The Monetry Policy Commitee of the Central Bank of The Gambia, has projected that economic gains observed over the past two years, is expected to be sustained in the near term.

This was contained in a press release issued by the Bank on Friday. Below we reproduce the full text of the release from the Bank: “The economic gains observed over the past two years are expected to be sustained in the near term. Growth in Gross Domestic Product (GDP) is projected at 7.0 percent in 2007, slightly lower than 7.7 percent in 2006 but within the 6-7 percent commonly used as a marker if a country is to achieve the Millennium Development Goals of reducing poverty by half in 2015. Monetary policy continues to focus on sustaining price stability, a necessary condition for strong and non-volatile economic growth.

Money supply grew by 26.2 percent in 2006, higher than the target of 13.0 percent. Both components of money supply increased. Quasi money grew by 26.5 percent and narrow money (26.0percent).Reserve money, the bank’s operating target, increased by 24.3 percent, higher than the target of 12.7 percent.

Inflationary pressures remain subdued. Headline inflation, measured by the consumer price index, declined from 1.8 percent in December 2005 to 1.4 percent at end-December 2006. The increase in non-food consumer price inflation of 4.4 percent is as a result of an increased in the consumer price inflation of housing to 32.6 percent which was offset by zero growth in food consumer price inflation.

Core inflation, which excludes prices of energy and volatile food items, decelerated from 1.6 percent in December 2005 to 1.5 percent at end-December 2006. Fiscal policy in 2007, aims to inter alia, consolidate macroeconomic stability. The fiscal deficit including grants is estimated at 0.2 percent of GDP compared to 3.1 percent in 2006. The fiscal consolidation should contain domestic borrowing, reduce the domestic debt and put downward pressure on interest rates. Lower interest rates would stimulate private investment, as well as create fiscal space for increasing priority government expenditure.

Revised balance of payments projections indicate that the current account deficit, including official transfers will narrow to D0.6 billion in 2006 from D1.24 billion in 2005. The capital and financial account balance, on the other hand, is estimated at D1.12 billion in 2006 relative to D2.2 billion in 2005. As a result, the overall balance is estimated at a surplus of D525.1 million (US$18.7 million) but lower than D960.48 million (US$34.2 million) in 2005. Gross official reserves increased to D3.4 billion (US$120.1million) compared to D2.7 billion (US$97.6 million) in 2005.

Reflecting strong macroeconomic fundamentals, including healthy reserves and increased foreign inflows, the dalasi remains stable. Transaction volumes in the inter-bank foreign exchange market rose to D34.1 billion in 2006 relative to D22.6 billion in 2005.

The banking sector remains fundamentally safe and sound. Total assets of the industry increased to D9.29 billion in 2006, or 20.0 percent from 2005. The average capital adequacy ratio was 32.5 percent, higher than the minimum requirement of 8.0 percent. All the banks observe the requirement. The highest ratio was 113.6 percent and the lowest (18.1 percent).

The Executive Board of the International Monetary Fund (IMF) approved a three year arrangement under the Poverty Reduction and Growth Facility in an amount equivalent to US$21.0 million in support of government’s economic programme from 2007-2009. The primary objectives of the programme are to consolidate recent macroeconomic achievements, sustained the high growth rate and reduce poverty. Successful implementation of the programme for at least six months is one of the pre-requisites for reaching completion point under the enhanced initiative for heavily indebted poor countries and to become eligible for substantial debt relief.

The near-term outlook for the Gambian economy is favourable consequent of robust growth in output, improved financial conditions and growing confidence looking forward. Inflationary pressures are expected to remain benign, but there are downside risks to the forecast primarily relating to the repaid growth in money supply, volatility in oil prices and high inflationary expectations.

Taking the above factors into consideration, concluding the risks to the inflation outlook, the MPC decided to maintain the rediscount rate, the policy rate, at 14.0 percent. The MPC will continue to monitor the situation and if the outlook changes, the committee will review its stance”.