1 61.1 62.4 459.4 (a) Govt Charges 46.2 65.7 80.5 80.6 89.9 77.9 78.9 58.5 (b) NTR from CRD 3.8 70.1 69.5 59.4 48.1 62.9 62.0 6.1 (c) NTR from CED 70.6 70.0 56.3 58.9 54.9 59.8 60.0 117.7 (d) Others 168.4 55.0 59.1 84.4 52.0 53.5 60.8 277.0 5. Grants 401.0 68.0 47.8 27.7 40.7 30.1 42.9 450.0 6. Exp & Net Lend (7+8) 3333.5 5357.0 67.1 60.3 55.2 55.6 54.1 7. Cur. .Exp (7.1 to 7.3) 2238.3 62.1 61.4 54.7 58.2 57.9 3851.0 7.1 Pers. Emoluments 816.7 56.2 55.0 57.1 54.2 54.5 55.4 1474.1 7.2 Other Charges 919.8 63.7 60.5 50.0 58.0 58.0 58.0 1584.7 7.3 Interest (a+b) 501.8 63.8 66.9 58.9 63.9 63.2 792.1 (a) External 108.8 66.8 66.6 58.0 65.9 65.6 64.6 168.4 (b) Domestic 393.0 63.0 67.0 59.2 63.3 62.6 63.0 623.7 8. Cap Exp & Net Lend. 1095.2 73.7 58.7 56.5 48.3 47.2 1506.0 8.1 Capital Exp. (a+b) 1106.2 73.1 61.4 53.1 45.9 45.3 1506.0 (a) Ext. Financed (i+ii) 844.7 74.4 62.7 60.1 57.5 39.8 1141.0 (i) Loans 443.3 76.1 64.8 70.9 56.3 54.3 64.5 691.0 (ii) Grants 401.4 65.3 47.8 27.7 60.1 26.2 45.4 450.0 (b) GLF Capital 261.5 56.1 35.8 24.8 34.7 57.5 41.8 365.0 8.2 Net lending -11.0 44.6 0.0 100.0 68.8 78.8 58.4 0.0 9. Overall fiscal bal (1-6) -465.9 -887.3 10.Basic balance -22.2 -196.3 11. Basic Primary Bal. 479.6 595.8 Memorandum Items: As percentage of IMF Program Nominal GDP (equal to D19904 million) 12. Fiscal bal (1-6)6 -1.6 -3.1 13.Basic balance -0.1 -0.7 14. Basic Primary Bal. 1.7 2.1

(10) 2806.0 1572

1234

421.9

1061.0 5769.7 4013.7 1499.3 1752.0 762.4 176.3 586.1 1756.0 1692.0 1360.0 692 668 365 64.0 -295.9 3.2 765.6 -1.0 0.0 2.7

5

Expected outturn for an item in 2010 = 100 X (actual realization in Jan 2010) / average realization ratio (in percentage) in Jan in the last five years (2005-2009). 6 (1) Overall balance = (Revenue and Grants) minus (Expenditure and Net Lending); (2) Basic Balance = (Domestic Revenue) less (Expenditure and Net Lending excluding externally financed capital expenditure) and (3) Basic Primary Balance = Basic Balance plus interest payments

25

The Gambia Monthly Economic Bulletin- August 2010

2.7 Domestic Debt and Treasury Bills Outstanding
(a) Including CBG support, the total outstanding domestic debt increased to D7.7 billion (27.6% of GDP) at end-June 2010, from D6.8 billion (27.1% of GDP) a year ago. Outstanding Treasury bills increased by 7.1 percent to D5.2 billion and accounted for 67.7 percent of the stock (including TMA overdraft). (b) The share of Treasury bills declined from 70.9% at end-June 2009 to 67.7% at end-June 2010, that of Sukuk Al-Salam increased from 1.2% to 1.6%, that of Govt. bonds declined from 4.9% to 4.7%, that of NIB treasury bills declined from 8% to 6.5% while share of TMA overdraft increased from 15% to 19.6% over the same period. Table-2.7-A Outstanding Domestic Public Debt as on 30 June 2010 Type of debt Million Dalasi Composition (in %) % change in June 2010 30 June 30 June 30 June 30 June over June 2009 2009 2010 2009 2010 Treasury bills 70.9 67.7 4,854 5,200 7.1 Sukuk Al-Salam 1.2 1.6 85 125 46.9
Marketable Govt Bonds Non-marketable GNPC Non-mark.Govt Bond NIB Treasury Notes TMA Overdrawn Total dom. Debt Nominal GDP As % of GDP Excluding overdraft 0 85 250 25 85 250 0.0 0.3 1.1 3.3 6.5 19.6 100.0

0.0 0.0 -9.3 46.3 12.2 10.2

1.2 3.7 8.0 15.0 100.0

547 1,027
6,848 25313 27.1 23.0

496 1,503
7,685 27885 27.6 22.2

Sustainability of Public Debt As judged by selected sustainability indices given in Table-2.7-B the public debt situation of Gambia is manageable and cannot be considered to be unsustainable over time. However, government needs to continue with sound macroeconomic policies and strict fiscal discipline which act as the first line of defense against any debt trap. Table-2.7-B Selected Sustainability Indicators for Public Debt (in percentage) Item 2005 2006 2007 2008 2009 2010 Estd.
1. Public debt/GDP ratio 125.1 2. External debt/GDP ratio 99.0 3. Domestic debt/GDP ratio 26.1 4. Interest/revenue ratio 43.4 5. Debt service/revenue ratio 59.2 6.Ext.debt service to exports ratio 11.9 Source: Estimated by the Modeling Team. 126.2 101.7 24.5 30.5 46.3 12.1 58.4 36.2 22.1 23.5 41.0 10.8 57.1 31.4 25.7 20.5 32.0 6.5 61.1 37.1 24.0 19.4 33.1 7.1 57.2 35.1 22.0 18.0 28.2 6.7

26

The Gambia Monthly Economic Bulletin- August 2010 2.8 Treasury Bills Yields • Yields on treasury bills fluctuated widely in recent months. As expected, the higher the maturity of treasury bills, the higher is the yield. However, despite stability in deposit rates and significant decline of annual point-to-point CPI inflation rate from 7% in Jan 2009 to 2.8% in Dec 2009, average yields on the 91-day bills increased from 10.5% in Jan 2009 to 11% in Dec 2009 and yield on 182-day bills from 12.1% in Jan 2009 to 12.9% in Dec 2009. In view of the declining trend of inflation rates, the Monetary Policy Committee reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, average yields of the 91-day, 182-day and 364-day bills had declining trend since then and fell from 11%, 12.9% and 14.3% respectively in December 2009 to 9.3%, 10.4% and 12.9% respectively in June 2010.
Table-2.8 Average yields on treasury bills (in percentage per annum) 2009 2010 2008 91-D 162-D 364-D 91-D 182-D 364-D 91-D 182-D 10.5 12.1 14.4 10.3 12.0 10.6 11.4 13.6 11.1 12.8 14.4 10.7 11.7 10.9 11.9 13.7 11.4 12.7 14.4 11.3 11.5 11.0 12.1 13.6 12.0 13.0 14.6 11.0 11.5 10.9 11.9 13.3 12.5 13.8 15.3 9.8 10.8 10.2 11.3 13.0 13.0 13.8 15.6 9.3 10.4 10.0 11.2 13.3 11.5 12.0 14.4 9.6 10.6 12.6 10.2 11.2 13.3 8.8 10.2 12.1 10.4 11.7 14.3 8.9 11.0 13.1 10.8 12.1 14.2 10.3 11.4 13.6 10.8 12.3 14.0 10.1 13.4 13.7 11.0 12.9 14.3 9.9 12.5 14.0

364-D

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
18 16 14 12 10 8 6 4 2 0

13.6 13.2 12.9 13.1 13.3 12.9

Trends of Yields of Treasury Bills during 2007-2010

J07 M -0 7 M -0 7 J07 S07 N07 J08 M -0 8 M -0 8 J08 S08 N08 J09 M -0 9 M -0 9 J09 S09 N09 J10 M -1 0 M -1 0

91-D

162-D

364-D

27

The Gambia Monthly Economic Bulletin- August 2010 2.9 Money Supply • Broad money supply (M2) recorded an annual growth of 21% in June 2010, compared to 21.2% a year ago. While quasi money increased by a faster pace of 29%, narrow money increased by 12.5 percent. On the supply side, 21% growth of broad money in June 2010 was supported by 9.6% growth in currency in circulation outside banks, 14.1% growth in demand deposits, 15.9% growth in savings deposits and significant growth of 45.3% in time deposits. On the demand side, growth was due to 5.9% growth in net foreign assets and 27.1% growth in net domestic assets over a year. Domestic credits increased by 23.7% from D6.9 billion in June 2009 to D8.6 billion in June 2010, supported by 28.4% growth in government borrowing and 29.6% growth in credits to the private sector, while credits to public entities declined by 15.8% over one year. Table-2.7 Money Supply and Demand in June 2010
Components June 2008 Million Dalasi 8495 4132 June 2009 Million Dalasi 10298 5009 June 2010 Million Dalasi 12458 5636 June 2009 % share 100 49 17 32 51 29 23 100 29 22 7 71 67 28 8 31 0 4 June 2010 % share 100 45 15 30 55 27 27 100 25 22 3 75 69 29 6 34 0 6 June-09 % ch. over June-08 21.2 21.2 18.1 23.0 21.2 12.8 33.8 21.2 -22.3 -23.7 -17.6 56.6 31.7 45.9 119.4 18.2 -100.0 -171.7 June-10 % ch. over June-09 21.0 12.5 9.6 14.1 29.0 15.9 45.3 21.0 5.9 23.6 -48.7 27.1 23.7 28.4 -15.8 29.6 84.5

• •

1,959 381 2,738 183 -573 Source: Central Bank of Gambia

1.Money Supply (M3) (2+3) 2.Narrow Money (2.1+2.2) 2.1 Currency 2.2 Demand deposits 3.Quasi money (3.1+3.2) 3.1 Savings deposits 3.2 Time deposits Demands for money (1+2) 1.Net foreign assets (1.1+1.2) 1.1 Monetary Authorities 1.2 Commercial banks 2.Net Dom. Assets (2.1+2.2) 2.1 Domestic credit (a) Credits to government (b) Credits to public entities (c) Credits to private sector (d) Credits to forex bureau 2.2 Other items, net

1,484 2,648
4363

1,753 3,256
5290

1,921 3,715
6822

2,603 1,760
8495 3807

2,935 2,354
10298 2959

3,401 3,421
12458 3133 2760 372 9325 8567 3671 703 4193 0 758

2,926 881
4688 5261

2,233 726
7340 6929

2,858 835 3,236 0 411

28

The Gambia Monthly Economic Bulletin- August 2010

2.10 Performance by Commercial Banks
(b) The Gambian banking industry now consists of 14 banks compared to 13 banks in 2009. However, the industry is dominated by three large banks holding 61 percent of the total assets, although their share has declined over the years. (c) The banking industry continues to show increasing signs of resilience with growth in assets, capital and reserves. The industry’s total assets increased to D15.6 billion in June 2010, up by 18.4% over a year, and the asset quality is satisfactory. (d) The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to 18.7% in March 2010 and was well above the statutory norm at 8% and all the banks satisfied the minimum requirement. (e) However, nonperforming loans as a ratio of gross loans deteriorated from 12.0% in December 2009 to 16.9% in March 2010. This was due to the Central Bank’s inclusion of restructured loans in non-performing category. However, all loans were adequately provisioned. (f) Loans and advances to the private sector, accounting for 51% of total domestic credit, increased by 10.5% to D4.9 billion in June 2010 from D4.4 billion in December 2009. (g) Credit to agriculture, manufacturing, tourism and financial sectors increased by 27%, 25.4%, 27.2% and 29% respectively. Similarly, credit to distributive trade, transportation and other commercial loans rose by 10.4%, 11.7% and 43.6% during the same period. (h) In contrast, loans and advances to fishing and personal purpose declined by 12.1% and 31.9% respectively. Table-2.8 Sectoral Distribution of Bank Loans (Million Dalasi) Items Agriculture Fishing Manufacturing Construction Transportation Trade Tourism Financial Personal loans Others Total Decembe r 2009 262.5 16.9 217.4 499.0 312.7 1160.7 211.2 146.4 816.8 769.3 4413.0 June 2010 333.5 14.9 272.6 507.4 349.2 1280.9 268.7 188.9 556.5 1105.1 4877.7 Composition (%) Dec-2009 5.9 0.4 4.9 11.3 7.1 26.3 4.8 3.3 18.5 17.4 100.0 June2010 6.8 0.3 5.6 10.4 7.2 26.3 5.5 3.9 11.4 22.7 100.0 GR (%) of June-2010 Over Dec-2009 27.0 -12.1 25.4 1.7 11.7 10.4 27.2 29.0 -31.9 43.6 10.5

Source: Central Bank of Gambia (CBG)

29

The Gambia Monthly Economic Bulletin- August 2010

2.11 Commercial Banks’ Assets
• • Total assets of the commercial banks increased by 18.4% on year-on-year basis from D13.2 billion at end-June 2009 to D15.6 billion at end-June 2010. Gambian banks do not have large exposure to foreign assets or foreign liabilities. At end-June 2010, foreign assets constituted only 8% of total assets (foreign exchange 1.9%, balances abroad 4.9% and foreign investment 1.3%), down from 8.8% a year ago (foreign exchange 1.4%, balances abroad 6.4% and foreign investment 1%). Gambian banks also do not have large contingent liabilities. At end-June 2010 contingent liabilities increased by only 1.4% over one year and constituted only 11.8% of total liabilities, down from 13.8% a year ago. At end-June 2010, loans and advances increased by 22.5% over a year and constituted 29.1% of total assets, compared to 28.1% a year ago. At end-June 2010, investments in government Treasury Bills by the banks increased by 22.8% over a year and constituted 24.9% of their total assets. As expected, three large banks had the dominant share. At end-June 2010, loans and advances to the public sector decline by 17.6% over a year, while those to the private sector increased by 32.6% over a year ago.
Jun-2008 170.4 174.6 953.8 942.3 11.5 890.7 18.1 2,757.2 243.8 2,513.3 3,384.1 3,074.4 166.2 143.4 742.0 1,311.3 889.4 11,291.5 9,980.2 1,208.8 Jun-2009 194.0 186.7 1,013.3 933.0 80.3 846.4 112.1 3,711.7 750.6 2,961.1 3,421.2 3,174.3 117.3 129.6 979.2 1,824.5 908.2 13,197.3 11,372.8 1,162.7 Jun-2010 250.6 289.9 1,560.4 1,334.8 225.5 762.9 92.8 4,545.0 618.5 3,926.5 4,224.2 3,898.2 129.4 196.6 1,186.0 1,849.2 830.2 15,630.5 13,781.3 1,249.4 % ch. % ch. Composition (% ) Jun-2009 Jun-2010 Jn09 over Jn10 over Jn08 Jn09 1.5 1.6 13.9 29.2 1.4 1.9 6.9 55.3 7.7 10.0 6.2 54.0 7.1 8.5 -1.0 43.1 0.6 1.4 599.3 181.0 6.4 4.9 -5.0 -9.9 0.8 0.6 519.6 -17.2 28.1 29.1 34.6 22.5 5.7 4.0 207.8 -17.6 22.4 25.1 17.8 32.6 25.9 27.0 1.1 23.5 24.1 24.9 3.3 22.8 0.9 0.8 -29.4 10.3 1.0 1.3 -9.7 51.7 7.4 7.6 32.0 21.1 13.8 11.8 39.1 1.4 6.9 5.3 2.1 -8.6 100.0 100.0 16.9 18.4 86.2 88.2 14.0 21.2 8.8 8.0 -3.8 7.5

• •

Table-2.11 Commercial Banks Assets at the end-June 2010 (Million Dalasi)
Assets (Million Dalasi) 1. Notes and coins 2. Foreign exchange 3. Local Bank balance ii. CBG iii. Banks locally 4. Balances abroad 5. Bills purchased 6. Loans and advances i. Public sector ii. Private sector 7. Investments i. Govt Treasury Bills ii. Others iii Foreign Invest. 8. Fixed assets 9. Guarantees 10. Other assets 11. Total assets (1 to 10) 12. Net Balance (11-9) Memo: Foreign Assets

Source: Central Bank of Gambia.

30

The Gambia Monthly Economic Bulletin- August 2010

2.12 Commercial Banks’ Liabilities
• As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities. At end-June 2010, external sector related liabilities constituted only 2% of total liabilities (non-residents deposits 1.1%, balances with banks abroad 0.1% and external debt 0.8%), up from 1.5% a year ago (non-residents deposits 1.2%, balances with banks abroad 0.1% and external debt 0.2%). At end-June 2010 bank deposits increased by 23.3% over a year, aided by a growth of 14.1% in demand deposits, 15.9% in savings deposits and 45.3% in time deposits. At end-June 2010 banks capital and reserves increased by 8.8% and bank balances declined by 79.4%, while borrowings increased by more than four times over a year.

• •

Table-2.10 Commercial Banks Liabilities at the end-June 2010 (Million Dalasi)
Liabilities (Million Dalasi) 1. Capital and reserves 2. Demand deposits i Residents ii Non residents iii Government entities 3. Savings deposits i Residents ii Non residents iii Government entities 4. Time deposits i Residents ii Non residents iii Government entities Total deposits 5. Bank Balances i HO & branches ii Other banks abroad iii. Banks locally 6. Borrowings from i Cent. bank of Gambia ii Other banks locally iii HO & branches iv Other banks abroad v. Other sources 7. Guarantees 8. Other liabilities 9. Total liabilities (1 to 8) 10. Net balance (9-7) Jun-2008 1,457.1 2,647.8 2,363.4 16.7 267.8 2,603.1 2,520.6 74.8 7.8 1,759.8 1,283.0 17.2 459.6 7,010.7 80.6 2.4 78.2 278.5 31.2 113.8 133.5 1,311.3 1,153.3 11,291.5 9,980.2 Jun-2009 1,514.8 3,255.5 2,712.1 18.8 524.6 2,935.2 2,844.7 79.1 11.3 2,354.4 1,674.6 65.4 614.5 8,545.2 288.3 273.5 14.8 148.5 123.5 25.0 1,824.5 876.1 13,197.3 11,372.8 Jun-2010 1,647.7 3,714.5 3,506.1 24.0 184.5 3,401.5 3,297.9 89.5 14.0 3,420.8 2,609.6 46.1 765.1 10,536.8 59.3 44.2 15.0 837.7 20.0 686.3 131.4 1,849.2 699.8 15,630.5 13,456.9 % ch. % ch. Composition (%) Jun-2009 Jun-2010 Ap09 over Ap10 over Apr08 Apr09 11.5 10.5 4.0 8.8 24.7 23.8 23.0 14.1 20.6 22.4 14.8 29.3 0.1 0.2 12.8 27.5 4.0 1.2 95.9 -64.8 22.2 21.8 12.8 15.9 21.6 21.1 12.9 15.9 0.6 0.6 5.8 13.1 0.1 0.1 46.2 23.7 17.8 21.9 33.8 45.3 12.7 16.7 30.5 55.8 0.5 0.3 280.1 -29.5 4.7 4.9 33.7 24.5 64.7 67.4 21.9 23.3 2.2 0.4 257.6 -79.4 2.1 0.3 11394.5 -83.8 0.1 0.1 -81.0 1.4 0.0 0.0 1.1 5.4 -46.7 464.1 0.0 0.0 0.0 0.1 -100.0 0.9 4.4 8.6 455.7 0.2 0.8 -81.3 425.8 0.0 0.0 13.8 11.8 39.1 1.4 6.6 4.5 -24.0 -20.1 100.0 100.0 16.9 18.4 86.2 86.1 14.0 18.3 1.5 2.0 -36.6 50.7

Memo: Foreign liabl.

320.4

203.1

306.0

Source: Central Bank of Gambia

31

The Gambia Monthly Economic Bulletin- August 2010

2.13 Interest Rates and Central Bank Policy Rates
Interest rate on treasury bills declined from 31% in 2003 to 14.9% in 2006 and further to 13.7% in 2007. It ranged in between 13.1% to 14.7% in 2008 and between 12.3% to 14.3% in 2009. The bank rate of the CBG 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. It has remained at 10% since then. However, with the introduction of the Monetary Policy Committee (MPC) Policy Rate, the Bank rate has become ineffective and non-operational. 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. The CBG rediscount rate declined from 34% in 2003 to 14% in 2004. In order to counter emerging inflationary pressures, the CBG raised its rediscount rate by one percentage point from 14% to 15% in June 2007, and further to 16% in October 2008. The rediscount rate remained unchanged at 16% since then until November 2009. In view of the declining trend of inflation rates, the MPC reduced the policy rate by 2 percentage points to 14% with effect from December 2009. As a result, average yields of the 91-day, 182-day and 364-day bills had declining trend since then and fell from 11%, 12.9% and 14.3% respectively in December 2009 to 9.3%, 10.4% and 12.9% respectively in June 2010. 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 10.5% in June 2010. By contrast, commercial banks’ lending rates remained sticky above 20% due to high operating costs and high risks of bank credits.

Table-2.13 Trends of Nominal Interest rates (per cent per annum, end period)
Items Bank lending rare- min Bank lending rare- max Deposit rate (SB) min Deposit rate (SB) max Time dep (3 months) min Time dep (3 months) max Time dep (6 months) min Time dep (6 months) max Time dep (12 month) min Time dep (12 month) max Govt. treasury bills CBG Bank Rate CBG Rediscount Rate Bank lending rate Deposit rate (SB) Time deposits (3 months) Time deposits (6 months) Time deposits (12 month) Inflation (GDP-Deflator) CPI-Inflation Real GDP-Growth Rate Exch. Rate change (%)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

18 24 8 10 9.5 12.5 10 12.5 11 12.5 12 10 15 6 2 3 2.5 1.5 3.6 0.9 5.5 12.2

18 17 21 21 21 24 24 36.5 36.5 30 8 8 8 10 5 10 10 17 17 10 9.5 6 7 8 5 12.5 13 22 22 14 10 6 8 8 7 12.5 13 22 22 15 11 7 10 12 7 12.5 13 22 23 13 15 20 31 30 16 13 18 29 28 14 18 23 34 33 19 Range = Maximum-Minimum 6 7 15.5 15.5 9 2 2 9 7 5 3 7 15 14 9 2.5 7 14 14 8 1.5 6 12 11 6 Factors Influencing Interest Rates 14.9 15.0 22.9 13.6 3.9 4.5 8.6 17.0 14.3 5.0 5.7 0.7 2.4 2.1 -0.1 22.7 27.0 43.2 5.3 -4.8

18 28 5 7 5 8.5 6 13 6 13 12.8 9 14 10 2 3.5 7 7 0.0 2.1 3.1 -1.8

18 27 5 7 5 12.9 6 12.9 7 12.9 13.7 10 15 9 2 7.9 6.9 5.9 2.0 5.4 6.3 -11.4

18 27 4 7 5 13.6 6 13.6 7 13.6 13.6 10 16 9 3 8.6 7.6 6.6 8.0 4.9 6.3 -9.8

18 27 4 7 5 15.5 6 15.5 6 15.5 14.2 10 16 9 3 9.5 9.5 9.5 4.7 4.5 5.0 15.9

32

The Gambia Monthly Economic Bulletin- August 2010 2.14 BOP, Foreign Exchange Reserves and Exchange Rates (a) BOP Situation in 2009 • The overall BOP situation in 2009 was better than expected earlier. The revised balance of payments estimates for 2009 indicate an improvement in the overall BOP situation from a deficit of US$23.35 million in 2008 to a surplus of US$6.79 million in 2009. • While the current account improved to a surplus of US$63.29 million compared to a surplus of US$12.35 million in 2008, the capital and financial account balance recorded a decline from US$11 million in 2008 to (-) US$70.08 in 2009. • The goods account worsened from a deficit of US$68.25 million in 2008 to US$85.98 million in 2009, but below the 2009 projection of US$141.20 million. Exports and imports declined by 8.5% and 3.7% to US$170.91 million and US$261.10 million compared to a year ago. • Net services declined from US$33.37 million in 2008 to US$21.65 million in 2009, net income improved from a deficit of US$34.26 million in 2008 to a lower deficit of US$8.13 million in 2009, while net transfers improved significantly from US$89.49 million in 2008 to US$135.75 million in 2009 due to increase of both official and non-official transfers including remittances by the Gambians living abroad. (b)BOP Situation in 2010-Q1 • The year 2010 has started with a significant improvement in the overall BOP situation as compared with that in the first quarter of 2009. Current account recorded a surplus of D642 million in 2010-Q1 compared to a deficit of (-) D108 million in 2009-Q1, due to significant improvements in exports and current transfers in 2010-Q1. • Capital and financial accounts also recorded an increase from (-) D751.31 Dalasi to D104 million in 2010-Q1. • Consequently, the overall balance of payments showed a surplus of D746 million in 2010Q1 compared with a deficit at (-) D859 in 2009Q1. • Data from the Gambia Tourism Authority (GTA) indicates that Tourists arrivals in 2010-Q1 declined by 33% over 2009-Q1 reflecting the weaker global economic situation. Similarly, data on remittances showed only a modest recovery, lower than expected earlier. (c) Foreign Exchange Reserves • Volume of transactions in the domestic foreign exchange market, measured by aggregate sales and purchases of foreign exchange in the first five months of 2010 amounted to D16.69 billion or US$691.02 million compared to D13.72 billion or US$520.50 million in 2009. • As at end-April 2010, gross international reserves, including the SDR allocations, stood at US$177.63 million, equivalent to 7.0 months of import cover compared to US$116.3 million or 4.9 months of import cover a year ago.

33

The Gambia Monthly Economic Bulletin- August 2010 Table-2.12 Balance of Payments in 2008-2009 and 2010Q1 in Million GD and US$
Period 1.Current A/C =2+3+4+5 2.Goods (2.1+2.2) 2.1 Exports FOB -- Exports trade stat -- Re-exports --Goods in transit 2.2 Imports FOB --Imports trade stat --For re-exports 3. Services --Transportation --Travel --Communications --Insurance --Construction -- IT --Other Business 4. Income --Investment income --Compensation of labor 5. Current transfers 5.1 Government 5.2 Remittances 5.3 Other transfers 6.CapitalFin.A/C=7+8 7. Capital 8. Financial=8.1+8.2+8. 3 8.1 FDI 8.2 Other inv.=A+B+C (A) Assets=i+ii (i) Loans (ii) Deposits (B) Liabilities=i+ii (i) Trade credits (ii) Govt Loans=a+b (a) Disbusements (b) Amortization (C) Curr. & dep. 8.3 Reserve Assets (increase if negative) Overall Balance 2008 Million GD 207.1 (1,558.4) 4,536.5 1,691.1 2,489.1 356.2 (6,094.8) (7,111.8) 1,017.0 713.5 (434.1) 1,624.1 214.4 (146.0) 76.0 (70.9) (550.0) (757.4) (931.4) 174.0 1,809.3 137.2 1,195.8 476.4 463.4 24.4 439.1 1,555.7 (1,308.5) 93.5 251.1 (157.6) (1,401.9) (1,472.0) 16.4 339.6 (323.2) 53.7 191.8 2008 Mln US$ 12.3 (68.2) 202.8 76.1 110.7 16.0 (271.1) (316.3) 45.2 33.4 (19.4) 73.5 9.8 (6.5) 3.5 (2.8) (24.7) (34.3) (42.1) 7.8 81.5 6.3 52.6 22.6 11.0 1.1 9.9 70.1 (68.1) 0.2 11.5 (11.3) (68.3) (69.3) 0.6 15.1 (14.5) 0.4 7.9 2009Q1 Million GD (107.6) (683.9) 934.5 239.1 660.9 34.5 (1,618.4) (1,888.4) 270.0 367.2 (123.6) 612.7 52.4 (38.0) 12.9 (23.6) (125.5) (74.8) (115.1) 40.3 283.9 108.3 420.0 (244.4) (751.3) (751.3) 262.7 (827.8) (197.1) 62.8 (259.9) (630.7) (528.3) 214.2 276.8 (62.5) (316.7) (186.2) (858.9) 2009Q1 Mln US$ (4.1) (26.1) 35.7 9.1 25.3 1.3 (61.8) (72.2) 10.3 14.0 (4.7) 23.4 2.0 (1.5) 0.5 (0.9) (4.8) (2.9) (4.4) 1.5 10.8 4.1 16.0 (9.3) (28.7) (28.7) 10.0 (31.6) (7.5) 2.4 (9.9) (24.1) (20.2) 8.2 10.6 (2.4) (12.1) (7.1) (32.8) 2009 million GD 1,692.7 (2,282.5) 4,646.0 1,706.1 2,829.6 110.3 (6,928.5) (8,084.6) 1,156.1 571.1 (480.2) 1,421.7 264.0 (165.9) 66.3 (35.9) (499.0) (214.9) (374.9) 160.0 3,619.1 798.6 1,741.6 1,079.0 (1,864.3) (1,864.3) 1,050.9 (1,029.8) 543.3 378.7 164.7 (1,573.1) (2,357.8) 526.1 798.5 (272.4) 258.7 (1,885.4) (171.6) 2009 Mln US$ 63.3 (86.0) 175.1 64.3 106.6 4.2 (261.1) (304.6) 43.6 21.7 (18.1) 53.7 10.0 (6.3) 2.5 (1.4) (18.8) (8.1) (14.2) 6.0 135.7 30.0 65.7 40.1 (70.1) (70.1) 39.6 (39.3) 20.2 14.2 6.0 (59.6) (88.9) 19.8 30.1 (10.3) 9.5 (70.3) (6.8) 2010Q1 million GD 642.5 (416.7) 1,103.7 466.9 620.9 15.8 (1,520.4) (1,774.1) 253.7 156.1 (224.6) 447.4 93.7 (33.4) (2.5) (124.5) (126.0) (103.4) (22.5) 1,029.0 248.8 242.6 537.6 104.2 104.2 262.7 119.1 276.5 94.7 181.8 (157.3) (595.1) 224.3 292.2 (67.9) 213.5 (277.7) 746.6 2010Q1 mln USD 23.8 (15.5) 41.0 17.3 23.0 0.6 (56.4) (65.9) 9.4 5.8 (8.3) 16.6 3.5 (1.2) (0.1) (4.6) (4.7) (3.8) (0.8) 38.2 9.2 9.0 20.0 3.9 3.9 9.8 4.4 10.3 3.5 6.7 (5.8) (22.1) 8.3 10.8 (2.5) 7.9 (10.3) 27.7

670.5 23.4 SOURCE: Central Bank of The Gambia.

34

The Gambia Monthly Economic Bulletin- August 2010 2.15 Exchange Rate • Over one year, in July 2010 Dalasi depreciated against US$ by 4.6%, against SEK by 4.5%, against CHF by 2.5% and against CFA by 1.5%, while it appreciated against Euro by 2.8% and against the UK£ marginally by 0.2%. Table-2.15 End-period mid-market exchange rates (Dalasi per foreign currency) Year Month UK£ US$ SEK(10 CHF CFA(500 0) 0) 2009 Jan 37.25 26.07 325.12 20.85 262.81 Feb 37.38 26.11 305.29 22.04 257.78 Mar 38.18 26.38 309.62 23.31 259.30 Apr 39.05 26.80 321.49 23.00 262.17 May 41.40 26.74 325.95 22.40 265.98 June 43.13 26.87 347.89 21.96 272.87 July 43.31 26.79 346.46 24.42 277.53 Aug 43.80 26.63 326.25 24.36 281.45 Sept 42.99 26.95 325.34 25.47 283.58 Oct 43.48 26.91 377.70 26.07 297.13 Nov 43.88 26.93 348.88 26.65 295.53 Dec 43.04 26.94 348.01 25.81 288.26 Ave 41.41 26.68 334.00 23.86 275.37 2010 Jan 43.01 26.94 362.62 25.29 289.32 Feb 42.32 26.94 372.91 25.27 284.26 Mar 40.79 27.01 364.08 25.09 273.22 Apr 41.00 27.25 368.69 25.03 281.41 May 39.11 28.73 353.12 25.67 280.85 June 41.77 27.86 345.71 24.08 286.26 July 43.20 28.03 362.19 25.04 281.81 Rate of appreciation (-) / depreciation (+) of Dalasi over the same period of previous year (in Percentage) 2009 Oct 7.4 8.1 14.4 29.4 15.1 Nov 8.2 2.5 8.5 32.8 14.4 Dec 7.2 1.5 -8.3 12.5 11.2 2009 Average 0.7 19.3 0.0 19.5 10.6 2010 Jan 15.5 3.3 11.5 21.3 10.1 Feb 13.2 3.2 22.1 14.6 10.3 Mar 6.8 2.4 17.6 7.6 5.4 Apr 5.0 1.7 14.7 8.8 7.3 May -5.5 7.4 8.3 14.6 5.6 June -3.1 3.7 -0.6 9.7 4.9 July -0.2 4.6 4.5 2.5 1.5
Source: Central Bank of Gambia (CBG)

unit of Euro 33.52 33.6 35.22 35.32 37.00 37.04 38.06 37.68 38.61 39.61 40.15 39.87 37.14 39.03 39.02 37.11 36.05 36.72 36.13 36.97

20.4 20.6 11.8 14.0 16.4 16.1 5.4 2.1 -0.7 -2.4 -2.8

35

The Gambia Monthly Economic Bulletin- August 2010 3. Recent Policy Developments and Development Issues 3.1 Budget Call Circular for the Preparation of Budget for 2011

As in earlier years the Ministry of Finance has issues a Budget Call Circular to all ministries and budgetary agencies indicating the policy guidelines and procedures for the preparation of the fiscal year 2011 budget proposals. The Circular provides the overall macroeconomic and fiscal policy framework and the indicative expenditure ceilings for all budgetary agencies for FY 2011; communicates the policy and administrative guidelines and procedures in the preparation of the FY 2011 budget consistent with public financial management reforms; and set the schedule of budget preparation activities. All Ministries/Departments/Agencies (MDAs) have been requested to prepare their Budgets for FY 2011 and submit them to the Ministry of Finance (MOF) not later than 6 August 2010 at the latest. Budget Strategy The budget shall give priority to major programs/activities that are geared towards achieving the PRSPII objectives and the MDGs. For FY 2011, the focus for funding shall be mostly directed to the following priority areas, determined in the context of the PRSPII: i) ii) iii) Infrastructure development including roads construction and improvement in energy supply and access Basic and secondary education services to increase efficiency in delivery Health services to pave the way for meeting the Millennium Development Goals (MDGs), especially: a. Increasing population access to the basic clinical care package b. Increasing the production and retention of skilled health care workers c. Improving essential drugs security in the country d. Increasing access to public health protection services e. Gradually meeting the tertiary care needs of the population Agricultural development to help improve food security, value addition and raise farmers’ income and foreign exchange earnings; Further improvement in Information Technology including telecommunication Deepening public financial management, especially to build capacity of MDAs in the area of strategic planning and budgeting Human capital formation through job creation programs/activities and the acceleration of the public service reform process Good governance and respect for the rule of law Environmental development to help establish an effective response to climate change

iv) v) vi) vii) viii) ix)

Macroeconomic Framework The preparation of the FY 2011 budget proposals shall be based on the Macroeconomic framework as presented in Table-1 and Table-2. Fiscal Framework: Table-3 presents the fiscal envelope for 2011 Budget.

36

The Gambia Monthly Economic Bulletin- August 2010 Table-1: Key Macroeconomic Parameters/Assumptions for 2011 Parameter 2009 (actual) 5.6 4.6 11.3 2010 (estimate) 5.0 3.9 10.0 27.48 28,425 57.2 35.1 22.0 2011 (projected) 5.4 5.0 9.5 28.30 31,434 53.3 33.6 19.7

1 GDP real growth % 2 Inflation % 3 91 days TB rate % Foreign Exchange 4 26.68 (Dalasi/USD) GDP (million dalasi, IMF 5 25,805 estimate) 6 Debt to GDP ratio % 61.1 37.1 - External debt - Domestic debt 24.0 Source: MEPID, GBOS, CBG, IMF and SSSD/MOF

Table-2: Sectoral Growth Rates and Shares in GDP at factor cost (in percentage) Sectoral Shares (%) Sectors Growth Rates (%) Agriculture Crops Livestock Forestry Fishing Industry Mining & Quar. Manufacturing Utilities Construction Services Trade Hotels Transport & Comm. 13.2 Financial 2.5 Real estate 2.0 Public admin 2.7 Education 8.0 Health 2.8 Community Source: GBOS and SSSD/MOF. 2009 9.8 14.3 4.5 0.7 5.1 2.1 12.0 -2.8 6.2 3.0 4.3 6.0 -26.8 5.0 2010 4.3 4.5 4.0 2.0 4.3 5.1 11.5 3.1 11.6 1.0 4.8 1.3 1.0 8.0 7.0 3.0 9.0 11.5 12.7 12.4 2011 4.3 4.5 4.0 2.0 4.3 4.7 11.5 3.1 11.6 1.0 5.3 2.0 1.5 8.5 7.0 3.0 9.0 11.5 12.7 12.4 2009 26.3 14.8 8.9 0.5 2.0 13.0 2.1 5.4 1.5 4.0 60.7 26.7 2.6 11.0 9.0 3.0 3.6 1.8 2.4 0.7 2010 26.2 14.8 8.9 0.5 2.0 13.1 2.2 5.4 1.6 3.8 60.7 25.9 2.5 11.3 9.2 2.9 3.8 1.9 2.5 0.7 2011 26.0 14.7 8.8 0.5 2.0 13.0 2.3 5.3 1.7 3.7 60.9 25.1 2.4 11.7 9.3 2.9 3.9 2.0 2.7 0.8

Table 3: Indicative GLF Resource Envelope for FY 2011 (in Million Dalasi)

37

The Gambia Monthly Economic Bulletin- August 2010
Varianc e 2010/11

Outturn 2009

Budget 2010

Projecte d 2011

Varianc e%

38

The Gambia Monthly Economic Bulletin- August 2010 1 Revenue and Grants - Tax - Non Tax revenue - Grants Expenditure & Net Lending - Debt interest - External - Domestic Other expenditure - Personnel - Other current - Capital GLF Net Lending and Investment - Investments - Net Lending Gross Surplus/Deficit Financing - Domestic borrowing (net) - Amortization - Arrears - Capital revenue Net surplus/deficit 4,069 3,391 380 298 3,870 845 147 698 2,968 1,035 1,583 350 57 86 (29) 199 (199) 167 (303) (117) 55 0 3,172 -1.5% 25,805 15.8% 15.0% 0.8% 0.0% 12.3% 4,838 3,991 422 425 4,428 762 176 586 3,604 1,486 1,752 365 62 84 (22) 410 (392) (10) (336) (110) 64 17.2 3,815 20.3% 28,425 17.0% 15.6% 1.4% 0.1% 13.4% 4,844 4,228 443 173 4,907 773 194 579 4,084 1,472 1,611 1,000 50 88 (38) (63) (399) (91) (372) 64 (462) 3,710 -2.8% 31,434 15.4% 15.6% -0.2% -1.5% 11.8% 10.6% 6 237 21 (252) 478 11 18 (7) 480 (14) (141) 635 (12) 4 (16) (472) (7) (81) (36) 110 (445) (105) 0.1% 5.9% 5.0% -59.3% 10.8% 1.4% 10.0% -1.2% 13.3% -0.9% -8.0% 173.8% -19.4% 4.8% 72.7% -115.3% 1.7% 808.6% 10.6% -100.0% 0.0% 2790.6 % -2.8%

2a

2b

2c

3 4

5 6

MDA resource envelope Annual increase in resource envelope Memorandum Items: GDP (nominal, MD, IMF est) Revenue/GDP ratio Expenditure/GDP ratio Gross deficit/surplus to GDP Net deficit/surplus to GDP Resource envelope to GDP Source: MOF

39

The Gambia Monthly Economic Bulletin- August 2010 3.2 Tax Policy Measures Taken in June 2010

As mentioned earlier, the fiscal performance during the first half of 2010 was not satisfactory due to shortfalls of government revenues, although the expenditures were within the budgeted allocations. In order to improve revenue realizations and to achieve positive basic balance at the end of the year, the government introduced the following measures in June 2010:

a) Reinstated domestic excise taxes of GMD 11 per liter of beer which will raise about
GMD 19 million in 2010;

b) Reformed the mechanism for setting retail prices for petroleum fuels, which
incorporates an excise tax of GMD 5 per liter on premium motor spirits and GMD 1 per liter on diesel, and applies the general sales tax rate of 15 percent on all petroleum based fuels. The new formula for retail prices will be adjusted at regular intervals to allow the pass-through of changes in world fuel prices and the exchange rate. c) Allowed business class air travel for only ministers and others having higher ranks;

d) Put a freeze on non-priority hiring in the public sector; and e) Reduced monthly cash allocations to spending agencies in line with the requirements to
achieve a cumulative basic balance of D265.1 million by end-September 2010. 3.2 IMF Technical Missions At the request of the authorities of the Gambia an IMF Technical Assistance Mission (MSA) on revenue administration comprising David Kloden (Head), Patrick Fossat and Maureen Kidd visited Banjul during April 30-May 13, 2010 and produced a report entitled “The GambiaBuilding on the Gambia Revenue Authority (GRA) Success- a Tax Reform Program Anchored on VAT”. The mission’s purpose was to evaluate the state of revenue administration with a specific focus on the administrative measures and preparations necessary to launch and implement VAT by January 2013 in accordance with the regional commitments under the Economic Community of West African States (ECOWAS). The mission has given valuable suggestions and advice on tax policy and designs, tax administration, restructuring GRA, particularly strengthening the customs administration, and VAT administration plan. In response to a request by the Honorable Finance minister another IMF Technical Assistance Mission (MSA) on public financial management comprising Duncan Last, Florence Kuteesa and Camille Karamaga visited Banjul during June 14 to 24, 2010 to advise on strengthening the budget preparation process, as well as the prioritization and sequencing of the public financial management (PFM) reform strategy over the medium term. The mission held a half day workshop on budget reforms attended by senior officers of ministries and local governments. The mission advised that as a first step towards PFM reforms, the MOF may implement program budgeting within the Medium Term Expenditure Framework (MTEF) in three pilot ministries in 2012 budget, and then rolling over to other ministries during 2013-2014. The Mission has produced a report entitled “The Gambia- Strengthening Budgetary Management and sequencing Reforms” with detailed action plans and time lines.

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