The Monetary Policy Committee (MPC) of the Central Bank of the Gambia met on Thursday February 28, 2019 to assess domestic and international economic and financial developments, and to decide on the policy rate.
This article provide extracts of some key point from the meeting’s press release.
At the domestic front, economic activity continues to gather strength evidenced by increased activity in construction, tourism, distributive trade, and financial intermediation. Real GDP is estimated to have grown by 4.6 percent in 2017, higher than 0.4 percent in 2016. Growth is expected to remain solid in 2018 and 2019, on the back of continued implementation of sound macroeconomic policies and structural reforms.
External Sector
Preliminary balance of payments estimates for 2018 indicates that the current account deficit has narrowed compared to 2017, attributed largely to the improvement in the services and current transfers. The current account deficit narrowed to US$69.7 million in 2018 compared to US$98.8 million in 2017.
Exports rose to US$135.3 million or by 15.5 percent in 2018. Similarly, imports increased to US$519.4 million or by 11.9 percent, reflecting increase in economic activities.
The surplus in the capital and financial account improved to US$53.3 million in 2018 compared to a surplus of US$8.5 million in the same period a year ago. Gross international reserves are at 4.3 months of current imports of goods and services and it is projected at 4.0 months of next year’s imports of goods and services.
Fiscal Operations
Preliminary data on government fiscal operations for 2018 indicate a budget deficit (including grants) of D3.9 billion (4.9 percent of GDP) in 2018 compared to a deficit of D3.7 billion (5.3 percent of GDP) in 2017.
Total revenue and grants stood at D10.7 billion (13.4 percent of GDP) in 2018, lower than D13.3 billion (19.2 percent of GDP) in 2017. Domestic revenue, comprising tax and non-tax revenues, rose by 13.7 percent to D8.8 billion or 11.0 percent of GDP.
Total expenditure and net lending declined by 14.0 percent to D14.6 billion (18.3 percent of GDP) in 2018 compared to D17.6 billion (24.5 percent of GDP) in 2017, reflecting mainly the marked drop in domestic interest payments by 34.5 percent.
Domestic Debt
The stock of domestic debt increased to D31.2 billion (40.5 percent of GDP) as at end-December 2018 from D29.7 billion (42.7 percent of GDP) in the corresponding period a year ago. The stock of Treasury and Sukuk-Al Salaam bills increased by 12.5 percent to D17.4 billion in 2018 from D15.5 billion in 2017.
Yields on all Treasury bills increased. The 91- day, 182-day, and 364-day Treasury bills rates increased from 5.03 percent, 5.52 percent, and 6.73 percent as at end-December 2017 to 5.06 percent, 7.04 percent, and 9.48 percent, respectively as at end-December 2018.
Development in Monetary Aggregates
As at end-December 2018, money supply grew by 20.0 percent, lower than 20.9 percent recorded a year earlie The net foreign assets of the banking system expanded to D10.4 billion or by 61.0 percent during the period. Similarly the net foreign assets of the Central Bank and commercial banks increased to D4.5 billion and D5.9 billion or by 62.0 percent and 60.3 percent respectively.
The net domestic assets of the banking system increased to D23.3 billion or by 7.8 percent. Claims on government, net, grew by 10.7 percent relative to a contraction of 5.3 percent a year ago. Private sector credit continued to expand at a robust pace. As at end-December 2018, it expanded significantly by 32.9 percent compared to a contraction of 1.2 percent a year ago.
Price Developments
Headline inflation as measured by the National Consumer Price Index (NCPI) decelerated to 6.1 percent in January 2019 compared to 6.4 percent in the corresponding period in 2018.
Food inflation, which is the main driver of headline inflation, edged up to 6.2 percent in January 2019 compared to 6 .1 percent a year ago. Non-food inflation, on the other hand, decelerated to 5.9 percent from 6.9 percent during the review period.
Decision
- The Committee decided to reduce the policy rate to 12.5 per cent.
- The Committee has also taken additional measure by increasing the maintenance period for the reserve requirement from week to two weeks. The move is to give banks flexibility in liquidity management
- The Committee also decided to maintain the overnight deposit rate at 2.0 percent and the overnight lending rate at 1 percent above the Monetary Policy Rate.
Read the full monetary policy committee minutes here
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