Press Release April 27, 2007

1. Global economic growth is expected to moderate to 4.9 percent in 2007, from 5.1 percent in 2006. Although economic growth in the US has slowed down, spillovers have been limited. Global output growth looks well sustained, and inflationary pressures moderated.
Expectations of continued robust economic growth and dissipating inflation worries have contributed to buoyant global financial market conditions. The international currency markets continued to remain fairly strong with the Euro and Pound Sterling strengthening, while the U.S. Dollar weakened in the first quarter of 2007.

2. The Gambian economy is expected to remain solid in 2007.
Although real GDP growth is expected to moderate to 7.0 percent in 2007 from 7.7 percent in the preceding year, this growth rate is expected to be sustained with increased value-added of all the major sectors.

3. Monetary policy in 2007 continues to support Government’s macroeconomic objective of maintaining low inflation, stable exchange rate, and non-volatile economic growth.
Money supply grew by 23.2 per cent in the year to end-February
2007, compared to 12.1 percent a year earlier. However, money supply increased by 3.1 percent from end-December 2006.
Reserve money, the Bank’s operating target, grew by 12.9 percent compared to 9.6 percent a year ago. From end-December 2006, reserve money declined by 3.1 percent.

4. During the first three months of 2007, inflationary pressures were well contained, underpinned by prudent monetary policy. End-period inflation as measured by the consumer price index (CPI), declined from 1.7 percent in March 2006 to 1.4 percent in March 2007.
Average inflation rate (12 month moving average) was 1.4 percent compared to 2.4 percent a year earlier.
Food consumer price inflation declined to 0.1 percent compared to
0.7 percent in March 2006. Consumer price inflation of all food subgroups declined. Non-food consumer price inflation on the other hand, rose to 4.3 percent from 3.8 percent at end-March 2006 as a result of a marked increase in the prices of housing to 32.5 percent compared to 0.7 percent in the preceding year. Core inflation remained unchanged at 1.5 percent in March 2007, compared to the preceding year.

5. Government’s fiscal position improved markedly during the first quarter of 2007, owing to improved tax collections as a result of structural reforms.
During the first quarter, 2007, total revenue and grants increased to D986.7 million or 34.6 percent from the previous quarter. Domestic revenue rose by 32.9 percent to D965.3 million, due to significant increases in both tax and non-tax revenue.
Total expenditure and net lending increased by 19.3 percent from the last quarter to D755.2 million in the first quarter, 2007 and was below projection by 33.7 percent.
The fiscal position on commitment basis including grants, improved from a surplus of D100.1 million in the fourth quarter, 2006 to a surplus of D231.5 million in the first quarter of 2007.

6. The Dalasi remained stable, supported by increased private sector inflows, tourism receipts and sustained foreign direct investment.
Transaction volumes in the inter-bank market for foreign exchange increased to D10.63 billion in the first quarter of 2007 from D7.61 billion the same period last year.

7. The banking industry remained sound, underpinned by increased profitability, growth in deposits and assets as well as declining nonperforming loans. Total industry assets increased to D9.6 billion, or
3.82 percent from December 2006. Average Capital Adequacy ratio for the industry stood at 31.84 percent, higher than the minimum requirement of 8.0 percent.

8. The balance of payments projections for 2007, indicate an overall balance of payments surplus of D865.97 million ($30.92 million) in
2007 compared to D606.19 million ($21.64 million) in 2006. This is premised largely on the implementation of sound macroeconomic policies, increased tourism receipts and foreign inflows including expected HIPC debt relief under the PRGF program.

9. The near term outlook for the Gambian economy is positive.
Inflationary expectations subdued, exchange rate remained stable and the external sector continues to improve. However, there are downside risks to the forecast, in particular, volatility of oil prices and unexpected fiscal slippages.

10. Taking the above factors into consideration, including risks to the inflation outlook, the MPC decided to maintain the rediscount rate, the policy rate, at 14.0 percent. The MPC would continue to monitor the situation and if the outlook changes, the Committee would review its stance.