Gambia Monthly Economic Report April 2009

The Gambia Monthly Economic Bulletin- April 2009

THE GAMBIA MONTHLY ECONOMIC BULLETIN1

April 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 Bulletin provides an update on recent economic developments and policies in the Republic of the Gambia. This Bulletin has been prepared by a research team comprising Tarun Das, Macroeconomic Adviser; Tamsir Cham, Director and Ami Khan and Momodou Taal, Principal Economists in the Economic Management and Planning Unit (EMPU) of the Ministry of Finance and Economic Affairs (DOSFEA); with key inputs from the Debt Management Adviser, Fiscal/Financial Adviser, the Gambian Bureau of Statistics (GBOS), the Central Bank of Gambia (CBG) and the Gambian Revenue Authority (GRA). Any questions and feedback can be addressed to: either Tarun Das ([email protected]) or Tamsir Cham ([email protected]).

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The Gambia Monthly Economic Bulletin- April 2009

At a Glance- April 2009 Economic Indicators

Latest Reference Period

Status in the latest reference period in 2009

Status in the Corresponding period in 2008

Outlook for 2009

1. Inflation, Money Supply, Interest Rates CPI inflation (%) Brent crude oil price (US$/ brl) Money supplyGrowth rate (%)

Feb 2009 Mar 2009 Jan 2009

Overall 7.0 Food 8.8 Non-food 4.8 Average US$45 19.3

Overall 5.0 Food 8.1 Non-food 1.2 Average US$104 3.9

Expected to rise in March-July 2009 & decline thereafter May rise to US$52 in April-May 2009 Money supply growth may be around 16%

2. Government fiscal operations - Percentage change over previous period Revenue & grants Domestic Revenue Tax Revenue Nontax Revenue Grants Exp & Net Lending Current Exp. Interest -- External -- Domestic Capital Exp. Net Lending Overall fiscal bal. Primary Balance

Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009

15.5 13.1 15.2 -6.6 60.7 15.8 -1.5 -8.9 -23.7 -3.6 114.4 -162.9 17.2 -2.8

-1.4 -4.0 1.9 -38.1 102.7 -3.9 21.3 -6.3 -21.1 0.4 -39.2 -65.4 55.1 3.2

Fiscal performance in the first quarter (Q1) of 2009 can be considered to be on track as per the Budget estimates. Better performance by revenue items in 2009Q1 compared to that in 2008-Q1. Overall Fiscal Surplus due to decline of interest payments and net lending in 2009-Q1.

3. Government fiscal operations as percentage of GDP at current market prices Rev. and grants Exp & Net Lending Interest Overall fiscal bal. Primary Balance

Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009 Jan-Mar 2009

4.6 4.3 0.8 0.3 1.1

4.4 4.1 1.0 0.3 1.3

As % of GDP at current market prices, revenues and expenditures are ontrack.

4. Outstanding Domestic Public Debt in Million Dalasi Treasury bills Sukuk Al-Salam Govt Bonds Non-int. bearing Treasury Notes Total

Feb 2009 Feb 2009 Feb 2009 Feb 2009

4696 92 250 873

4749 71 250 415

Feb 2009

5911

5485

2

Outstanding treasury bills are expected to decline.

The Gambia Monthly Economic Bulletin- April 2009

At a Glance- April 2009 Continued Economic Indicators

Latest Reference Period

Status in the latest reference period in 2009

Status in the Corresponding period in 2008

Outlook for 2009

5. Composition of Outstanding Domestic Public Debt (Percentage share in total) Treasury bills Sukuk Al-Salam Govt Bonds Non-int. bearing Treasury Notes Total

Feb 2009 Feb 2009 Feb 2009 Feb 2009

79.5 1.5 4.2 14.8

86.6 1.3 4.6 7.6

Feb 2009

100

100

Share of non-interest bearing Treasury notes is expected to decline.

6. Composition of Interest Bearing Domestic Debt By Holders (in percentage) Central Bank Banks Parastatals Other Non Banks Total

Feb 2008 Feb 2008 Feb 2008 Feb 2008 Feb 2008

8 63 15 14 100

8 56 18 18 100

Likely to remain stable.

7. Composition of Interest Bearing Domestic Debt By Instruments (in percentage) Treasury Bills Sukuk Al Salaam Govt Bonds Total dom. Debt

Feb 2008 Feb 2008 Feb 2008 Feb 2008

93 2 5 100

94 1 5 100

Expected stable.

to

remain

8. Maturity Composition of Treasury Bills (in Percentage) 91-days 182-days 364-days

Feb 2008 Feb 2008 Feb 2008

15 16 69

11 22 67

9. Yields of Treasury Bills (in Percentage) 91-days 182-days 364-days

Feb 2008 Feb 2008 Feb 2008

11.1 12.8 14.4

10.9 11.9 13.7

Yields may come down when CPI inflation decelerates.

10. Annual Growth Rate of Money Supply (Percentage) Broad Money supply (M3) Reserve Money

Jan-2009

19.3

3.9

Jan-2009

12.7

0.1

3

Broad money growth rate is likely to decelerate.

The Gambia Monthly Economic Bulletin- April 2009

At a Glance- April 2009 Continued Economic Indicators

Latest Reference Period

Status in the latest reference period in 2009

Status in the Corresponding period in 2008

Outlook for 2009

11. CBG Policy Rates and Banks’ Lending rates (Percentage per annum) CBG Bank rate Rediscount rate Bank lending rate

Mar 2009 Mar 2009 Mar 2009

10 16 18 to 27

10 15 18 to 27

Banks’ lending rates may decline if the credit rating system is strengthened.

12. Share of Banks Foreign Assets/ Liabilities in Total Assets/ Liabilities (%) Foreign assets Foreign liabilities

Jan 2009 Jan 2009

9.2 3.1

14.4 4..1

Likely to remain stable

13. Balance of Payments (billion Dalasi) Goods A/C Balance Goods exports Goods imports Overall BOP Balance

2008

(-) 5.27

(-) 4.27

2008 2008 2008

2.16 7.41 (-) 1.30

2.27 6.54 0.80

Likely to remain under pressure. Likely to deteriorate further in 2009.

14. Inter-bank Exchange Rate- End Period Mid-Market Rates Dalasi per unit of foreign currency US$ UK £ Euro CHF CFA (5000)

Mar 2009 Mar 2009 Mar 2009 Mar 2009 Mar 2009

26.14 37.25 34.15 22.59 257.18

19.46 40.87 30.82 19.15 239.16

Dalasi is likely to depreciate against major currencies.

15. Foreign Exchange Reserves (US$ Million) FER Inter-bank FE transactions

End-Jan 2009 Jan 2009

116.8

140.4

1300

1700

4

Likely to remain under pressure.

The Gambia Monthly Economic Bulletin- April 2009 1. Global Economic Outlook and Global Public Policies 1.1 Sustained weakness and risk in global output and trade in 2009 The global economic outlook has deteriorated further since the IMF made an update of the World Economic Outlook (WEO) at the end of January 20092. In a recent paper entitled “Global Economic Policies and Prospects”3, the IMF reduced further its estimate for the expected global output growth in 2009 to a range of (-) 1.0 to (-) 0.5 per cent on an annual average basis, before recovering gradually to the range of 1.5 to 2.5 percent in the course of 2010 (Table-1). This is the first global contraction in the last 60 years since the great depression in 1930s. With all the advanced economies – the United States, Europe and Japan - having firmly drowning into recession, the contagion of the crisis has spread from the financial sector to the real sectors. Recent evidence suggests that contraction forces are strong with slumping demand, plunging production, rising unemployment and weakened banks. Most worryingly, world trade is projected to contract by 2.8 per cent in 2009, the fastest pace of shrinkage in the last 80 years.

Global GDP is estimated to have fallen by an unprecedented 5 percent in the fourth quarter of 2008 (annualized), led by advanced economies, which contracted by 7 percent. GDP declined in 2008-Q4 by 6 percent in both the United States and the euro area, while it plummeted at a post-war record of 13 percent in Japan. Growth also plunged across a broad swath of emerging economies, reflecting the confluence of weakening external demand, tightening financing constraints, and plunging commodity prices. Global inflation continues to drop rapidly, reflecting the sharp fall in economic activity and the collapse of commodity prices since mid-2008. Recent data point to sustained weakness in the period ahead (Figure 1). Global real sectors and financial markets continue to weaken both in advanced and emerging economies. Trade 2

World Economic Outlook- An Update, 28 January 2009, IMF, Washington D.C.

3

Global Economic Policies and Prospects, paper prepared by the Staff of the International Monetary Fund (IMF) for the Group of Twenty (G20) Meeting of the Ministers and Central Bank Governors during March 13–14, 2009 at London, U.K.

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The Gambia Monthly Economic Bulletin- April 2009 volumes continue to shrink rapidly, while production and employment data suggest that the global activity continues to contract in the current quarter.

Figure-1: Trends of Global Growth Rates and World Trade Emerging Asia Emerging Asia is being hurt through its reliance on manufacturing exports. The region’s manufacturing activity has been particularly hurt by collapsing IT exports and decline of automobile and electronics production. Growth in China is also slowing, albeit from a high rate (13 percent in 2007), and domestic demand is being supported by strong policy stimulus. Africa and the Middle East In Africa and the Middle East, growth is also projected to slow, but more modestly than in other regions. In Africa, growth is expected to moderate particularly in commodity exporting countries, and several countries are experiencing reduced demand for their exports, lower remittances, and foreign direct investment (FDI), while aid flows are under threat. In the Middle East, the effects of the financial crisis have been more limited so far. Despite the sharp drop in oil prices, government spending is largely being sustained to cushion the toll on economic activity. Global Responses and Risks Governments and central banks across countries have responded to the crisis through large, aggressive and unconventional fiscal and monetary measures to bail out failed financial and other strategic sectors and to boost domestic consumption and investment demand. However, there is a contentious debate on whether these measures are adequate and appropriate, and when, if at all, they will start to show some positive and encouraging results. 1.2 Deflation Risks and Prospects of Emerging Economies

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The Gambia Monthly Economic Bulletin- April 2009 Deflation risks, concentrated in the major advanced economies, could reinforce a deeper and longer downturn for the global economy. Expectations of falling prices could encourage both households and business houses to postpone consumption and investment spending and push the economy into deeper recession. With policy rates already near the zero limits, monetary authorities in many countries have limited capacity to counteract deflationary pressures through traditional means, while the effectiveness of less conventional approaches is uncertain. There is a serious risk that emerging economies will not be able to secure adequate external financing, especially given global deleveraging, potentially large borrowing needs of advanced economies and increased domestic bias guided by growing feeling of strong nationalism. Overall, risks are largest for emerging economies that relied on cross-border flows to finance current account deficits or to fund the activities of their financial or corporate sectors. 1.3 Decisions of G20 Meeting at London on April 2, 2009 The Group of Twenty (G20) Leaders in their meeting on April 2, 2009 at London agreed to take collective action to strengthen financial regulation and supervision for improving transparency and accountability, enhancing sound regulation, promoting integrity in financial markets and reinforcing international cooperation. Amongst others, major actions include the following: (a) To expand the Financial Stability Forum with broadened mandate and re-established with a stronger institutional basis and enhanced capacity as the Financial Stability Board (FSB). (b) Concrete measures for strengthening international cooperation and prudential regulation to assure economic recovery and to maintain quality of capital thereafter. (c) Hedge funds or their managers will be registered and will be required to disclose appropriate information on an ongoing basis. (d) Principles on pay and compensation in significant financial institutions to ensure that compensation structures are consistent with firms’ long-term goals and prudent risk taking. (e) Information exchange on tax havens and non-cooperative jurisdictions to protect public finances and international standards against the risks posed by non-cooperative jurisdictions. (f) Reviewing tax treaty policies according to agreed principles of tax transparency and information exchange. (g) To improve accounting standards for realistic and fair valuation of financial instruments based on their liquidity and investors’ holding horizons. (h) To improve accounting standards for recognition and provisioning of loan-loss, off-balance sheet contingent liabilities and valuation uncertainty; (i) More effective oversight of the activities of the Credit Rating Agencies, as they are essential financial market participants.

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The Gambia Monthly Economic Bulletin- April 2009 1.4 India-Africa Partnership Conclave held in New Delhi on 23-24 March 2009 During 23-24 March 2009 at New Dellhi, the Confederation of Indian Industry (CII) and the EXIM Bank of India held the 5th CII-EXIM Bank Conclave on India Africa Project Partnership. The CII-EXIM Bank India-Africa Partnership Project was launched in 2004. The first ever India-Africa Forum Summit held in New Delhi in April 2008 was convened in partnership with the African Union. This year’s Conclave had participation by 38 African nations, four regional bodies and six financial institutions on the either side. The two-day conclave was attended by 450 participants from Africa, including 15 ministers from Botswana, Burkina Faso, Central African Republic, Comoros, Congo, Cote d’lvoire, Liberia, Mauritius, Mozambique, Sudan, Togo, Uganda, and Zimbabwe. India called for doubling the India-Africa bilateral trade to the level of $70 billion over the next five years, continuing the growth trajectory that began in 2000-01 with a trade of only $3 billion but shot up 12 times to $36 billion in 2007-08. In April 2008 India had announced duty free tariff preferential scheme for 49 least developed countries (LDCs) which has benefited 33 African countries. India is the world’s largest importer of rough diamonds, most of which are sourced from Africa. It is also a major exporter of cut and polished diamonds. India has also comparative advantages in many sectors. While Indian companies have already begun investing in Africa, the African Ministers and other leaders have called for boosting investments in almost all sectors including agriculture, transportation, health, education, water supply, mining, power, agro-processing, irrigation, pharmaceuticals, IT, micro finance, retail chain and small and medium scale sector for generating employment and helping Africa to achieve poverty reduction and MDG targets. India is committed to helping Africa to bridge the digital divide and help spread the benefits of development, especially in sub-Saharan Africa. The Indian Technical and Economic Cooperation has benefited African students undertaking training courses in India and in 2009 the Indian government has designed special courses for experts from Africa in mining and new and renewable energy resources. The number of training slots for African students has been increased from 1100 to 1600. The number of scholarships for African students has been doubled to 500. The EXIM Bank of India has already provided $2 billion line of credit to African nations and additional $600 million credit is under active consideration at various stages. This is a part of the commitment to extend $5.3 billion assistance for development of trade and infrastructure both in the private and public sectors over a period of five years.

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The Gambia Monthly Economic Bulletin- April 2009 1.5 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. Inflationary pressures had subsided in the major advanced economies. There are also significant declines of housing prices in some advanced countries, showing signs of deflation. 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. Inflationary pressures also subsided in the low and income economies. Although commodity prices recorded some increase in January 2009, they declined again since Feb 2009 (Table-2). 1.6 Petroleum 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). In their last meeting, the OPEC has decided not to have any cut in oil supply. Accordingly, oil prices are expected to remain soft in the rest of the year 2009. In March-April 2009 Brent crude oil prices ranged around US$47 per barrel. Given weakness in the Chinese demand and negative growth in the US and EU, global oil prices are likely to remain around US$50 per barrel in 2009 Trends of Monthly Brent Crude Oil Prices (US$/ 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

9

The Gambia Monthly Economic Bulletin- April 2009

Table 2: Trends of World Commodity Prices Quarterly averages

Commodity Energy Coal, Australia Crude oil, Brent Crude oil, Dubai Natural gas Index Agriculture Coffee, Arabica Tea, Mombasa auctions Coconut oil Groundnut oil Soybean oil Maize Rice, Thailand, 25% Wheat, US, HRW Wheat US SRW Fishmeal Meat, beef Meat, chicken Meat, sheep Oranges Sugar, world Raw Materials Logs, Cameroon Plywood Cotton A Index Cotton Memphis * Rubber RSS3, SGP Fertilizers DAP Phosphate rock Potassium chloride Urea Metals and Minerals Aluminum Copper Gold

Monthly averages

JanMar 2008

AprJun 2008

Jul-Sep 2008

OctDec 2008

JanMar 2009

Jan 2009

Feb 2009

Mar 2009

114.00 96.67 91.30

138.65 122.39 116.67

162.80 115.60 113.47

92.97 55.89 53.67

71.93 44.98 44.56

79.40 44.86 44.97

75.38 43.24 43.14

61.00 46.84 45.58

235.3

286.0

284.1

266.2

199.0

229.6

187.9

179.3

¢/kg

328.5

315.1

321.2

267.8

283.9

282.9

285.5

283.3

¢/kg $/mt $/mt $/mt $/mt

221.8 1,379 2,007 1,384 220.4

221.6 1,499 2,328 1,466 259.0

252.8 1,246 2,417 1,353 244.7

190.8 772 1,773 830 168.4

214.3 677 1,287 754 166.9

219.3 734 1,343 789 172.8

211.8 673 1,293 748 163.4

211.8 624 1,224 725 164.6

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

182.2 411.8 384.1 1,126 282.1 158.8 453.6 1,103 28.42

n.a. 346.5 277.8 1,185 332.7 167.9 493.2 1,322 27.01

669.5 317.7 241.5 1,198 372.4 177.1 477.3 1,163 31.14

449.9 228.1 182.7 1,023 268.0 174.7 410.0 842 26.28

469.4 231.6 187.4 1,013 245.2 173.5 378.5 799 28.85

464.0 239.1 195.1 1,009 251.6 174.9 380.7 783 27.76

472.8 224.7 183.4 1,001 236.2 173.8 380.3 767 29.26

471.5 230.9 183.7 1,029 247.7 171.9 374.6 847 29.54

$/cum ¢/sheets ¢/kg ¢/kg

530.8 640.4 167.9 174.2

554.4 647.3 166.5 171.6

548.5 648.6 168.2 170.0

473.8 645.5 126.9 130.1

426.8 563.3 120.8 129.8

470.2 574.7 127.2 134.9

421.9 573.0 121.7 131.4

388.2 542.1 113.4 123.3

¢/kg

273.5

303.5

298.4

159.0

146.0

148.7

146.3

143.1

$/mt $/mt

860.2 234.4

1,191.6 367.5

1,153.7 409.2

663.3 371.3

362.2 193.3

351.0 265.0

367.9 157.5

367.6 157.5

$/mt $/mt

367.7 357.6

511.1 575.7

635.0 745.4

766.7 292.2

865.2 267.3

853.1 263.4

872.5 273.3

870.0 265.4

$/mt $/mt $/toz

2,743 7,796 927

2,940 8,443 896

2,787 7,680 870

1,821 3,905 795

1,360 3,428 909

1,413 3,221 859

1,330 3,315 943

1,336 3,750 924

Unit

$/mt $/bbl $/bbl 2000=10 0

Source: World Bank Pink Sheet April 2009

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The Gambia Monthly Economic Bulletin- April 2009 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 and wholesale and retail trade.

•

However, thanks to favorable rainfall and bumper crops, high food grains prices and very good performance by electricity, telecom and financial sectors, the real GDP growth at constant 2004 factor cost improved from 6.1% in 2007 to 7.2% in 2008, supported by a spectacular growth of 28.4% in agriculture value added and a marginal growth of 0.7% by industry while services value added declined by (-) 0.6% due to poor performance by trade and public administration.

•

Agriculture is expected to perform well in 2009, but due to higher base in 2008 the agricultural growth will be moderate in 2009. It is projected that real GDP growth rate in 2009 is likely to be around 4.5% aided by a growth of 6% in agriculture, 2% in industry and 4.4% in services.

•

However, the general increase in civil servant salaries, introduction of work efforts’ incentives and donors’ commitment to provide financial support to Gambia under PRGF and to help Gambia to mitigate adverse impact would boost both consumer spending and investment and enhance economic growth in the range of 5%.

Table-2.1: Trends of Sectoral Growth Rates and Shares in GDP4 In the Gambia in 2005-2009 (In percentage) I T E MS

GDP at 2004 FC

GDP Growth Rates (%)

2005 Actual 2.0

2006 Actual 6.6

Sectoral Shares (%)

2007 Actual 6.1

2008 Est. 7.2

2009 Proj. 4.5

2005 Actual 100.0

2006 Actual 100.0

2007 Actual 100.0

2008 Est. 100.0

2009 Proj. 100.0

Agriculture and allied

-0.8

3.9

3.9

28.4

6.0

29.1

28.4

27.8

33.4

33.9

Industry

6.2

18.5

-3.1

0.7

2.0

15.8

17.5

16.0

15.0

14.7

Services

3.2

5.7

10.4

-0.6

4.4

60.0

59.5

61.9

57.4

57.4

Source: Gambian Bureau of Statistics (GBOS) for the years 2005-2008 and projections for 2009 by the Macroeconomic Adviser.

4

Gross Domestic Product at Factor Cost at constant 2004 prices. 11

The Gambia Monthly Economic Bulletin- April 2009 2.2 Consumer Price Index and Inflation •

As measured by the Consumer Price Index (CPI), the annual point-to-point inflation accelerated from 5% in February 2008 to 7.0% in February 2009. However, the 12month average inflation rate decelerated to 4.5% from 5.7% a year ago.

•

Food items (with weights of 55.2% in overall CPI) recorded average inflation of 8.8% in Feb 2009 compared to 8.1% a year ago and contributed 72% to inflation in Feb 2009.

•

Non-food items (with weights of 44.8% in overall CPI) recorded annual inflation of 4.8% in February 2009 compared to 1.2% a year ago and contributed 28% to inflation.

•

Among other groups, in February 2009, clothing and textiles recorded annual inflation of 5.4%, housing and utilities 5.9%, restaurants 7.7% and transport 4.4%.

Items

Feb-2008

Overall

Weights (%) 100.0

Food Tobacco Clothing Utilities Furnishing

55.2 0.7 11.3 3.4 5.2

115.5 103.8 105.3 114.4 110.6

Feb-2009

112.3

120.25 125.57 105.68 110.98 121.18 114.87 Health 1.0 101.0 101.77 Transport 4.4 114.9 119.93 Telecom 3.0 101.1 101.95 Recreation 8.0 103.6 104.5 Education 1.5 101.9 102.24 Hotels 0.4 107.6 115.89 Misc. 5.9 112.3 124.28 non-food 44.8 108.6 113.79 Source: Gambian Bureau of Statistics (GBOS).

5

Inflation (%)

Wi.(CPI1-CPI0)

7.0 8.8 1.8 5.4 5.9 3.9 0.8 4.4 0.9 0.9 0.4 7.7 10.7 4.8

777.3 558.7 1.3 64.1 23.1 22.6 0.8 22.2 2.6 7.5 0.6 3.0 71.0 233.4

Contributio n5 (%) 100.0 71.9 0.2 8.2 3.0 2.9 0.1 2.9 0.3 1.0 0.1 0.4 9.1 28.1

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 558.7 / 777.3 = 71.9%.

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The Gambia Monthly Economic Bulletin- April 2009 2.3 Government Financial Performance in the First Quarter (Q1) of 2009 •

Columns (5) and (6) of Table 2.3.1 present major item-wise revenue realization and expenditure of the government in the first quarter of 2009 (2009-Q1) and that of 2008 (2008Q1) respectively. Columns (7) and (8) indicate the percentage changes of major items of revenues and expenditure in 2009-Q1 compared with those in 2008-Q1.

•

It may be observed from the table that, in terms of percentage changes, the government’s fiscal performance has been significantly better in 2009-Q1 than in 2008-Q1.

•

In the 2008-Q1 total revenues and grants had declined by 1.4%, as tax revenues increased by only 1.9% while non-tax revenues declined by 38.1% over 2007-Q1. On contrast, 2009Q1 has witnessed 15.5% increase in total revenue and grants aided by 15.2% increase in taxes and 60.7% increase in grants, while non-tax revenues declined by only 6.6% over 2008-Q1.

•

During the first quarter of the current year, total expenditures and net lending has increased by 15.8% over 2008-Q1 due to 12.5% increase in personnel emoluments and more than doubling (114.4% increase) of capital expenditure while interest payments declined by 8.9% over 2008-Q1.

•

Overall there is a fiscal balance of 77.8 million Dalasi in 2009-Q1, higher than the overall fiscal balance of 66.4 million Dalasi in 2008-Q1, despite significant increase of capital expenditure in 2009-Q1. Table 2.3.1 Govt Financial Performance in 2009Q1 compared with 2008Q1

Items

2008 Actual Mln Dal.

2008 BE Mln Dal.

2009 BE Mln. Dal.

2009-Q1 Jan-Mar Actual

2008-Q1 Jan-Mar Actual

% change over prev. period ’09-Q1 ’08-Q1

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

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 fiscal balance Primary Balance Nominal GDP

3644.6 3479 3161.3 317.7 165.64 4134.8 3011.4 905.53 1397.5 708.42 153.52 554.89 1123.4 1016.6 106.77 -490.2 218.2 22788

4,475.5 3,770.9 3,362.6 408.3 704.7 5,205.1 2,812.3 917.5 1,143.4 622.3 72.3 550.0 2,332.8 2,223.2 109.6 -729.5 -107.2 22788

4582.2 3771.1 3390.5 380.5 811.1 5362.9 3838.0 1035.2 1957.5 845.3 147.3 698.0 1524.9 1468.2 56.7 -780.7 64.6 25253

1,142.3 1,061.4 977.2 84.1 80.9 1,067.5 709.2 252.9 256.0 200.3 44.0 156.4 358.3 375.3 -17.0 77.8 278.1 25253

988.6 938.2 848.2 90.1 50.4 922.2 720.2 224.9 275.5 219.8 57.6 162.2 202.1 175.0 27.0 66.4 286.2

15.5 13.1 15.2 -6.6 60.7 15.8 -1.5 12.5 -7.1 -8.9 -23.7 -3.6 77.3 114.4 -162.9 17.2 -2.8 11.0

-1.4 -4.0 1.9 -38.1 102.7 -3.9 21.3 34.8 43.3 -6.3 -21.1 0.4 -44.8 -39.2 -65.4 55.1 3.2 10.5

13

22590

The Gambia Monthly Economic Bulletin- April 2009 An analysis of Table 2.3.2 leads to the following observations: •

Columns (2) and (3) present the major item-wise performance of revenues and expenditure as percentages of the corresponding budget estimates in 2009-Q1 and 2008-Q1 respectively. It is evidenced from the table that as percentages of the budget respective estimates, government revenue collections and expenditures have performed better in the first quarter of 2009 than those in the first quarter of 2008.

•

Columns (7) and (8) present the major item-wise performance of revenues and expenditure as percentages of the corresponding GDP at current market prices in 2009-Q1 and 2008-Q1 respectively. It is observed from the table that, in terms of the percentages of GDP, the total revenues and expenditures have performed better in the first quarter of 2009 than in the first quarter of 2008.

•

The revenue and expenditure ratios to GDP are also observed to be on track in 2009-Q1.. Table 2.3.2 Govt Financial Performance in 2009Q1 compared with 2008Q1 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 fiscal balance Primary Balance

2009-Q1 as % of Budget (2) 24.9 28.1 28.8 22.1 10.0 19.9 18.5 24.4 13.1 23.7 29.9 22.4 23.5 25.6 -30.0 -10.0 430.5

2008-Q1 as % of Budget (3) 22.1 24.9 25.2 22.1 7.1 17.7 25.6 24.5 24.1 35.3 79.7 29.5 8.7 7.9 24.7 -9.1 -267.0

2008-Q1 as % of actual (4) 27.1 27.0 26.8 28.3 30.4

22.3 23.9 24.8 19.7 31.0 37.5 29.2 18.0 17.2 25.3 -13.5 131.2

2009 BE as % of GDP (5) 18.3 15.0 13.5 1.5 3.2 21.4 15.3 4.1 7.8 3.4 0.6 2.8 6.1 5.9 0.2 -3.1 0.3

2008 AC as % of GDP (6) 16.1 15.4 14.0 1.4 0.7 18.3 13.3 4.0 6.2 3.1 0.7 2.5 5.0 4.5 0.5 -2.2 1.0

2009-Q1 as % of GDP (7) 4.6 4.2 3.9 0.3 0.3 4.3 2.8 1.0 1.0 0.8 0.2 0.6 1.4 1.5 -0.1 0.3 1.1

2008-Q1 as % of GDP (8) 4.4 4.2 3.8 0.4 0.2 4.1 3.2 1.0 1.2 1.0 0.3 0.7 0.9 0.8 0.1 0.3 1.3

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

Column (2) of the Table 2.3.3 below presents detailed item-wise revenues and expenditure of the expenditure in the first quarter of 2009. We have estimated the ratios of realization for any item in the first quarter to the actual outturn for the item during the complete year for the last five years viz, 2004, 2005, 2006, 2007 and 2009. Item-wise average ratios (as percentage to the actual outturn for the year) for these years are presented in column (3) of the table 2.3.3. Taking these ratios as norms, expected revenue and expenditure outcomes for the full year 2009 are estimated by the following formula and are presented in column (4).

14

The Gambia Monthly Economic Bulletin- April 2009 Expected outcome for an item in 2009 = 100 X (actual realization in 2009-Q1) / average realization ratio (in percentage) during the last five years (2004-2008) Comparison of the expected outcome with the budget estimates given in Column (5) indicate that total domestic revenue and tax revenue targets are expected to be achieved. However, there is likely to be shortfall in grants realization unless the subsequent disbursements are significantly augmented. There is also expected shortfall in non-tax revenues. Table-2.3.3 Government Fiscal Performance in the First Quarter of 2009 2009-Q1 Average Q1 realization 2009 Actual as % of actual outcome Expected (Average ratio in Q1 in last Outcome6 five years 2004-2009) (1) (2) (3) (4) 1.Revenue and grants (2+5) 1142.2 4249.6 2.Domestic Revenue (3+4) 1061.3 4001.6 3.Tax Revenue (3.1+3.2) 977.2 3695.4 3.1 Direct Tax (a to e) 308.2 1088.8 (a) Personal 140.3 25.8 544.8 (b) Corporate 115.0 25.2 456.4 (c) Capital Gains 6.2 29.5 21.2 (d) Payroll 30.1 69.4 43.4 (e) Other 16.5 71.5 23.1 3.2 Indirect Tax (3.2.1+3.2.2) 669.1 2606.6 3.2.1 Dom Tax on G&S 165.3 632.6 (a) Stamp Duties 5.1 22.4 22.9 (b) Excise Duties 40.3 21.2 189.9 (c) Dom Sales Tax 117.8 28.6 412.6 (e) Others 2.0 28.0 7.1 3.2.2 Tax on Ext Trade (a+b) 503.8 1974.0 (a) Duty (i+ii) 310.7 1166.9 (i) Oil 195.1 27.5 710.2 (ii) Non-oil 115.6 25.3 456.7 (b) Sales tax on imp (i+ii) 193.1 807.1 (i) Oil 25.3 24.1 105.0 (ii) Non-oil 167.7 23.9 702.1 4. Nontax Revenue (a to d) 84.1 306.2 (a) Govt Charges 56.9 35.5 160.3 (b) NTR from CRD 1.6 24.1 6.7 (c) NTR from CED 25.1 19.4 129.2 (d) Others 0.5 5.0 10.0 5. Grants 80.9 32.6 248.0

6

Estimated on the basis of the formula as explained in the text,

15

2009 Budget

(5) 4582.2 3771.1 3390.6

380.5

811.1

The Gambia Monthly Economic Bulletin- April 2009

2009-Q1 Actual (1) 6. Exp & Net Lending (7+8) 7. Current Exp (7.1+7.2+7.3) 7.1 Personnel Emoluments 7.2 Other Charges 7.3 Interest (a+b) (a) External (b) Domestic 8. Cap Exp & Net Lending 8.1 Capital Expenditure (a) Externally Financed (b) GLF Capital 8.2 Net lending 9. Overall fiscal bal (1-6) 10. Primary Balance (9+7.3)

(2) 1067.5 709.2 252.9 256.0 200.3 44.0 156.4 358.3 375.3 269.3 106.0 -17.0 74.7 275.1

Average Q1 realization 2009 as % of actual outcome Expected (Average ratio in Q1 in last Outcome7 five years 2004-2009) (3) (4) 4468.1 2825.7 26.6 949.3 22.0 1165.7 710.7 32.6 134.8 27.1 575.9 1642.4 1585.7 32.9 819.8 13.8 765.9 56.7 -218.5 492.2

2009 Budget

(5) 5362.9 3838.0 1035.2 1957.5 845.3 147.3 698 1524.9 1468.2 56.7 -780.7 64.6

As regards expenditure, there is likely to be expenditure overrun of capital expenditure, while actual current expenditure is expected to shoow some surplus over the budgeted expenditure. Overall, it is expected to have a fiscal deficit of 218.5 million Dalasi (amounting to 0.9 percent oof GDP at current market prices) compared to budget estimate of fiscal deficit at 780.7 million Dalasi (amounting to 3.1 percent of GDP).

7

Estimated on the basis of the formula as explained in the text,

16

The Gambia Monthly Economic Bulletin- April 2009 2.4 Public Debt (a) External Debt The stock of external debt declined substantially at end-2007 following HIPC and MDRI debt relief. At the end of 2006, prior to completion point, the stock of nominal external public debt was US$676.7 million (133.1 percent of GDP). Multilateral creditors accounted for 84 percent of this debt. At end-2007, post-completion point, the stock of external public debt fell to US$299.4 million (46.0 percent of GDP). (b) Outstanding Domestic Debt •

As on 28 February 2009, outstanding domestic debt stood at D5.9 billion (amounting to 24.8% of GDP) compared to D5.5 billion (amounting to 24.3% of GDP) a year ago.

•

Treasury bills, accounting for 79.5% of total domestic debt, declined by 1.1% to D4.7 billion at the end of February 2009.

•

At end-Feb 2009 the CBG provided 8% of interest bearing domestic debt, commercial banks 63%, Parastatals 14%, Sukuk Al Salaam 2% and others 14%. Outstanding Domestic Public Debt, 28 February 2009

Type of debt Treasury bills Sukuk Al-Salam Government Bonds Non-interest bearing Treasury Notes Total

Million Dalasi 28 Feb 2008 28 Feb 2009 4749 4696 71 92 250 250 415 873 5485

5911

Composition (in percentage) 28 Feb 2008 28 Feb 2009 86.6 79.5 1.3 1.5 4.6 4.2 7.6 14.8 100.0

100.0

Composition of Interest Bearing Domestic Debt (in percentage) Book Value 28 Feb 2008

Face Value

28 Feb 2009 28 Feb 2008 28 Feb 2009 By Holders Central Bank 9 8 8 8 Commercial Banks 56 64 56 63 Parastatals 18 15 18 15 Other Non Banks 18 13 18 14 Total 100 100 100 100 By Instruments Treasury Bills 93 92 94 93 Sukuk Al Salaam 2 2 1 2 Government Bonds 5 6 5 5 Total domestic debt (%) 100 100 100 100 Source: Banking Operations Department of the Central Bank of Gambia (CBG).

17

The Gambia Monthly Economic Bulletin- April 2009 2.5 Money Supply in February 2009 •

Annual growth rate of broad money supply (M3) accelerated from 19.3% in January 2009 to 20.4% in February 2009. On the contrary, annual growth rate of reserve money decelerated from 12.7% in January 2009 to 4.9% in February 2009.

•

On the supply side, 20.4% growth in money supply in February 2009 was supported by 7.4% growth in currency, 30% growth in demand deposits, 5.6% growth in savings deposits and 44.9% growth in time deposits.

•

On the demand side, growth was mainly due to 41.5% growth in domestic credits, while net foreign assets declined by 10 percent over a year ago.

•

Domestic credit increased from D4.8 billion in Feb 2008 to D6.8 billion in Feb 2009, supported by 41.6% growth in government borrowing and 53.3% growth in credits to the private sector, while credits to public entities declined by 34.5% over a year ago.

Components of money supply

Composition in Feb 2008 (in %)

Composition in Feb 2009 (in %)

Annual growth in Feb 2009 over Feb2008 (in %)

Feb 2008 Mill. Dalasi

Feb 2009 Mill. Dalasi

8242.23 4116.23 1673.74 2442.49 2252.95 189.54 4126.00 2611.89 2567.32 44.57 1514.11 1187.78 326.33

9924.91 4971.49 1796.85 3174.64 2692.91 481.73 4953.42 2759.36 2753.31 6.05 2194.06 1687.09 506.97

100.0 49.9 20.3 29.6 27.3 2.3 50.1 31.7 31.1 0.5 18.4 14.4 4.0

100.0 50.1 18.1 32.0 27.1 4.9 49.9 27.8 27.7 0.1 22.1 17.0 5.1

20.4 20.8 7.4 30.0 19.5 154.2 20.1 5.6 7.2 -86.4 44.9 42.0 55.4

8242.23 3769.22 2830.31 938.91

9924.93 3393.76 2729.92 663.84

100.0 45.7 34.3 11.4

100.0 34.2 27.5 6.7

20.4 -10.0 -3.5 -29.3

1.Broad 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 forign assets (1.1+1.2) 1.1 Monetary Authorities 1.2 Commercial banks 2.Net Domestic Assets (2.1+2.2) 2.1 Domestic credit (a) Credits to governnment (b) Credits to public entities (c) Credits to private sector (d) Credits to forex bureau 2.2 Other items, net Source: Economic

4473.01 6531.17 54.3 65.8 4812.57 6809.44 58.4 68.6 1839.02 2604.04 22.3 26.2 292.04 191.4 3.5 1.9 2498.22 3830.71 30.3 38.6 183.29 183.29 2.2 1.8 -339.56 -278.27 -4.1 -2.8 Research and Statistics Department of CBG.

18

46.0 41.5 41.6 -34.5 53.3 0.0 -18.0

The Gambia Monthly Economic Bulletin- April 2009 2.6 Commercial Banks’ Assets •

The banking industry remains sound. Total industry assets increased by 19.5% to D12.5 billion year-on-year at end-Dec 2008, and stood at D12.3 billion at end-Jan 2009, up by 14% over those at the end-Jan 2008.

•

Gambian banks do not have large exposure to foreign assets or foreign liabilities. At end-Jan 2009, foreign assets constituted only 9.2% of total assets (foreign exchange 1.9%, balances abroad 6.4% and foreign investment 0.9%), down from 14.4% a year ago (foreign exchange 1.9%, balances abroad 11.7% and foreign investment 0.8%).

•

At end-Jan 2009, loans and advances to the public sector declined by 33.8% while those to the private sector increased by 49.4% over Jan-2008.

•

At end-Jan 2009, investments in government Treasury Bills increased by 10.2 percent while banks’ foreign investment increased by almost 40 percent.

•

The risk-weighted capital adequacy ratio stood at 35.9% in Dec 2008, well above the statutory requirement of 8%.

•

Non-performing loans rose from 7.3% in Sep 2008 to 9.5% in Dec 2008, but were adequately provisioned in compliance with the statutory requirements. Commercial Banks Assets at the end-Feb 2009 (Million Dalasi)

Assets 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 Investments 8. Fixed assets 9. Guarantees 10. Other assets 11. Total assets (1 to 10) 12. Net Balance (11-9)

Composition (%) Feb-08 Feb-09

217.3 401.3 854.7 851.9 2.8 758.4 40.9 3,263.1 325.7 2,937.4 3,231.1 2,949.5 139.9

141.5 172.5 934.5 908.0 26.5 1,042.4 5.6 2,476.3 155.1 2,321.2 3,069.8 2,793.5 135.0

224.5 279.2 1,004.0 954.4 49.6 618.7 115.3 3,576.1 88.7 3,487.4 3,255.7 2,950.9 182.5

1.7 3.2 6.9 6.8 0.0 6.1 0.3 26.2 2.6 23.6 25.9 23.7 1.1

1.3 1.6 8.9 8.6 0.3 9.9 0.1 23.5 1.5 22.0 29.2 26.5 1.3

1.8 2.3 8.2 7.8 0.4 5.1 0.9 29.3 0.7 28.5 26.6 24.1 1.5

% change Over Feb-08 58.6 61.9 7.4 5.1 87.1 -40.6 1974.5 44.4 -42.8 50.2 6.1 5.6 35.2

141.6 840.1 1,435.8 1,425.5 12,468.2 11,032.4

141.3 579.9 1,088.7 1,019.1 10,530.3 9,441.6

122.3 868.0 1,360.5 920.8 12,222.8 10,862.4

1.1 6.7 11.5 11.4 100.0 88.5

1.3 5.5 10.3 9.7 100.0 89.7

1.0 7.1 11.1 7.5 100.0 88.9

-13.4 49.7 25.0 -9.6 16.1 15.0

Dec-08

Feb-08

Feb-09

Dec-08

Source: Central Bank of Gambia.

19

The Gambia Monthly Economic Bulletin- April 2009 2.7 Commercial Banks’ Liabilities •

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities. At end-Jan 2009, external sector related liabilities constituted only 3.1% of total liabilities (non-residents deposits 0.9%, balances with banks abroad 1.6% and external debt 0.6%), down from 4.1% a year ago (non-residents deposits 2%, balances with banks abroad 1.5% and external debt 0.6%).

•

In January 2009 commercial banks’ total deposits increased by 21 percent over January 2008, contributed by a growth of 25.3 percent in demand deposits, 5.1 percent growth in savings deposits and 42.5 percent growth in time deposits.

•

In January 2009 banks capital and reserves increased by 26 percent, bank balances increased by 33.6% while borrowings declined by 38.5% over January 2008.

20

The Gambia Monthly Economic Bulletin- April 2009

Commercial Banks Liabilities at the end-Feb 2009 (Million Dalasi) LIABILITIES (in 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 Head office & branches ii Other banks abroad 6. Borrowings from i CBG ii Other banks locally iii Head office & branches iv Other banks abroad v. Other sources 7. Guarantees 8. Other liabilities 9. Total liabilities (1 to 8) 10. Net balance (9-7)

Comp-sition (%) Dec-08 1,448.0 3,286.7 2,653.5 39.5 593.6 2,737.9 2,638.8 75.0 24.0 1,938.9 1,386.2 18.1 534.6 7,963.5 137.0 86.7 50.3 414.6 12.0 201.1 201.5 1,435.8 1,069.3 12,468.2 11,032.4

Feb-08 1,253.7 2,442.5 2,194.6 58.3 189.5 2,611.9 2,494.5 72.8 44.6 1,514.1 1,171.4 16.3 326.3 6,568.5 134.3 14.2 120.1 293.0 10.0 124.7 75.2 83.1 1,088.7 1,192.1 10,530.3 9,441.6

Feb-09 1,498.1 3,174.6 2,603.5 89.4 481.7 2,759.4 2,673.8 79.5 6.0 2,194.1 1,559.8 127.2 507.0 8,128.1 163.1 121.3 41.7 193.4 120.9 72.4 1,360.5 879.8 12,222.8 10,862.4

Source : Central Bank of The Gambia

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Dec-08 11.6 26.4 21.3 0.3 4.8 22.0 21.2 0.6 0.2 15.6 11.1 0.1 4.3 63.9 1.1 0.7 0.4 3.3 0.0 0.1 1.6 1.6 0.0 11.5 8.6 100.0 88.5

Feb-08 11.9 23.2 20.8 0.6 1.8 24.8 23.7 0.7 0.4 14.4 11.1 0.2 3.1 62.4 1.3 0.1 1.1 2.8 0.0 0.1 1.2 0.7 0.8 10.3 11.3 100.0 89.7

Feb-09 12.3 26.0 21.3 0.7 3.9 22.6 21.9 0.7 0.0 18.0 12.8 1.0 4.1 66.5 1.3 1.0 0.3 1.6 0.0 0.0 1.0 0.6 0.0 11.1 7.2 100.0 88.9

% change over Feb2008 19.5 30.0 18.6 53.3 154.2 5.6 7.2 9.1 -86.4 44.9 33.2 678.6 55.4 23.7 21.4 755.4 -65.2 -34.0 -100.0 -3.0 -3.7 -100.0 25.0 -26.2 16.1 15.0

The Gambia Monthly Economic Bulletin- April 2009 2.9 Balance of Payments and Foreign Exchange Reserves •

Balance of Payments estimates indicate an overall deficit of D1.30 billion ($54.6 million) in 2008 compared to an estimated surplus of D796.80 million ($32.0 million) in 2007, reflecting the deterioration in both the current and the capital and financial accounts.

•

The goods account balance deteriorated to a deficit of D5.27 billion in 2008, or by 23.4%. Exports are estimated at D2.16 billion in 2008, or a decrease of 5.1 per cent from 2007. The import bill rose to D7.41 billion, or 13.3 per cent from 2007.

•

Projections for 2009 indicate deterioration in the overall balance emanating from the ongoing slowdown in global economic activity which is expected to adversely impact remittances, foreign direct investment and tourism.

Foreign Exchange Reserves •

Reflecting the widening of the current account deficit, gross external reserves stood at US$116.8 million at end-January 2009 compared to US$140.4 million in January 2008.

•

Volume of transactions in the inter-bank foreign exchange market in the year to endJanuary 2009 amounted to D35.1 billion (US$1.3 billion) compared to D37.8 billion (US$1.7 billion) a year ago. 2.10 Exchange Rate

•

During January to December 2008, the Dalasi depreciated against major international currencies traded in the inter-bank market except the British Pound, reflecting the impact of the global financial crisis on remittances and tourism as well as increased demand for foreign exchange to meet the high cost of imports.

•

Since January 2009, Dalasi has appreciated against major international currencies.

27 March 2009

37.25

26.14

22.59

22

300.00

257.18

34.15

The Gambia Monthly Economic Bulletin- April 2009

3. Recent Policy Developments and Issues 3.1 IMF approves US$9.2 million Augmentation for PRGF In February 2009, the IMF Executive Board has approved US$9.2 million Augmentation and US$7.5 million disbursement for the Gambia under the Poverty Reduction Growth Facility (PRGF) Arrangement to help mitigate the impact of the global slowdown The IMF has complemented the Gambian authorities for the satisfactory implementation of the PRGF-supported program and their commitment to prudent economic policies, which have contributed to robust growth and moderate inflation. Nevertheless, The Gambia was not spared from the adverse impact of the global economic crisis, which led to a decline in foreign exchange reserves and widening of the current account deficit as a result primarily of reduced income from tourism and remittances. The IMF appreciated the commitment of the authorities to achieve sustained growth and poverty reduction by maintaining fiscal discipline, reducing the still high debt level, and promoting private sector development. The government will increase the share of budgetary resources allocated to poverty reduction, in line with the priorities of the poverty reduction strategy, and faster progress toward achieving the Millennium Development Goals (MDGs). Fiscal policy is being strengthened to ensure long-term fiscal sustainability. Going forward, it will be important to improve the revenue base, rationalize taxation, better align the budget with PRSP priorities, and further strengthen public financial management. The IMF also appreciated the commitment of the Central Bank of the Gambia (CBG) to maintain a monetary policy designed to keep inflation at single-digit levels, and to rebuild international reserves for providing a stronger buffer against adverse external developments. However, the IMF cautioned that the Gambia remains at high risk of debt distress, even after receiving HIPC and MDRI debt relief, due to high levels of debt in relation to exports and vulnerability to external shocks. They have requested the government to formulate a national debt strategy to ensure long-term sustainability, and to rely on grants for financing the country's development programs. 3.2 The Joint (Fund-Bank) Staff Advisory Note (JSAN) on PRSP In October 2008 the Gambian National Planning Commission (NPC) completed the first Annual Progress Report (APR) of the 2007 Poverty Reduction Strategy Paper (PRSP). The APR notes that the country’s poverty rates are high and the poor remain highly vulnerable to exogenous shocks. As per the latest poverty survey, fifty eight percent of the households are poor. There are concerns that the high growth in recent years was concentrated in sectors such as telecommunication and tourism which had limited impact on the poverty reduction. In February 2009 the staffs of the IMF and World Bank jointly prepared the Joint Staff Advisory Note (JSAN) on the PRSP-APR for The Gambia. The JSAN recommends the following priority tasks by the government. (a) developing a comprehensive agricultural sector strategy; (b) maintaining macro-economic stability; (c) prioritizing improvement of governance; and (d) refining PRSP performance indicators.

23