Gambia Monthly Economic Abstract July 2009

The Gambia Monthly Economic Bulletin- July 2009

THE GAMBIA MONTHLY ECONOMIC ABSTRACT1 July 2009

Institutional Support Project for Economic and Financial Governance (ISPEFG) Department of State for Finance and Economic Affairs (DOSFEA) The Republic of Gambia The Quadrangle, Banjul, the Gambia

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The Gambia Monthly Economic Abstract is an abridged version of the Gambia Monthly/ Quarterly Economic Bulletin published every month. It provides a brief account of the current state of the Gambian economy. The Abstract has been prepared jointly by Dr. Tamsir Cham, Director, the Economic Management and Planning Unit (EMPU) and Dr. Tarun Das, Macroeconomic Adviser (ISPEFG); Ministry of Finance and Economic Affairs (MOFEA) under the overall direction and supervision by Mr. Mod A. K. Secka, Honorable Permanent Secretary-I and Mr. Serign Cham, Honorable Permanent Secretary-II. Any questions and feedback can be addressed to: Either Tamsir Cham ([email protected]) or Tarun Das ([email protected])

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The Gambia Monthly Economic Bulletin- July 2009

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 (2004) Million US$ 3284 167 out of 224 countries GDP Nominal (2006) Million US$ 511 199 out of 229 countries GDP PPP per capita (2004) US$ 1945 177 out of 223 countries GDP per capita (2006) US$ 329 192 out of 207 countries Poverty Ratio (% of people Percent 59 7 out of 59 countries 2

The Gambia Monthly Economic Bulletin- July 2009 below One-US$) (2000) Source: http://www.nationmaster.com

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The Gambia Monthly Economic Bulletin- July 2009 HIGHLIGHTS CPI Inflation

•

Annual point-to-point CPI inflation accelerated significantly from 2.2% (food 2.6% and non-food 1.8%) in June 2008 to 5.4% (food 6.5% and non-food 3.9%) in June 2009, and the 12-month average inflation rate accelerated to 6.1% in June 2009 from 4.6% a year ago.

•

Given global economic slowdown, global crude oil prices were projected to remain soft and rule around $51 per barrel in 2009. However, since April 2009 petroleum prices started rising and increased to $60/barrel in May 2009 and S$70/barrel in June 2009. Recent forward markets project oil prices around $74 for 2010, which is not much above current price.

Government Financial Performance

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Government Financial Performance in Jan-June 2009 was better than in Jan-June 2008. In JanJune 2009 revenue and grants increased by 15.5% aided by 13.3% increase in taxes, 8.9% increase in non-taxes and 63.7% increase in grants over Jan-June 2008.

•

Overall, there was a fiscal deficit of 198 million Dalasi (1% of GDP) in Jan-June 2009, higher than the fiscal deficit of 86 million Dalasi (0.5% of GDP) in Jan-June 2008, due to significant increase of capital expenditure by 55.2% in Jan-June 2009 over Jan-June 2008.

Domestic Debt and Treasury Bills Yields

•

•

At the end of June 2009, outstanding domestic debt stood at D5.7 billion (28.8% of GDP), compared to D6 billion (33.4% of GDP) a year ago. The share of Treasury bills increased from 80.5% at the end of June 2008 to 84.6% at the end of June 2009, Despite significant decline of CPI inflation from 7% in Jan 2009 to 5.4% in June 2009, average yield on 91-day increased from 10.5% in Jan 2009 to 13% in June 2009, yield of 182-day bills from 12.1% to 13.8% and that of 364-day bills from 14.4% to 15.6% over the period.

Money Supply and Bank Credits

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Annual growth rate of money supply (M3) increased from 8.5% in June 2008 to 21.2% in June 2009, aided by 18.1% growth in currency, 23% growth in demand deposits, 12.8% growth in savings deposits and 33.8% growth in time deposits. On the demand side, growth was mainly due to 31.7% growth in domestic credits, while net foreign assets decreased by 4.8%.

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Domestic credit increased from D5.3 billion in June 2008 to D6.9 billion in June 2009, supported by 45.9% growth in government borrowing, 119.4% growth in credits to public entities and 18.2% growth in credits to the private sector, over a year ago.

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Gambian banks were least affected by global financial crisis as the Gambian banks do not have large exposure to foreign assets or liabilities. At end-June 2009, foreign assets constituted only 8.8% of total assets and external sector related liabilities constituted only 2.6% of total liabilities.

Foreign Exchange Reserves and Exchange Rate

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At end-May 2009, international reserves stood at $119.7 million equal to 4 months of imports.

•

At end-July 2009, Dalasi has depreciated by 5.3% against British Pound, by 27.3% against US$, by 24.7% against CHF, by 17.4% against Euro and by 11.5% against CFA over end-July 2008.

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The Gambia Monthly Economic Bulletin- July 2009

At a Glance- July 2009 Latest Reference Period

Status in the latest reference period

Real GDP (FC) Growth rate (%)

Calendar year 2008

CPI inflation (%)

June 2009

Brent crude oil price (US$/ brl)

July 2009

Overall 7.2 Agriculture 28.4 Industry 0.7 Services (-) 0.6 Overall 5.4 Food 6.5 Non-food 3.9 Average US$68.50

Economic Indicators

Growth rate (%) of Revenue & grants Growth rate (%) of Exp & Net Lending Overall fiscal bal. as % of GDP Basic Balance as % of GDP Primary Bas. Bal, as % of GDP

Domestic debt as % of GDP Yield on 91-days TBs (%) Yield on 182days TBs (%) Yield on 364days TBs (%) GR of Money supply (M3) (%) CBG Rediscount rate (%) Banks Foreign assets as % of total assets Foreign liabilities as % of total Dalasi/ UK £ Dalasi/ US$ Dalasi/ CHF Dalasi/ Euro Dalasi/ CFA (5000) Foreign Exch. Reserve (US$)

Status in the Corresponding period in the previous year Overall 6.1 Agriculture 3.9 Industry (-) 3.1 Services 10.4 Overall 2.2 Food 2.6 Non-food 1.7 Average US$133

Outlook for 2009

Overall 3.6 to 4.5 Agriculture 4.0 to 6.0 Industry 2.0 to 2.4 Services 2.4 to 4.4 Expected to decline in the remaining months of the year May stabilize around US$70 by the end-2009

Jan-June 2009

15.5

-1.2

Jan- June 2009

20.4

14.7

Jan-June 2009

-1.0

-0.5

Jan-June 2009

0.8

0.4

Jan-June 2009

2.8

2.5

June 2009

28.8

33.4

Likely to decline in 2009.

13.0

10.0

Yields may come down as CPI inflation has started decelerating.

13.8

11.2

June 2009

15.6 21.2

13.3 8.5

June 2009

16

15

May 2009

7.5

11.7

May 2009

1.5

2.8

End-July 2009 End-July 2009 End-July 2009 End-July 2009 End-July 2009 End-May 2009

43.85 26.65

41.65 20.94

24.83

19.90

37.80

32.21

280.00

251.05

119.7

140.4

June 2009 June 2009

Overall fiscal performance in 2009 may not be better than 2008.

June 2009

5

Money growth rate is likely to decelerate. Likely to remain stable

Dalasi is likely to depreciate against major currencies during the year 2009.

Likely to remain under pressure.

The Gambia Monthly Economic Bulletin- July 2009 1. Consumer Price Index and Inflation •

As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflation accelerated significantly from 2.2% in June 2008 to 5.4% in June 2009, and the 12month average inflation rate accelerated to 6.1% in June 2009 from 4.6% a year ago.

•

Food and drinks (with weights of 55.2% in overall CPI) recorded average inflation of 6.5% in June 2009, up from 2.6% a year ago, and contributed 71.2% to overall inflation in June 2009.

•

Non-food items (with weights of 44.8% in overall CPI) recorded annual inflation of 3.9% in June 2009 compared to 1.8% a year ago and contributed 28.8% to inflation.

•

Among other groups, in June 2009, clothing and textiles recorded annual inflation of 4%, housing and utilities 5.1%, restaurants and hotels 5.9% and miscellaneous goods and services 10.9%.

Table-2.3 CPI Inflation Rates in June 2009 (in percentage) June-2008 June-2009 Inflation Wi (CPIi1 – Index Index (%) CPIi0) Overall 114.48 120.61 5.4 597.4 Food 118.17 125.87 6.5 425.1 Tobacco 104.64 106.16 1.5 1.1 Clothing 107.10 111.35 4.0 47.9 Utilities 116.38 122.3 5.1 20.1 Furnishing 112.13 115.11 2.7 15.6 Health 101.10 101.78 0.7 0.7 Transport 118.87 119.77 0.8 4.0 Telecom 101.55 101.97 0.4 1.2 Recreation 104.13 104.84 0.7 5.7 Education 1.5 101.87 102.25 0.4 0.6 Hotels 0.4 110.10 116.58 5.9 2.3 Misc. 5.9 113.59 125.93 10.9 73.2 non-food 44.8 109.99 114.23 3.9 189.9 Source of basic data: Gambian Bureau of Statistics (GBOS). Items

Weights Wi (%) 100.0 55.2 0.7 11.3 3.4 5.2 1.0 4.4 3.0 8.0

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Contributio n2 (%) 100.0 71.2 0.2 8.0 3.4 2.6 0.1 0.7 0.2 1.0 0.1 0.4 12.2 28.8

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 is estimated as 100 X 425.1 / 597.4 = 71.2%.

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The Gambia Monthly Economic Bulletin- July 2009

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The Gambia Monthly Economic Bulletin- July 2009 2. World Commodity Prices and Inflation As a result of the sharp downturn in global demand, commodity prices, especially for energy, declined significantly since the last quarter of 2008. Inflation will continue to retreat due to the combination of lower commodity prices and increasing economic slackness, with deflation risks growing in advanced economies. IMF forecasts indicate that G-7 deflation vulnerability has risen above its previous peak, reflecting high risks in Japan and the United States and moderate risks in several euro area members— including Germany, Italy and France. Commodity prices have rebounded ahead of the recovery. The recent rally in commodity prices was strong and broad-based, reflecting improved market sentiment, U.S. dollar depreciation, and commodity-specific supply-demand conditions. 2.1 Trends of International Crude Oil Prices During 2008 Brent crude oil prices ruled very high until July 2008 when prices increased to $147 per barrel. However, due to global financial crisis and economic slowdown oil prices started declining thereafter. A recent report from the Paris based International Energy Agency (IEA) has projected that the world oil demand in 2009 will decline by half a million barrels per day (bpd). Given weakness in the Chinese demand and negative growth in the US and EU in March-April 2009 Brent crude oil prices ranged around US$47 per barrel. However, oil prices responded strongly to improved demand prospects and OPEC members’ strict observance of lower production quotas, and increased to an average of $58 per barrel in May 2009 and further to an average of $69 per barrel in June 2009. Recent forward markets project oil prices at $74.50 for 2010, not much above current levels, with high excess capacity expected to buffer growing demand. Trends of Monthly Brent Crude Oil Prices (US$/ barrel)

120 100 80 60 40 20

an -9 9 J ul -9 9 J an -0 0 J ul -0 Ja 0 n0 1 J ul -0 1 J an -0 2 J ul -0 2 J an -0 3 J ul -0 3 J a n0 4 J u l-0 4 J an -0 5 J ul -0 5 J a n0 6 J ul -0 6 J a n0 7 J u l-0 7 J an -0 8 J ul -0 8 J a n0 9

0

J

US$ per Barrel

140

Months and Years 1999-2009 Series1

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The Gambia Monthly Economic Bulletin- July 2009 Table-2 Trends of World Commodity Prices

Commodity

AprJun 2008

Unit

Quarterly averages JulOctJanSep Dec Mar 2008 2008 2009

Monthly averages AprJun 2009

Apr 2009

May 2009

Jun 2009

Energy Coal, Australia Crude oil, Brent Crude oil, Dubai Natural gas, Europe Natural gas, US Beverages Cocoa Coffee, Arabica Tea, Mombasa auctions Fats and Oils Coconut oil Copra Groundnut oil Palm oil Soybean oil Soybeans Grains Barley Maize Rice, Thailand, 35% Sorghum Wheat, US, HRW Wheat US SRW Other Food Bananas EU Fishmeal Meat, beef Meat, chicken Meat, sheep Oranges Shrimp, Mexico Sugar EU domestic Sugar, world Raw Materials Logs, Cameroon Plywood Sawnwood, Cameroon Cotton Memphis Rubber RSS1, US

a/ a/ a/ a/ a/

$/mt $/bbl $/bbl $/mmbtu $/mmbtu

b/ b/ b/ b/ b/ b/ b/ b/ b/ b/

b/

b/ b/ b/ b/ b/ b/

138.65 122.39 116.67 12.40 11.35

162.80 115.60 113.47 14.62 9.03

92.97 55.89 53.67 15.75 6.40

71.93 44.98 44.56 11.94 4.57

66.48 59.13 58.93 8.18 3.71

63.56 50.85 50.18 8.51 3.50

64.50 57.94 57.40 8.09 3.81

71.38 68.62 69.21 7.95 3.81

¢/kg ¢/kg ¢/kg

276.4 315.1 221.6

282.6 321.2 252.8

224.1 267.8 190.8

259.7 283.9 214.9

258.7 320.2 228.0

258.1 297.4 221.0

247.5 332.9 222.3

270.4 330.2 240.8

$/mt $/mt $/mt $/mt $/mt $/mt

1,499 1,013 2,328 1,198 1,466 585

1,246 817 2,417 928 1,353 566

772 520 1,773 512 830 377

677 447 1,283 577 755 394

781 513 1,165 744 859 460

747 499 1,187 702 801 414

843 559 1,157 801 892 465

754 480 1,151 730 885 502

$/mt $/mt $/mt $/mt $/mt $/mt

239.1 259.0 n.a. 246.9 346.5 277.8

216.6 244.7 n.a. 214.7 317.7 241.5

129.5 168.4 n.a. 151.0 228.1 182.7

116.3 166.9 n.a. 145.3 231.6 187.4

129.5 176.0 n.a. 148.1 250.5 195.6

111.3 168.5 n.a. 154.1 234.2 182.6

128.7 179.9 n.a. 160.1 262.3 202.5

148.5 179.5 n.a. 130.0 255.1 201.7

$/mt $/mt ¢/kg ¢/kg ¢/kg $/mt ¢/kg ¢/kg ¢/kg

1,263 1,185 332.7 167.9 493.2 1,322 1,109 77.59 27.01

1,123 1,198 372.4 177.1 477.3 1,163 1,048 74.70 31.14

944 1,023 268.0 174.7 410.0 842 1,014 51.97 26.28

1,142 1,013 245.2 173.5 378.5 799 976 51.44 28.85

1,280 1,096 262.8 174.1 428.8 864 970 53.75 33.89

1,292 1,040 255.5 171.2 404.4 905 970 52.09 30.09

1,286 1,103 263.7 174.5 427.7 888 970 53.84 35.36

1,262 1,146 269.2 176.7 454.4 798 970 55.34 36.22

$/cum ¢/sheets $/cum ¢/kg ¢/kg

554.4 647.3 1,052.3 171.6 311.7

548.5 648.6 974.5 170.0 329.1

473.8 645.5 770.8 130.1 202.8

426.8 572.8 689.2 129.8 165.8

394.6 565.5 721.4 142.4 187.0

382.5 567.7 684.3 135.6 183.6

395.4 565.9 717.6 150.2 189.8

406.0 562.7 762.5 141.4 187.6

1,191.6 367.5 511.1 575.7

1,153.7 409.2 635.0 745.4

663.3 371.3 766.7 292.2

362.2 193.3 865.2 267.3

303.6 113.3 726.7 241.1

335.4 125.5 745.0 245.2

297.5 117.5 717.5 240.8

277.8 96.9 717.5 237.4

2,940 8,443 896 140.6 230.7

2,787 7,680 870 140.6 191.2

1,485 4,663 922 101.0 149.9 12,92 0 1,376 700 450 1,007 1,351 147.3

1,460 4,569 929 101.0 144.0 12,63 5 1,411 700 450 1,020 1,379 148.4

1,574 5,014 946 101.0 167.4

18,961 1,495 1,100 934 1,135 2,051 177.0

1,360 3,428 909 101.0 115.7 10,47 1 1,265 1,033 473 1,200 1,103 117.2

1,421 4,407 890 101.0 138.3

25,682 1,720 900 838 950 2,265 211.3

1,821 3,905 795 140.6 124.5 10,84 3 1,020 1,100 630 1,200 1,310 118.5

Fertilizers DAP Phosphate rock Potassium chloride Urea Metals and Minerals Aluminum Copper Gold Iron ore Lead

b/ b/ b/ b/

$/mt $/mt $/mt $/mt

b/ b/

$/mt $/mt $/toz ¢/dmtu ¢/kg

Nickel Silver Steel cr coilsheet Steel, rebar Steel wire rod Tin Zinc

b/

b/ b/

c/ c/ c/ b/ b/

$/mt ¢/toz $/mt $/mt $/mt ¢/kg ¢/kg

11,166 1,252 700 425 1,100 1,174 137.9

Source: World Bank Pink Sheet July 2009

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14,960 1,466 700 475 900 1,499 155.7

The Gambia Monthly Economic Bulletin- July 2009 3. Government Fiscal Performance in Jan-June 2009 •

Columns (4), (5) and (6) of Table-3.1 present major item-wise revenue realization and expenditure of the government in the first half (i.e. Jan-June) of 2007, 2008 and 2009 respectively. Column (8) indicates annual percentage changes of major items of revenues and expenditure in Jan-June 2009 compared with those in Jan-June 2008 (column 7).

•

It may be observed from the table that, the government’s fiscal performance has been to some extent better in Jan-June 2009 than in Jan-June 2008, but still it is under pressure. In Jan-June 2008 total revenues and grants declined by 1.2%, as tax revenues decreased by 3.8% and non-tax revenues declined by 26.3% over Jan-June 2007. On contrast, Jan-June 2009 has witnessed 15.5% increase in total revenue and grants aided by 13.3% increase in taxes, 8.9% increase in non-tax revenues and 64% increase in grants.

•

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

•

Overall, there is a fiscal deficit of D197.7 million, and basic surplus of D70.2 million in JanJune 2009, compared to a fiscal deficit of D86 million and basic surplus of D70.2 million in Jan-June 2008. Table-3.1 Govt Financial Performance in Jan-June 2009 compared with Jan-June 2008 Items

2008 Actual Mln Dal.

2009 Budget Estimate Mln. Dal.

2007 Jan-June Actual Mln Dal.

2008 Jan-June Actual Mln Dal.

2009 Jan-June Actual Mln Dal.

(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 Net Lending Overall Bal Inc. grants Basic balance Basic Primary Bal Nominal GDP (IMP Prg)

(2) 3645 3479 3161 318 166 4135 3011 906 1398 708 154 555 1123 1017 107 -490 -156 553 17959

(3) 4582 3771 3391 380 811 5363 3838 1035 1958 845 147 698 1525 1468 57 -781 -268 577 19904

(4) 1941 1893 1637 256 49 1748 1194 336 450 409 104 305 553 488 66 194 590 999 16007

(5) 1919 1820 1631 189 99 2005 1544 450 710 385 80 305 461 396 65 -86 70 455

(6) 2216 2055 1849 206 161 2414 1640 531 701 409 98 311 773 614 159 -198 158 567 19904

17859

% change In JanJun 2008 over JanJun 2007 (7) -1.2 -3.8 -0.3 -26.3 102.5 14.7 29.3 34.0 57.7 -5.9 -23.5 0.1 -16.7 -18.9 -0.8 -144.4 -88.1 -54.5 11.6

% change In JanJun 2009 over JanJun 2008 (8) 15.5 12.9 13.3 8.9 63.7 20.4 6.3 18.0 -1.2 6.3 22.7 2.1 67.8 55.2 144.4 129.7 125.3 24.7 11.5

Notes: (1) Overall balance= (Revenue and grants) minus (expenditure and net lending). (2) Basic balance= Domestic revenue minus (expenditure and net lending) plus externally financed capital expenditure; (3) Basic primary balance= Basic balance plus interest payments

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The Gambia Monthly Economic Bulletin- July 2009 •

Column (2) of Table-3.2 indicates the item-wise actual fiscal performance in 2008 as percentage of GDP and the column (3) indicates the item-wise budget estimates in 2009 as percentage of GDP. It is observed from these columns that 2009 budget estimates assume better performance of grants and expenditure as percentages of GDP. Overall fiscal deficit for 2009 is estimated as 3.9% of GDP compared to 2.7% of GDP in 2008.

•

Columns (4), (5) and (6) of Table-3.2 present the major item-wise performance of revenues and expenditure in the first half (Jan-June) of 2007, 2008 and 2009 respectively, as percentages of the corresponding nominal GDP (IMF Program estimate) for the full year. It is observed from the table that, in terms of the percentages of GDP, the total revenues and expenditures have performed better in Jan-June 2009 than those in Jan-June 2008.

•

The revenue and expenditure ratios to GDP are also observed to be on track in Jan-June 2009 as compared with the 2009 budget estimates (given in column-5). Table-3.2 Govt Financial Performance in Jan-June 2009 compared with Jan-June 2008 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 Net Lending

Overall Bal Inc.grants3 Basic balance4 Basic Prim. Balance5

2008 Actual as % of GDP (2) 20.3 19.4 17.6 1.8 0.9 23.0 16.8 5.0 7.8 3.9 0.9 3.1 6.3 5.7 0.6 -2.7

2009 Budget as % of GDP (3)

23.0 18.9 17.0 1.9 4.1 26.9 19.3 5.2 9.8 4.2 0.7 3.5 7.7 7.4 0.3 -3.9

2007 Jan-Jun as % of GDP (4) 12.1 11.8 10.2 1.6 0.3 10.9 7.5 2.1 2.8 2.6 0.7 1.9 3.5 3.0 0.4 1.2

-0.9

-1.3 2.9

3.7

0.4

0.8

6.2

2.5

2.8

3.1

2008 Jan-Jun as % of GDP (5) 10.7 10.2 9.1 1.1 0.6 11.2 8.6 2.5 4.0 2.2 0.4 1.7 2.6 2.2 0.4 -0.5

2009 Jan-Jun as % of GDP (6) 11.1 10.3 9.3 1.0 0.8 12.1 8.2 2.7 3.5 2.1 0.5 1.6 3.9 3.1 0.8 -1.0

2008 Jan-Jun as % of Actual (7)

2009 Jan-Jun as % of Budget (8)

52.6 52.3 51.6 59.4 59.5 48.5 51.3 49.7 50.8 54.3 51.8 55.0 41.0 38.9 61.0 17.6

48.4 54.5 54.5 54.0 19.9 45.0 42.7 51.2 35.8 48.4 66.3 44.6 50.7 41.8 281.0 25.3

-45.2 82.2

-59.1 98.2

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

3

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

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The Gambia Monthly Economic Bulletin- July 2009 4. Domestic Debt and Treasury Bills Outstanding •

At the end of June 2009, outstanding domestic debt stood at D5.7 billion (amounting to 28.8% of GDP), down by 4.4% from the outstanding domestic debt at D6 billion (amounting to 33.4% of GDP) a year ago.

•

The share of Treasury bills increased from 80.5% at the end of June 2008 to 84.6% at the end of June 2009, share of Sukuk Al-Salam from 0.8% to 1.5% and that of Government bonds increased from 4.2% to 4.4% over the period.

•

On the contrary, the share of Non-interest bearing Treasury Notes declined from 14.6% to 9.5% over the period

Type of debt

Table-4.1: Outstanding Domestic Public Debt as on 30 June 2009 Million Dalasi Composition % change in (in percentage) June2009 30 June 30 June 30 June 30 June over June 2008 2008 2009 4,829 48

4,854 85

Government Bonds

250

250

NIB Treasury Notes

873

547

Total

6,000

5,736

Treasury bills Sukuk Al-Salam

0.5 79.3 0.0 -37.4 -4.4

2008 80.5

2009 84.6

0.8

1.5

4.2

4.4

14.6

9.5

100

100

Memo Item: Domestic debt as % of nominal GDP (As per IMF Program, nominal GDP equals D17959 for 2008 and D19904 for 2009) As % of nominal 33.4 28.8 GDP

Domestic Debt Sustainability As per the analysis made by the CBG, the Gambia’s domestic debt is unsustainable. Out of three sustainability indicators given in Table-2.8.2, only one indicator viz. debt to revenue ratio is satisfied. However, debt to GDP ratio may be satisfied during 2009. Table-4.2 Primary Benchmarks for Domestic Debt Sustainability Ratios (%) Item Threshold 2006 2007 2008 2009 Projected 1. Debt service to 28-63 142 124 118 91 revenue ratio 2. Debt to GDP ratio 20-25 33 30 27 31 3. Debt to revenue 92-167 180 158 166 147 ratio Note: (1) Debt service the sum of interest payments plus the amortization (i.e. repayment of principal) including the rollover of treasury Bills. (2) There are no internationally agreed levels of thresholds. The thresholds used here are those used by the Debt Relief International (DRI) for many HIPC countries.

Source: Central Bank of Gambia

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The Gambia Monthly Economic Bulletin- July 2009 5. Treasury Bills Yields •

Yields on treasury bills fluctuated widely in recent months. Despite stability in deposit rates and significant decline of CPI inflation from 7% in January 2009 to 5.4% in June 2009, Average yield on the 91-day increased from 10.5% in Jan 2009 to 13% in June 2009, yield of 182-day bills increased from 12.1% to 13.8% and that of 364-day bills increased from 14.4% to 15.6% over the period.

•

This implies that the margins of yields over inflation rates or over deposit rates are increasing over time and need to be corrected by adopting appropriate monetary policies.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Table-5. Interest Rates (yields on treasury bills in percentage per annum) 2008 2009 2007 3-M 6-M 12-M 3-M 6-M 12-M 3-M 6-M 10.5 12.7 13.6 10.6 11.4 13.6 10.5 12.1 12.0 13.4 13.8 10.9 11.9 13.7 11.1 12.8 12.6 13.4 13.7 11.0 12.1 13.6 11.4 12.7 13.0 13.4 13.8 10.9 11.9 13.3 12.0 13.0 12.8 13.3 13.8 10.2 11.3 13.0 12,.5 13.8 12.6 13.1 13.9 10.0 11.2 13.3 13.0 13.8 12.5 13.2 13.9 9.6 10.6 12.6 12.6 12.9 13.6 8.8 10.2 12.1 11.6 12.2 12.9 8.9 11.0 13.1 10.6 11.7 12.5 10.3 11.4 13.6 10.5 11.5 12.5 10.1 13.4 13.7 10.4 11.6 13.6 9.9 12.5 14.0

Trends of Yields of Treasury Bills during 2007-2009

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12-M 14.4 14.4 14.4 14.6 15.3 15.6

The Gambia Monthly Economic Bulletin- July 2009 6. Money Supply •

Annual growth rate of broad money supply (M3) accelerated from 8.5% in June 2008 to 21.2% in June 2009. Reserve money increased by 10.6% in June 2009 over June 2008.

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On the supply side, 21.2% growth in money supply in June 2009 was supported by 18.1% growth in currency, 23% growth in demand deposits, 12.8% growth in savings deposits and 33.8% growth in time deposits.

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On the demand side, growth was mainly due to 31.7% growth in domestic credits, while net foreign assets decreased by 4.8% over a year ago.

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Domestic credit increased from D5.3 billion in June 2008 to D6.9 billion in June 2009, supported by 45.9% growth in government borrowing, 119.4% growth in credits to public entities and 18.2% growth in credits to the private sector, over a year ago. Table-6: Money Supply in June 2009 Components

1.Money Supply (M3) (2+3) 2.Narrow Money (2.1+2.2) 2.1 Currency 2.2 Demand deposits (a+b) (a) Private sector (b) Official 3.Quasi money (3.1+3.2) 3.1 Savings deposits (a+b) (a) Private sector (b) Official 3.2 Time deposits (a+b) (a) Private sector (b) Official 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 Reserve Money

Jun 2007 Million Dalasi

Jun 2008 Million Dalasi

Jun 2008 Million Dalasi

Jun 2008 % share

Jun 2008 % share

Jun 2008 % change over Jun 2007

Jun 2009 % change over Jun 2008

7832 3972 1644 2328 2120 209 3860 2701 2696 5 1160 783 376 7832 4471 2636 1834 3361 4009 1327 212 2287 183 -647 2636

8495 4132 1484 2648 2380 268 4363 2603 2595 8 1760 1300 460 8495 3627 2746 881 4867 5261 1959 381 2738 183 -394 2572

10298 5009 1753 3256 2731 525 5290 2935 2924 11 2354 1740 615 10298 3453 2727 726 6845 6929 2858 835 3236 0 -83 2844

100.0 48.6 17.5 31.2 28.0 3.2 51.4 30.6 30.6 0.1 20.7 15.3 5.4 100.0 42.7 32.3 10.4 57.3 61.9 23.1 4.5 32.2 2.2 -4.6

100.0 48.6 17.0 31.6 26.5 5.1 51.4 28.5 28.4 0.1 22.9 16.9 6.0 100.0 33.5 26.5 7.0 66.5 67.3 27.7 8.1 31.4 0.0 -0.8

8.5 4.0 -9.7 13.7 12.3 28.3 13.0 -3.6 -3.7 61.8 51.8 66.0 22.2 8.5 -18.9 4.2 -52.0 44.8 31.2 47.7 79.9 19.7 0.0 -39.2

21.2 21.2 18.1 23.0 14.7 95.9 21.2 12.8 12.7 46.3 33.8 33.8 33.7 21.2 -4.8 -0.7 -17.6 40.6 31.7 45.9 119.4 18.2 -100.0 -78.9

-2.5

10.6

Source: Economic Research and Statistics Department of CBG.

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The Gambia Monthly Economic Bulletin- July 2009 7. Sectoral Distribution of Bank Credits Bank credits increased by 40.2% in March 2009 over March 2008. There was significant increase across all sectors. While credits to agriculture increased by 66.2%, manufacturing credits increased by 76.9%, building credits by 39.3%, transport credits by 27.4% and distributive trade credits by 27.5% in March 2009 over March 2008. Credits to financial institutions and other commercial credits also registered significant increases, while tourism credits recorded the lowest increase by 16.5% among all the sectors. As regards composition of bank credits, trade had the largest share (23%), followed by other commercial credits (17%), miscellaneous sectors (16%), building (11%), transport (9%), agriculture (8%), tourism (7%), manufacturing (5%), and financial institutions (4%) in 2008. Sectors

Agriculture Fishing Manufacturing Building Transportation Trade Tourism Financial Inst. Other comm. Others Total credits

Table-7. Sectoral Distribution of Bank Credits Outstanding credits Annual GR Composition of bank credits (Million Dalasi) in Mar 2009 (in percentage) (%) March-2008 March 2009 Mar-2008 Mar-2009 178.507 296.65 66.2 6.7 7.9 16.268 19.156 17.8 0.6 0.5 99.959 176.846 76.9 3.7 4.7 286.313 398.95 39.3 10.7 10.7 253.027 322.375 27.4 9.5 8.6 679.72 866.5 27.5 25.5 23.2 214.237 249.526 16.5 8.0 6.7 84.225 135.869 61.3 3.2 3.6 529.002 657.543 24.3 19.8 17.6 327.238 617.467 88.7 12.3 16.5 2668.496 3740.882 40.2 100.0 100.0

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The Gambia Monthly Economic Bulletin- July 2009

8. Balance of Payments (BOP) and Foreign Exchange Reserves 8.1BOP Situation in 2008 (a) Overall BOP outcome in 2008 was not as bad as they were anticipated earlier. Year end foreign exchange reserves at US$125.2 million were still equal to 5.7 months of c.i.f. imports compared to US159.4 million equal to 6.2 months at end-2007 (b) BOP estimates indicate an overall deficit of D767.3 billion (-) $34.2 million), amounting to (-) 3.4 percent of GDP in 2008 compared to an estimated surplus of D741.7 million ($29.8 million), amounting to 3.6 percent of GDP in 2007, reflecting the deterioration in both the current and the capital and financial accounts. The Net Usable Reserve of the CBG stood at US$95.6 million at end-March 2009 and was above the IMF Program target (floor) by US$3.6 million.

(c) The goods account deficit improved from a deficit of D3.52 billion, amounting to 17.2 percent of GDP in 2007 to a deficit of D2.92 billion, amounting to 12.8 percent of GDP in 2008, or a decline by 17.14%. (d) Exports of goods at D3.18 billion amounted to 14% of GDP in 2008 compared to D3.29 billion amounting to 16.1% of GDP- a decline by only 3.4%. However, due to appreciation of average exchange rate of dalasi per US$, goods exports in terms of US$ increased from US$132.2 million in 2007 to US$141.6 in 2008. (e) The c.i.f. import bill declined by 10.1% from D7.43 billion, amounting to 36.4 percent of GDP, in 2007 to D6.67 billion, amounting to 29.3 percent of GDP, in 2008. (f) Current account deficit including official transfer declined from (-) D1.46 billion, amounting to 7.2 percent of GDP, in 2007 to (-) D1.11 billion, amounting to 4.9 percent of GDP in 2008.

8.2 BOP Situation in 2009 •

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

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

8.3 Foreign Exchange Reserves •

The volume of transactions in the inter-bank foreign exchange market totaled D33.3 billion (US$1.4 billion) in January-May 2009 compared to D36.5 billion (US$1.7 billion) a year ago. At end-May 2009, gross international reserves stood at D2.6 billion (US$119.7 million) equivalent to 4.0 months of import cover.

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The Gambia Monthly Economic Bulletin- July 2009 9. Exchange Rate

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During Jan-April 2009, every month the Dalasi depreciated against major international currencies (viz. US$, CHF, EURO and CFA) traded in the inter-bank market except the UK£, reflecting the ADVERSE impact of the global financial crisis on remittances and tourism and increased demand for foreign exchange to meet the high cost of imports. Since May 2009 Dalasi has also started depreciating against UK£.

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At end-July 2009, Dalasi has depreciated by 5.3% against British Pound, by 27.3% against US$, by 24.7% against CHF, by 17.4% against Euro and by 11.5% against CFA over end-July 2008. Table-9. Inter-bank exchange rates - end period mid-market rates (Dalasi per unit of foreign currency)

Year

Month UK US$ CHF Euro CFA (5000) 2008 Jan 44.27 22.34 19.91 32.89 252.85 Feb 42.58 21.88 19.57 32.28 243.98 Mar 40.87 19.46 19.15 30.83 239.16 Apr 39.52 20.12 19.16 31.43 235.95 May 40.25 20.64 19.46 32.1 245.84 June 40.77 20.65 19.27 32.07 245.51 July 41.65 20.94 19.9 32.21 251.05 Aug 40.73 21.37 20.08 32.23 249.47 Sept 41.65 23.12 19.86 33.02 249.30 Oct 40.49 24.89 20.15 32.89 258.09 Nov 40.56 26.26 20.07 33.28 258.31 Dec 40.14 26.54 22.94 35.67 259.15 2009 Jan 37.25 26.07 20.85 33.52 262.81 Feb 37.38 26.11 22.04 33.6 257.78 Mar 38.18 26.38 23.31 35.22 259.30 Apr 39.05 26.80 23.00 35.32 262.17 May 41.40 26.74 22.40 37.00 265.98 June 43.13 26.87 21.96 37.03 272.87 July 43.85 26.65 24.83 37.80 280.00 Annual Rate of appreciation (-) / depreciation (+) of Dalasi (in % over same month in 2008) 2009 Jan -15.9 16.7 4.7 1.9 3.9 Feb -12.2 19.3 12.6 4.1 5.7 Mar -6.6 35.6 21.7 14.2 8.4 Apr -1.2 33.2 20.1 12.4 11.1 May 2.9 29.5 15.1 15.3 8.2 June 5.8 30.1 14.0 15.5 11.1 July 5.3 27.3 24.7 17.4 11.5

Source: Central Bank of Gambia (CBG)

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