Impact of the Financial-Fuel-Food (F-3) Crisis

On the Gambian Economy

Update 5 October 2009

Institutional Support Project for Economic and Financial Governance (ISPEFG)

Ministry of Finance and Economic Affairs (MOFEA)
The Republic of Gambia
The Quadrangle, Banjul, the Gambia

1
 Impact of the Financial-Fuel-Food (F-3) Crisis
On the Gambian Economy

1. Global Financial-Food-Fuel Crisis and Economic Slowdown

It is well known that the global economy is presently passing through a critical conjecture. It
was adversely affected by three worst crises in fuel, food and financial sectors (called F-3
Crisis) in a single year in 2008 - the first massive F-3 crisis in the last 70 years since the
great depression in 1930s. Both the advanced and developing countries have adopted
various monetary and fiscal stimulus packages (such as cuts in central bank policy interest
rates, continued provision of bank liquidity, credit easing, provision of public guarantees, bail
outs and bank recapitalization etc.) to boost both investment and consumption, output and
employment. In their latest World Economic Outlook (WEO)1 of October 2009, the
International Monetary Fund (IMF) concludes that although the global economy has started
to pull out of the unprecedented recession, recovery is expected to be weak and slow, and
jobless for some time, as financial systems remain impaired, support from public policies will
gradually have to be withdrawn, and households that suffered asset price busts will continue
to rebuild savings.

As per the IMF projections made in the WEO October 2009, global growth is expected to
reach about 3 percent in 2010, following a contraction in activity of about 1 percent in 2009
(Table-1.1). During 2010–14, global growth is expected to be just above 4 percent,
appreciably less than the 5 percent growth rates in the years just ahead of the crisis.
Achieving this turnaround will depend on stepping up efforts by the governments of both
developed and developing countries to heal the financial sector, while continuing to support
demand with monetary and fiscal easing.

In recent years African economies in general experienced an economic boom contributed

by two favorable factors: namely (a) rising exports driven by high commodity prices, and (b)
increasing inflows of remittances and foreign investment. The ongoing financial crisis and
economic slowdown in the developed countries have led to reversal of these positive factors
and imposed serious adverse impact on the African economies.

Growth projections in Sub-Saharan Africa have been revised downward to 1.3 percent in
2009 while growth projection for 2010 remains unchanged at 4.1 percent. Real GDP growth
in Africa as a whole is projected to decline from an average of 6 percent in 2004–08 to 1¾
percent in 2009, before accelerating to 4 percent in 2010. This growth performance, while
disappointing in light of the experience of the mid-2000s, is still encouraging given the
severity of the external shocks. An important factor behind this outcome has been that many
governments in the region have been able to use fiscal balances as shock absorbers,
sustaining domestic demand and helping contain employment losses.

1
World Economic Outlook- Sustaining the Recovery, October 2009, IMF Washington D.C.

2
 Table-1.1 IMF WEO (Oct 2009) Projections (Annual Growth Rate in Percentage)

Source: World Economic Outlook- Sustaining the recovery, October 2009,

International Monetary Fund, Washington D.C.

3
 2. Impact on the Gambian economy

A crisis of this magnitude in the industrialized countries is bound to have an adverse impact
around the world. Gambian economy cannot be an exception to it. Although the Gambia is a
small economy, it has strong inter-linkages with the outside world. With an area of 10,380
km² (164th in the world) and population of 1.7 million (150th as per 2007 UN estimate),
Gambia is the smallest nation in African continental mainland. It has limited natural
resources and low domestic demand. Therefore, its growth depends on its external trade
and tourism, and economic growth in the neighboring countries. It has always maintained a
relatively open economy for trade and investment and market based exchange rate and
interest rate system. Re-exports, tourism, wholesale and retail trade had been traditional
drivers of growth.

Gambian total trade (exports plus imports) of goods and services as percentage of GDP was
as high as 106 percent in 2006 and presently stands at around 74% of GDP. Gross capital
flows (inflows plus outflows) amount to 15% of GDP. Gross flows on current and capital
account (i.e. total inflows plus outflows on both current and capital account) were as high as
150 percent of GDP in 2006 and now stand at almost 100 percent of GDP.

All these statistics indicate that the Gambian economy is closely linked to the developments
in the global economy and is likely to be adversely affected by the ongoing global financial
crisis and economic slowdown.

Table-2: Measures of globalization (as percentage of GDP at current market prices)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Exports of goods 41.4 35.9 42.5 42.4 46.1 41.9 41.6 37.6 31 31.1
& services

Imports of goods 55.6 48.5 59.8 61.3 67.1 59.9 64.3 53.2 43 43.1
& services

Gross Trade 97 84.4 102.3 103.7 113.2 101.8 105.9 90.8 74 74.2
(Exports plus
imports)

Gross Current 112.9 99.9 122.8 122.9 136.8 117.8 123.3 104.3 84.2 84.5
Account

Gross Capital 15.9 11.3 30.3 20 34.9 16.1 26.4 17.3 12.8 14.5
Inflow

Gross current + 128.8 111.2 153.1 142.9 171.7 133.9 149.7 121.6 97 99
Capital flows

This report summarizes the impact of the global financial-fuel-food crisis on various sectors
of the Gambian economy.

4
 2.1 Impact on real sector and economic growth

1. Although the initial global financial crisis did not have much adverse impact on the
Gambian financial sector, the second round of impact has affected adversely the real
sectors of the Gambian economy. In fact, even in the case of the developed
economies, adverse impact has shifted from the financial sectors to the real sectors
leading to loss of output and severe unemployment.

2. The sharp decline in global economic activity had adverse impact on the Gambian
economy in 2008 leading to decline of Gambian exports, tourism income and
remittances and decline of manufacturing production and wholesale and retail trade.

3. 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).

4. As per the Preliminary Estimates of the GBOS, real GDP growth in 2009 at constant
market prices is expected to be 5% supported by a growth of 5.5% in agricultural
production, 3.5% by industrial production and 5.7% in services production.

5. Share of agriculture increased from 21.6% in 2007 to 25.3% in 2009, while share of
industry declined from 14.7% to 13.2% and that of services declined from 63.7% to
61.5% during the same period. Increase of agricultural share was contributed by
increase in share of crops, while decline of services share was mainly due to decline
of share of wholesale and retail trade, and transport and communications.

GDP Composition(%) in 2009

Others
Business 7%
11%

Agriculture
Transport 26%
12% Mining
2% Manufacturing
Hotels 6%
4% Trade
26% Utilities
2% Construction
4%

Figure-2.1: Trends of sectoral growth rates during 2000-2009 (in percentage)

5
 30.0

20.0

10.0

0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-10.0

-20.0

-30.0

GDPMP Agriculture Industry Services

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2005-2009 (in
%)
Sectoral GDP Growth Rates Sectoral Shares in GDP
(in percentage) (in percentage)
Items 2006 2007 2008 2009 2009 2006 2007 2008 2009
Actual Actual Actual Estd. IMF-Proj Actual Actual Actual Estd.
GDP at 2004 basic price 3.1 6.3 6.3 5.0 3.6 100.0 100.0 100.0 100
Agriculture and allied -14.3 -1.9 26.6 5.5 4.0 23.1 21.6 25.3 25.3
-- Crops -26.3 -15.2 55.2 5.5 4.0 11.8 9.5 13.6 13.7
-- Livestock 2.4 11.9 4.3 4.5 4.0 8.8 9.4 9.0 9.0
-- Forestry 3.0 -4.0 1.0 0.7 3.0 0.7 0.6 0.6 0.5
-- Fishing 7.8 18.0 3.5 11.3 3.0 1.9 2.1 2.0 2.1
Industry 4.5 2.5 -1.2 3.5 2.6 15.1 14.7 13.4 13.2
-- Mining and quarrying 1.2 -14.1 8.8 8.8 2.0 2.4 1.9 1.9 2.0
-- Manufacturing 4.1 3.9 -8.3 0.4 4.0 7.0 7.0 5.9 5.6
-- Electricity, gas, water 8.7 59.1 1.7 10.0 5.0 1.1 1.6 1.5 1.6
-- Construction 6.0 -4.3 5.0 3.0 5.0 4.6 4.2 4.1 4.0
Services 10.0 8.3 4.2 5.7 2.4 61.8 63.7 61.3 61.5
-- Wholesale/retail trade 16.1 9.7 -2.3 1.0 2.7 28.2 29.5 26.6 25.5
-- Hotels/ restaurants 15.7 14.3 2.9 3.0 -10.0 3.6 3.9 3.7 3.6
-- Transport / telecom 2.7 7.0 -8.0 8.0 3.5 12.8 13.0 11.0 11.3
-- Financial 5.7 -0.9 28.2 3.0 1.0 7.5 7.0 8.3 8.2
-- Real est., business -3.9 1.4 0.0 2.5 1.0 3.4 3.3 3.0 3.0
-- Public administration 11.1 12.9 42.1 2.0 5.0 2.6 2.8 3.7 3.6
-- Other service 11.0 17.8 27.0 37.1 3.0 3.7 4.1 4.9 6.3
Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2009 and IMF projections for 2009
by the IMF Mission to the Gambia in May 2009.

6
 2.2 Consumer Price Index and Inflation

1. As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflation
decelerated significantly from 6.3% in Sept 2008 to 2.3% in Sept 2009, while the 12-
month average inflation rate accelerated to 5.6% in Sept 2009 from 4.3% a year ago.

2. Food and drinks (with weights of 55.2% in overall CPI) recorded an annual point-to-
point inflation rate of 2.6% in Sept 2009, down from 8.1% a year ago, and contributed
68.1% to overall inflation in Sept 2009.

3. Non-food items (with weights of 44.8% in overall CPI) recorded annual inflation rate
of 1.9% in Sept 2009, down from 4% a year ago and contributed 31.9% to overall
inflation.

4. Among other groups in Sept 2009, housing and utilities recorded an annual inflation
of 2.4%, restaurants and hotels 2.2% and miscellaneous goods and services 4.7%.

Table-2.2 CPI Inflation Rates in September 2009 (in percentage)

Items Weights Sept-2008 Sept-2009 Inflation Wi (CPIi1 – Contributio
Wi (%) Index Index (%) CPIi0) n2 (%)
Overall 100.0 118.96 121.75 2.3 265.8 100.0
Food 55.2 124.11 127.39 2.6 181.1 68.1
Tobacco 0.7 104.64 106.4 1.7 1.2 0.5
Clothing 11.3 110.46 111.82 1.2 15.3 5.8
Utilities 3.4 119.76 122.64 2.4 9.8 3.7
Furnishing 5.2 113.38 115.7 2.0 12.2 4.6
Health 1.0 101.10 101.8 0.7 0.7 0.3
Transport 4.4 119.97 119.97 0.0 0.0 0.0
Telecom 3.0 101.55 102.02 0.5 1.4 0.5
Recreation 8.0 104.13 105.07 0.9 7.5 2.8
Education 1.5 101.87 102.99 1.1 1.7 0.6
Hotels 0.4 114.52 117.08 2.2 0.9 0.3
Misc. 5.9 121.01 126.75 4.7 34.0 12.8
non-food 44.8 112.68 114.82 1.9 95.9 31.9
Source of basic data: Gambian Bureau of Statistics (GBOS).

2
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 181.1 / 265.8 = 68.1%.

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 Sub-group wise inflation in Sept 2009 (%)
Misc.
Education
Telecom
Health Series1
Utilities
Tobacco
Overall

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Contributionto Inflationin Sept 2009 (%)

Recreation
3% Others
Furnishing 15%
4% Utilities
4%
Clothing Food
6% 68%

25.0

20.0

15.0

10.0

5.0

0.0

Food Non -Food All

8
 2.3 Government Fiscal Performance in Jan-Sept 2009

• Columns (4), (5) and (6) of Table-2.3.1 present major item-wise revenue realization
and expenditure of the government in the first three quarters (i.e. Jan-Sep) of 2007, 2008
and 2009 respectively. Column (8) indicates annual percentage changes of major items
of revenues and expenditure in Jan-Sep 2009 over those in Jan-Sept 2008 (column 7).

• It may be observed from the table that, the government’s fiscal performance has
been mixed in Jan-Sep 2009 compared to Jan-Sep 2008, and it is still under pressure. In
Jan-Sep 2008 total revenues and grants declined by 0.5%, as tax revenues increased
marginally by 0.3% while non-tax revenues declined by 18.2% over Jan-Sep 2007. On
contrast, Jan-Sep 2009 has witnessed an increase in total revenue and grants by 15.6%
aided by 16.1% increase in taxes, marginal decline by 0.9% in non-tax revenues and
46.2% increase in grants.

• During Jan- Sep 2009, total expenditures and net lending has increased by 22.3%
over Jan- Sep 2008 due to 13% increase in current expenditure and 54.4% increase of
capital expenditure and net lending over Jan- Sep 2008.

• Overall, there is a fiscal deficit of D321 million, and basic deficit of D8.5 million in
Jan-Sep 2009, compared to a lower fiscal deficit of D109 million and basic surplus of
D143.6 million in Jan- Sep 2008.

Table-2.3.1 Govt Financial Performance in Jan-Sep 2009 compared with Jan-Sep 2008
2008 2009 2007 2008 2009 % change % change
Items Actual Budget Jan-Sep Jan-Sep Jan-Sep In Jan- In Jan-
Mln Dal. Estimate Actual Actual Actual Sep 2008 Sep 2009
Mln. Dal. Mln Dal. Mln Dal. Mln Dal. over Jan- over Jan-
Sep 2007 Sep 2008
(1) (2) (3) (4) (5) (6) (7) (8)
Revenue and grants 3645 4582 2823.9 2810.7 3249.8 -0.5 15.6
Domestic Revenue 3479 3771 2747.7 2690.3 3073.8 -2.1 14.3
Tax Revenue 3161 3391 2389.3 2397.2 2783.3 0.3 16.1
Nontax Revenue 318 380 358.4 293.1 290.5 -18.2 -0.9
Grants 166 811 76.2 120.4 176.0 58.0 46.2
Exp & Net Lending 4135 5363 2645.8 2919.7 3571.0 10.4 22.3
Current Expenditure 3011 3838 1906.1 2262.4 2556.1 18.7 13.0
Personnel Emoluments 906 1035 488.0 681.9 787.7 39.7 15.5
Other Charges 1398 1958 779.7 1033.3 1181.9 32.5 14.4
Interest 708 845 638.4 547.2 586.5 -14.3 7.2
External 154 147 202.1 111.6 126.7 -44.8 13.5
Domestic 555 698 436.3 435.5 459.8 -0.2 5.6
Cap Exp & Net Lending 1123 1525 739.7 657.3 1014.9 -11.1 54.4
Capital Expenditure 1017 1468 664.1 586.2 905.8 -11.7 54.5
Net Lending 107 57 75.7 71.1 109.1 -6.1 53.5
Overall Bal Inc. grants -490 -781 178.2 -109.0 -321.2 -161.2 194.6
Basic balance -156 -268 687.2 143.6 -8.5 -79.1 -105.9
Basic Primary Bal 553 577 1325.5 690.8 578.0 -47.9 -16.3
Nominal GDP (GBOS) 22590 25023 20413 22590 25023 10.7 10.8
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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 • Column (2) of Table-2.3.2 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 budgeted at 3.1% of GDP compared to 2.2% of GDP
recorded in 2008.

• Columns (4), (5) and (6) of Table-2.3.2 present the major item-wise performance of
revenues and expenditure in Jan-Sep of 2007, 2008 and 2009 respectively, as
percentages of the corresponding nominal GDP (as estimated by GBOS) 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-Sep 2009 than those in Jan-
Sep 2008.

• The revenue and expenditure ratios to GDP are also observed to be on track in Jan-
Sep 2009 (column-6) as compared with the 2009 budget estimates (column-3).

Table-2.3.2 Govt Financial Performance in Jan-Sep 2009 compared with Jan-Sep 2008
2008 2009 2007 2008 2009 2008 2009
Actual Budget Jan-Sep Jan-Sep Jan-Sep Jan-Sep Jan-Sep
Items as % of as % of as % of as % of as % of as % of as % of
GDP GDP GDP GDP GDP Outturn Budget
(1) (2) (3) (4) (5) (6) (7) (8)
Revenue and grants 16.1 18.3 13.8 12.4 13.0 77.1 70.9
Domestic Revenue 15.4 15.1 13.5 11.9 12.3 77.3 81.5
Tax Revenue 14.0 13.5 11.7 10.6 11.1 75.8 82.1
Nontax Revenue 1.4 1.5 1.8 1.3 1.2 92.3 76.4
Grants 0.7 3.2 0.4 0.5 0.7 72.7 21.7
Exp & Net Lending 18.3 21.4 13.0 12.9 14.3 70.6 66.6
Current Expenditure 13.3 15.3 9.3 10.0 10.2 75.1 66.6
Personnel Emoluments 4.0 4.1 2.4 3.0 3.1 75.3 76.1
Other Charges 6.2 7.8 3.8 4.6 4.7 73.9 60.4
Interest 3.1 3.4 3.1 2.4 2.3 77.2 69.4
External 0.7 0.6 1.0 0.5 0.5 72.7 86.0
Domestic 2.5 2.8 2.1 1.9 1.8 78.5 65.9
Cap Exp & Net Lending 5.0 6.1 3.6 2.9 4.1 58.5 66.6
Capital Expenditure 4.5 5.9 3.3 2.6 3.6 57.7 61.7
Net Lending 0.5 0.2 0.4 0.3 0.4 66.6 192.5
Overall Bal -2.2 -3.1 0.9 -0.5 -1.3 22.2 41.1
Inc.grants3
Basic balance4 -0.7 -1.1 3.4 0.6 0.0 -92.3 3.2
Basic Prim. Balance5 2.4 2.3 6.5 3.1 2.3 124.9 100.1
Source: Economic Planning and Management Unit (EMPU), DODFEA.

3
(1) Overall balance= (Revenue and grants) minus (expenditure and net lending).
4
(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

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 2.4 Domestic Debt and Treasury Bills Outstanding

• At the end of Sept 2009, outstanding domestic debt stood at D5.9 billion (amounting
to 23.7% of GDP), down from the outstanding domestic debt at D6.1 billion
(amounting to 27% of GDP) a year ago.

• The share of Treasury bills increased from 79.6% at the end of Sep 2008 to
84.5% at the end of Sep 2009, share of Sukuk Al-Salam remained unchanged at 2%,
that of Government bonds increased marginally from 4.1% to 4.2%, while that of NIB
treasury bills declined from 14.2% to 9.2% over the period.

Table-2.4-A Outstanding Domestic Public Debt as on 30 Sep 2009

Type of debt Million Dalasi % change in Composition

June2009 (in percentage)
30 Sep 30 Sep over June 2008 30 Sep 30 Sep
2008 2009 2008 2009
Treasury bills 4,860 5,005 3.0 79.6 84.5
Sukuk Al-Salam 122 120 -1.7 2.0 2.0
Government Bonds 250 250 0.0 4.1 4.2
NIB Treasury Notes 873 547 -37.4 14.3 9.2
Total 6,105 5,922 -3.0 100 100
Nominal GDP 22590 25023
(GBOS)
As % of nominal 27.0 23.7
GDP

Domestic Debt Sustainability

As per the analysis made by the CBG, the current level of Gambia’s domestic debt is
unsustainable. Out of three sustainability indicators given in Table-2.6.B, only one indicator
viz. debt to revenue ratio is satisfied. However, debt to GDP ratio may be satisfied during
2009.

Table-2.4-B 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 30
3. Debt to revenue 92-167 180 158 166 147
ratio
Note: (1) Debt service is 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

2.5 External Debt and Aid

11
• 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, with IDA as the largest creditor (39
percent of total outstanding debt).

• At end-2007, post-completion point, the stock of external public debt fell to US$299.4
million (46.0 percent of GDP).

• The latest IMF Debt Sustainability Analysis (DSA) concludes that The Gambia
remains at a high risk of debt distress after HIPC and MDRI debt relief due to the
high level of debt as well as the country’s vulnerability to shocks.

• The World Bank’s Country Policy and Institutional Assessment (CPIA), classifies The
Gambian economy as a “poor performer” based on an average of the ratings for the
preceding three years. Table below presents the policy-dependent debt burden
thresholds. The PV of debt-to-GDP and the PV of debt-to-revenue ratios remain
comfortable. Debt service payments remain manageable throughout the projection
period, rising no higher than 10 percent of exports and revenue. But, the PV of debt-
to-exports ratio breaches the debt-burden threshold for a protracted period.

• Presently, Ministry of Finance and Economic Affairs is actively engaged in

establishing a fully computerized debt recording and management system and
formulating a debt management strategy. As per the latest compilation, the
outstanding external debt is estimated to be US$328 million (amounting to 31.4% of
GDP) at the end of 2008.

• The Ministry has also set up a separate Directorate for the Aid Management and has
prepared a comprehensive report on aid coordination for the first time.

Table 2.5: Policy Dependent Debt Burden Thresholds

Under Debt Sustainability Framework

Indicators Strong Moderate Weak The

Performer Performer Performer Gambia
2008
NPV of External Debt to GDP Ratio (%) 50 40 30 22

NPV of External Debt to Exports Ratio 200 150 100 117

(%)
NPV of External Debt to Revenue Ratio 300 250 200 117
(%)
Debt service to Exports Ratio (%) 25 20 15 9

Debt Service to Revenue Ratio (%) 35 30 25 9

Source: International Monetary Fund, Washington D.C.

12
 2.6 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 CPI inflation from 7% in January 2009 to 2.3%
in Sep 2009, Average yields on the 91-day and 364-dat treasury bills remained
unchanged at 10.4% and 14.3% respectively and yield of 182-day bills declined
marginally from 12.1% in Jan 2009 to 11.7% in Sep 2009.

• 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
instruments and policies.

Table-2.6 Average yields on treasury bills (in percentage per annum)

2007 2008 2009
91-D 162-D 364-D 91-D 162-D 364-D 91-D 162-D 364-D
Jan 10.5 12.7 13.6 10.6 11.4 13.6 10.5 12.1 14.4
Feb 12.0 13.4 13.8 10.9 11.9 13.7 11.1 12.8 14.4
Mar 12.6 13.4 13.7 11.0 12.1 13.6 11.4 12.7 14.4
Apr 13.0 13.4 13.8 10.9 11.9 13.3 12.0 13.0 14.6
May 12.8 13.3 13.8 10.2 11.3 13.0 12.5 13.8 15.3
Jun 12.6 13.1 13.9 10.0 11.2 13.3 13.0 13.8 15.6
Jul 12.5 13.2 13.9 9.6 10.6 12.6 11.5 12.0 14.4
Aug 12.6 12.9 13.6 8.8 10.2 12.1 10.2 11.2 13.3
Sep 11.6 12.2 12.9 8.9 11.0 13.1 10.4 11.7 14.3
Oct 10.6 11.7 12.5 10.3 11.4 13.6
Nov 10.5 11.5 12.5 10.1 13.4 13.7
Dec 10.4 11.6 13.6 9.9 12.5 14.0

Trends of Yields of Treasury Bills during 2007-2009

45
40
35
30
25
20
15
10
5
0

91-D 162-D 364-D

13
 2.7. Money Supply

• Broad money supply (M2) recorded an annual growth of 20.7%, compared to 11.1
percent a year ago. While quasi money increased by a faster pace of 27.1 percent,
narrow money increased by 14.2 percent. Reserve money grew by 2.7 percent,
higher than an increase of 0.9 percent recorded a year ago.

• On the supply side, 20.7% growth in broad money supply in Sept 2009 was
supported by 4% growth in currency, 20.1% growth in demand deposits, 17.8%
growth in savings deposits and 40.7% growth in time deposits.

• On the demand side, growth was mainly due to 32.7% growth in net foreign assets,
while net domestic assets increased by only 12.7% over a year ago.

• Domestic credit increased from D5.8 billion in Sept 2008 to D6.9 billion in Sept 2009,
supported by 21.3% growth in government borrowing, 82.9% growth in credits to
public entities and 13.3% growth in credits to the private sector, over a year ago.

Table-2.7 Money Supply and Demand in Sept 2009

Components Sep 2008 Sep Sep 2008 Sep Sep 2009 %
Million 2009 % share 2009 change over Sep
Dalasi Million Dalasi % share 2008
1.Money Supply (M2) (2+3) 8770 10585 100 100 20.7
2.Narrow Money (2.1+2.2) 4360 4979 50 47 14.2
2.1 Currency 1599 1663 18 16 4.0
2.2 Demand deposits 2760 3315 31 31 20.1
3.Quasi money (3.1+3.2) 4410 5606 50 53 27.1
3.1 Savings deposits 2617 3083 30 29 17.8
3.2 Time deposits 1793 2523 20 24 40.7
Demands for money (1+2) 8770 10585 100 100 20.7
1.Net foreign assets (1.1+1.2) 3494 4637 40 44 32.7
1.1 Monetary Authorities 3087 3934 35 37 27.4
1.2 Commercial banks 407 703 5 7 72.8
2.Net Dom. Assets (2.1+2.2) 5277 5949 60 56 12.7
2.1 Domestic credit 5835 6909 67 65 18.4
(a) Credits to government 2132 2587 24 24 21.3
(b) Credits to public entities 482 881 5 8 82.9
(c) Credits to private sector 3038 3442 35 33 13.3
(d) Credits to forex bureau 183 0 2 0 -100.0
2.2 Other items, net -558 -961 -6 -9 72.2
Reserve Money 2572 2844 10.6
Source: Central Bank of Gambia

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 2.8 Performance by Commercial Banks

• The Gambian banking industry consists of 13 banks with highly skewed distribution
of assets. The industry continues to be dominated by three large banks which
accounted for 64.4% of the total assets at the end of September 2009, although their
share has declined from 67% a year ago.

• The banking industry remains sound. Total industry assets increased by 21% on
year-on-year basis from D11.3 billion at end-Sep 2008 to D13.7 billion at end-Sep
2009.

• Gambian banks do not have large exposure to foreign assets or foreign liabilities.
Banks also do not have large contingent liabilities. At end-Sep 2009 contingent
liabilities constituted 13.2% of total liabilities, compared to 10.3% a year ago.

• At end-Sept 2009, loans and advances constituted 30% of total assets and the ratio
remained fairly stable during 2009. The notable sectoral increases of bank loans in
September 2009 were for manufacturing, construction, tourism and fishing, while
loans to agriculture recorded decline over last year’s lending.

• At end-Sept 2009, investments in government Treasury Bills by the banks constituted

about 26% of their total assets. As expected, three large banks had the dominant
share.

• The Banking sector continues to function efficiently with sufficient capital and
liquidity. The industry’s risk-weighted capital adequacy ratio stood at 34.84% in
March 2009, and 33.22% in Sept 2009 significantly above the statutory requirement
of 8%.

• Non-performing loans rose from 7.3% in Sep 2008 to 9.5% in Dec 2008, but declined
to 7% in Sept 2009 compared to 9.95 percent a year ago, and were adequately
provisioned in compliance with the statutory norms and requirements.

• However, commercial banks’ Return on Assets (ROA) declined from 2.10% in March
2008 to 0.9% in Sep 2008. ROA declined further to 0.49% at the end of Sep 2009.

Table-2.9 Banks’ total loans and non-performing loans (NPL) by sectors in Sept 2009
Sectors Sep 2008 Sep 2009 Sep Sep 2009 Sep 2009 NPL NPL
Million Million 2008 % % share % change Ml. D. as %
Dalasi Dalasi share over Sep of
2008 Total
1. Agriculture 148 136 5 3 -8.4 5.9 4.3
2. Fishing 17 25 1 1 43.0 10.4 42.0
3. Manufacturing 117 195 4 5 67.4 3.1 1.6
4. Building 342 512 11 12 49.6 62.8 12.3
5. Transport 281 355 9 8 26.3 21.4 6.0
6. Distribution 831 931 26 22 12.0 103.1 11.1
7. Tourism 195 293 6 7 50.5 22.2 7.6
8. Financial sector 125 126 4 3 0.8 12.9 10.2
9. Others 1140 1624 36 39 42.5 71.8 4.4
10. Total 3196 4197 100 100 31.3 313.5 7.5

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 2.9 BOP, Foreign Exchange Reserves and Exchange Rates

(a) BOP 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 a 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%.

(b) BOP Situation in 2009-Q1

Provisional BOP 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.

(c) BOP Situation in 2009-Q2

Preliminary BOP estimates for the first half of 2009 (i.e. Jan-June 2009) indicated that the
overall deficit narrowed to D348.44 million in 2009 from D376.5 million in Jan-June 2008.
The current account recorded a surplus of D163.48 million in Jan-June 2009 compared to a
deficit of D276.1 million in Jan-June 2008. The capital and financial account balance
worsened to deficit of D511.92 million in Jan-June 2009 from a deficit D100.4 million in Jan-
June 2008 reflecting the decline in reinvested earnings and equity capital.

The goods account balance improved from a deficit of D1.4 billion in Jan-June 2008 to D1.1
billion in Jan-June 2009 attributed to the surge in exports which more than offset the
increase in imports. Exports, including re-exports rose to D2.2 billion in Jan-June 2009
compared to D1.4 billion Jan-June 2008.

(d) Foreign Exchange Reserves and Exchange Rates

Volume of transactions in the domestic foreign exchange market contracted to US$1.3 billion
in the year to end-September 2009 from US$1.6 billion a year earlier. The domestic currency
depreciated by 7.9 percent on the overall nominal exchange rate index of currencies
compared to an appreciation of 1.6 percent in the preceding year. From December 2008 to
end-September 2009, the Dalasi depreciated against the British Pound, US Dollar, CFA
Franc and euro by 7.1 percent, 17.5 percent, 9.4 percent and 8.2 percent respectively.

Gross official reserves, including Special Drawing Rights (SDR) allocation from the
International Monetary Fund (IMF), as at end-September stood at US$141.3 million,
equivalent to 6.0 months of import cover.

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