gambia monthly economic bulletin october 2010

8/8/2019 Gambia Monthly Economic Bulletin October 2010

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The Gambia Monthly Economic Bulletin- October 2010

THE GAMBIA MONTHLY

ECONOMIC BULLETIN1

October 2010

Institutional Support Project for Economic and Financial Governance (ISPEFG)Ministry of Finance (MOF)The Republic of Gambia

The Quadrangle, Banjul, the Gambia

1TheGambia Monthly Economic Bulletinprovides an update on the recent economic developments andpolicies in the Republic of the Gambia. This Bulletin has been prepared, under the overall guidance of the

Honorable Permanent Secretary Mr. Serign Cham, by a research team comprising Tarun Das,

Macroeconomic Adviser (ISPEFG); Momodou Taal, Director; Lamin Camara, Principal Economist and

Ms. Ceesay Chiel, Senior Economist and Alhagi Jalllow, Economist in the Statistics and Special Studies

Division (SSSD), Ministry of Finance; with key inputs from the Central Bank of Gambia (CBG), the

Gambian Bureau of Statistics (GBOS), and the Gambian Revenue Authority (GRA).

It may also be noted that the views expressed in this Bulletin solely indicate the views of the Research

Team, which need not necessarily imply the views of the MOF, the other budgetary agencies or the

organizations they are associated with.

Any questions and feedback can be addressed to: Tarun Das ([email protected])

1
mailto:[email protected]:[email protected]


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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 DecemberItems (Year) Units Value Rank in the World

from topin descending order

Area (2009) Sq. km. 11,300 171 out of 248countries

Population (2008) Million 1.735 148 out of 241countries

GDP PPP (2006) Million US$ 2061 184 out of 229countries

GDP Nominal (2006) Million US$ 511 199 out of 229countries

GDP PPP per capita (2006) US$ 1921 140 out of 169countries

GDP per capita (2006) US$ 329 192 out of 207countries

Poverty Ratio (% of peoplebelow One-US$ per day) (2004)

Percent 59 7 out of 95 countries

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Source: http://www.nationmaster.com

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Contents

Items Page

Basic Facts about the Gambia 2

Contents 3

ISPEFG Project/ Research Team and Document History 4

Highlights 5-6

At a Glance 7

1. Global Economic Outlook

1.1Global recovery is stronger than expected but risks rise1.2Global inflation pressures are generally subdued but diverge

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2. Current State of the Gambian Economy

2.1 Overall and Sectoral GDP Growth Rates2.2 Consumer Price Index (CPI) and Inflation2.3 Projection of CPI inflation for the year 20102.4 Producers Price Index (PPI)2.5 Government Fiscal Performance2.6 Additional Revenue Measures2.7 Domestic Debt and Outstanding Treasury Bills2.8 Treasury Bills Yields2.9 Money Supply

2.10 Performance of Commercial Banks2.11 Commercial Banks Assets2.12 Commercial Banks Liabilities2.13 Interest Rates and Central Banks Policy Rates2.14 BOP, Foreign Exchange Reserves and Exchange Rates2.15 Exchange Rates

13-2913151718192021222324

2526272830

3. Recent Policy Developments and Development Issues 3.1 Budget Call Circular for Preparation of 2011 Budget

3.2 IMF Technical Assistance Missions on VAT Tax Administration andPublic Financial Management (PFM) Reforms

31-343134

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ISPEFG Project and Monthly Economic Bulletin Research Team

Project Supervisor Mr. Serign Cham,Honorable Permanent Secretary

Acting Project Coordinator Mr. Mod K Ceesay,Director (Debt)

Director (SSSD)Principal Economist (SSSD)Senior Economist (SSSD)Economist (SSSD)

Mr. Momodou TaalMr. Lamin CamaraMs. Ceesay ChilelMr. Alhagie Jallow

Technical Assistants:Macroeconomic AdviserDebt Adviser

Fiscal/ Financial Adviser

Dr. Tarun DasMr. Adam Aikuta

Mr. Dan Mwanje

Document History:

This report is an update of the following reports prepared by the Research Team:

1. The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009.2. The Gambia Monthly Economic Abstract, pp.1-16, 31 March 2009.3. The Gambia Monthly Economic Bulletin, pp.1-40, 30 April 2009.4. The Gambia Monthly Economic Abstract, pp.1-16, 30 April 2009.5. The Gambia Monthly Economic Bulletin, pp.1-39, 31 May 2009.6. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009.7.

The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, June 2009.8. The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, June 2009.9. The Gambia Monthly Economic Abstract, pp.1-16, June 2009.10.The Gambia Monthly Economic Bulletin, Part-1, pp.01-22, July 2009.11.The Gambia Monthly Economic Bulletin, Part-2, pp.23-46, July 2009.12.The Gambia Monthly Economic Abstract, pp.1-16, July 2009.13.The Gambia Monthly Economic Abstract, pp.1-16, August 2009.14.The Gambia Monthly Economic Abstract, pp.1-16, September 2009.15.The Gambia Monthly Economic Bulletin, pp.1-25, October 2009.16.The Gambia Monthly Economic Bulletin, pp.1-37, November 2009.17.The Gambia Monthly Economic Bulletin, pp.1-37, December 2009.18.The Gambia Monthly Economic Bulletin, pp.1-36, January 2010.19.The Gambia Monthly Economic Bulletin, pp.1-40, February 2010.20.The Gambia Monthly Economic Bulletin, pp.1-40, March 2010.21.The Gambia Monthly Economic Bulletin, pp.1-31, June 2010.22.The Gambia Monthly Economic Bulletin, pp.1-36, July 2010.23.The Gambia Monthly Economic Bulletin, pp.1-36, August 2010.

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HIGHLIGHTS

Global Economic Recovery Is Stronger than Expected, but Speed Varies and Risks Rise

As per the IMF latest World Economic Outlook (WEO Oct 2010) Global economic recovery is proceedingbroadly as expected, but downside risks remain elevated. Most advanced economies and a few emerging

economies still face large adjustments and major social challenges with sluggish pace of recovery andhigh unemployment. By contrast, many emerging and developing economies are again seeing stronggrowth, because they did not experience major financial excesses just prior to the Great Recession.

World output is expected to grow by 4.8% in 2010 followed by 4.2% in 2011. IMF forecasts continuingglobal recovery, but cautioned that renewed financial turbulence and euro area problems cloud theoutlook. Sub-Saharan Africa has weathered the global crisis well and is expected to recover rapidly fromthe slowdown in 2009. Although some middle-income and oil-exporting economies were hit hard by thecollapse in export and commodity markets, the region managed to grow by 2.6% in 2009. Its growth isprojected to accelerate to 5% in 2010 and further to 5.5% in 2011.

Global Inflation Pressures are Subdued and Oil Prices are Moderate

Inflation is projected to stay low amid continued excess capacity and high unemployment. Marketindicators suggest that commodity prices should remain stable and headline and core inflation shouldconverge to about 1.25% in 2011 in advanced economies and to about 5% in emerging economies.

Average Brent crude oil prices reached peak level at $84.98 per barrel in April 2010, but started decliningsince then and reached US$74.74 in July 2010. It started rising again and stood at US$77.79 per barrelcompared to US$67.70 per barrel a year ago. In line with futures market developments, the IMFsbaseline petroleum price projection has been revised to $76.20 in 2010 and $78.75 in 2011.

Impact on the Gambian Economy

Global recession had adverse impact on the Gambian economy in 2008 leading to decline of exports andremittances and decline of manufacturing production, distributive trade, transport and telecom. However,

thanks to bumper crops and very good performance by electricity, telecom and financial sectors, the realGDP growth improved from 6% in 2007 to 6.3% in 2008.

As per revised estimates by GBOS, real GDP growth in 2009 is estimated to be 5.6% supported by agrowth of 9.8% in agriculture, 2.1% by industry and 4.3% in services production. With expected normalmonsoons, real GDP growth in 2010 is projected to be 5% aided by a growth of 4.6% in agriculture, 5.1%by industrial production and 4.9% in services production.

CPI Inflation

Annual point-to-point CPI inflation accelerated significantly from 2.3% in Sept 2009 to 6.2% in Sept 2010.However, the 12-month average inflation rate decelerated from 5.6% in Sept 2009 to 4.2% in Sept 2010.Food and drinks recorded an annual point-to-point inflation rate of 8.2% in Sept 2010, up from 2.6% a

year ago, while non-food items recorded annual inflation rate of 2.9% in Sept 2010, up from 1.9% a yearago. Among other groups, transport recorded an inflation of 24.3%, clothing 1.8%, utilities 2.2%,restaurants and hotels 9.4% and miscellaneous items 7.5% in Sept 2010.

Government Fiscal Performance

Governments fiscal performance was not satisfactory in Jan-Aug 2010 compared with Jan-Aug 2009. Taxrevenues in Jan-Aug 2010 showed no growth over Jan-Aug 2009 compared with a growth of 18.1% inJan-Aug 2009 over Jan-Aug 2008. However, there was better performance of non-tax revenues in Jan-Aug 2010 than in Jan-Aug 2009.

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Despite significant contraction of expenditure, basic balance was negative at (-) 0.5% of GDP comparedto budget target at 0% of GDP, and overall fiscal deficit at 2% of GDP in Jan-Aug 2010 was significantlyhigher than the budget target at 1% of GDP for the year 2010.

Domestic Debt and Treasury Bills Yields

Including CBG support, the total outstanding domestic debt increased to D7.8 billion (27.5% of GDP) atend-Sept 2010, from D6.9 billion (26.8% of GDP) a year ago. Outstanding Treasury bills increased by5.9% to D5.3 billion and accounted for 67.7% of the stock (including TMA overdraft).

Yields on treasury bills fluctuated widely in recent months. In view of the declining trend of inflation rates,the Monetary Policy Committee reduced the policy rate by 2 percentage points to 14% with effect fromDecember 2009. Subsequently, due to inflationary pressures, policy rate was raised to 15% with effectfrom 31 Aug 2010.

Money Supply and Commercial Banks Performance

Broad money supply (M2) recorded an annual growth of 19.5% in Aug 2010, compared to 18.9% a yearago. Quasi money increased by a faster rate of 26.4%, than the growth rate of 11.7 percent by narrowmoney. On the supply side, 19.5% growth of broad money in Aug 2010 was supported by 14.4% growth

in currency in circulation outside banks, 10.3% growth in demand deposits, 11.1% growth in savingsdeposits and significant growth of 45% in time deposits.

On the demand side, growth was mainly due to 39% growth in net domestic assets net while net foreignassets declined by 23.1 percent over a year. Domestic credits increased by 39.1% from D6.7 billion inAug 2009 to D9.4 billion in Aug 2010, supported by 67% growth in government borrowing and 28.4%growth in credits to the private sector, while credits to public entities declined by 8.5% over one year.

The banking industry continues to show increasing signs of resilience with growth in assets, capital andreserves. The industrys total assets increased to D15.6 billion in June 2010, up by 18.4% over a year,and the asset quality is satisfactory.

The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to 18.7% in March

2010 and was well above the statutory norm at 8%. However, nonperforming loans as a ratio of grossloans deteriorated from 12.0% in December 2009 to 16.9% in March 2010.

Balance of Payments, Foreign Exchange Reserves and Exchange Rate

Revised BOP estimates for 2009 indicate a decline in the overall balance from a surplus of

US$23.35 million in 2008 to a deficit of US$6.79 million. While the current account improved to a

surplus of US$63.29 million relative to a deficit of US$12.35 million in 2008, the capital and financial

account balance recorded a deficit over the period relative to the surplus recorded a year ago.

The year 2010 has started with a significant improvement in the overall BOP situation as comparedwith that in the first quarter of 2009. Current account recorded a surplus of D642 million in 2010-Q1compared to a deficit of (-) D108 million in 2009-Q1, and the overall balance of payments showed asurplus of D746 million in 2010-Q1 compared with a deficit at (-) D859 in 2009Q1.

At end-April 2010, gross international reserves, including the SDR allocations, stood at US$178.63million, equivalent to 7.0 months of import cover.

Over one year, in July 2010 Dalasi depreciated against US$ by 4.6%, against SEK by 4.5%, against

CHF by 2.5% and against CFA by 1.5%, while it appreciated against Euro by 2.8% and against the

UK marginally by 0.2%.

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At a Glance- October 2010

EconomicIndicators

LatestReference

Period

Status in thelatest reference

period

Status in theCorresponding

period a year ago

Outlook for 2010

Real GDP (MP)

Growth rate (%)

2009 Overall 5.6

Agriculture 9.8Industry 2.1Services 4.3

Overall 6.3

Agriculture 26.6Industry (-) 1.2Services 4.2

Overall 5.0

Agriculture 4.6Industry 5.1Services 4.9

CPI inflation (%) Aug 2010 Overall 6.2Food 8.2Non-food 2.9

Overall 2.3Food 2.6Non-food 1.9

Expected to remainmoderate around 5percent.

Brent crude oilprice (US$/ brl)

Sept 2010 AverageUS$77.79

AverageUS$67.70

May stabilize aroundUS$76.12 in 2010

Growth rate (%) ofDomestic Revenue

Jan-Aug 2010 2.0 16.5The budget for 2010 hastargeted overall fiscal deficitat (-) 1.1% of GDP andbasic balance at nil.Zero basic balance may not

be achieved unlessrevenue realizationimproves significantly in thesubsequent months.Government has takenfiscal measures in June2010 for additional revenuerealizations.

Growth rate (%) ofExp & Net Lending

Jan-Aug 2010 3.0 36.8

Revenue & grantsas % of GDP

Jan-Aug 2010 11.1 13.3

Exp & Net Lendingas % of GDP

Jan-Aug 2010 13.2 14.1

Overall fiscal bal.as % of GDP

Jan-Aug 2010 -2.0 -0.8

Basic balance as% of GDP

Jan-Aug 2010 -0.4 -0.5

Basic Primary bal.as % of GDP

Jan-Aug 2010 1.5 1.6

Domestic debtas % of GDP

End-Sept 2010 27.5 26.8 Likely to decline at theend of December 2010.

Yield on 91-daysTBs (%)

Sept 2010 10.6 10.4Yields may come downfurther as CPI inflation ismoderate.

Yield on 182-days TBs (%)

Sept 2010 10.1 11.7

Yield on 364-days TBs (%)

Sept 2010 12.3 14.3

GR of Moneysupply (M2) (%)

Aug 2010 19.5 18.9 Money growth rate islikely to remain high.

Banks assets(Billion Dalasi)

End-July 2010 16.2 13.7 Likely to increase

CBG policy rate(%)

Oct 2010 15 16 MPC reduced policyrate to 14% in Dec 2009.

Overall BOPBalance (Mln $)

2010-Q1 27.7 (-) 32.8 BOP situation is likely toremain comfortable in2010 due to revival ofexports, tourist income,remittances and foreigninvestment.

Current A/CBalance (Mln $)

2010-Q1 23.8 (-) 4.1

Capital-Fin. A/CBalance (Mln $)

2010-Q1 3.9 (-) 28.7

Dalasi/ UK End-Aug 2010 45.18 43.80 Dalasi is expected todepreciate against majorcurrencies in 2010.

Dalasi/ US$ End-Aug 2010 28.65 26.79Dalasi/ Euro End-Aug 2010 38.18 37.68

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1. Global Economic Outlook

1.1 World Recovery Continues, But Risks Increase, Says IMF

As per the IMF latest World Economic Outlook (WEO October 20102) Global economicrecovery is proceeding broadly as expected, but downside risks remain elevated. Most

advanced economies and a few emerging economies still face large adjustments and majorsocial challenges with sluggish pace of recovery and high unemployment. By contrast, manyemerging and developing economies are again seeing strong growth, because they did notexperience major financial excesses just prior to the Great Recession.

World output is expected to grow by 4.8% in 2010 followed by 4.2% in 2011. IMF forecastscontinuing global recovery, but cautioned that renewed financial turbulence and euro areaproblems cloud the outlook. The United States and Japan experienced a significant slowdown inthe second quarter of 2010, while growth accelerated in Europe and stayed strong in emergingand developing economies. Financial conditions have begun to normalize, but institutions andmarkets are still fragile. In general, volatility in financial, currency, and commodity marketsremains elevated. IMF advised countries to continue with repairing and reforming the financial

system, resumption of healthy credits growth and cuts of future fiscal deficits. Key emergingeconomies will need to further develop domestic sources of growth, with the support of greaterexchange rate flexibility.

Emerging and Developing Economies: Activity in emerging and developing economies isleading the global recovery. In key emerging Asian economies, particularly in China and India,output already exceeds pre-crisis levels by a wide margin, and the output growth in thesecountries, averaging about 10% in 2010,is outpacing estimates of full-capacity (potential) outputgrowth. Overall growth in emerging Asia is expected to be 9.4% in 2010 followed by 8.4% in2011, as robust domestic demand spread from China, India, and Indonesia to other Asianeconomies. In both China and India, major fiscal stimulus, a large expansion of credit, and anumber of specific measures to boost household incomes and consumption increased domestic

demand growth and a transition from public stimulus to private-sector-led growth. Latin Americahas also recovered strongly, with real GDP growth at about 7 percent in 2010.

Sub-Saharan Africa: Sub-Saharan Africa has weathered the global crisis well and is expectedto recover rapidly from the slowdown in 2009. Although some oil-exporting economies were hithard by the collapse in export and commodity markets, the region managed to grow by 2.6% in2009. Its growth is projected to accelerate to 5% in 2010 and to 5.5% in 2011. The regionsquick recovery is due to the relatively limited integration of the most low-income economies intothe global economy and the limited impact on their terms of trade, the rapid normalization inglobal trade and commodity prices, and the use of countercyclical fiscal policies. Remittancesand official aid flows have also been less adversely affected than anticipated by the recessionsin advanced economies. Banking sectors, in general, remained resilient, and private capital

inflows resumed into the regions more integrated economies. Shocks from the global crisis hitsub-Saharan Africa mainly through the trade channel. Reflecting their greater openness to trade,the regions middle-income economies like the South Africa were among the hardest hit.

2 World Economic Outlook (WEO) - Recovery, Risk and Rebalancing, IMF, Washington DC,

October 2010.

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1.2 Inflation Pressures Are Generally Subdued but Diverge

Inflation is projected to stay low amid continued excess capacity and high unemployment. Therecovery of commodity prices raised consumer prices. Market indicators suggest thatcommodity prices should remain stable and with diminishing downward pressures on wages,headline and core inflation should converge to about 1.25% in 2011 in advanced economies

and to about 5% in emerging economies. Inflation pressures are more elevated in economiesthat have had a history of unstable inflation or that are operating closer to capacity.

Figure 1.1 Global Inflation(Twelve-month change in the consumer price index, unless noted otherwise)

Petroleum prices are reboundingPetroleum prices have started to rebound due to higher demand after the global economicrecovery (Table 1.2). The global spot price of crude oil per barrel has remained broadly in the$70 to $80 range that began to emerge in fall 2009. Average Brent crude oil prices reachedpeak level at $84.98 per barrel in April 2010, but started declining since then and reached

US$74.74 in July 2010. It started rising again and stood at US$77.79 per barrel compared toUS$67.70 per barrel a year ago. Looking ahead, commodity prices are expected to rise a bitfurther supported by the strength of global demand, especially from emerging economies.However, this upward pressure is expected to be modest, given the above-average inventorylevels and substantial spare capacity in many commodity sectors. In line with futures marketdevelopments, the IMFs baseline petroleum price projection has been revised to $76.20 in2010 and $78.75 in 2011.

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Table-1.2 Trends of World Commodity Prices

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Source: World Bank Pink Sheet October 2010

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2. Current State of the Gambian Economy2.1 Overall and Sectoral GDP Growth Rates

The sharp decline in global economic activity had adverse impact on the Gambianeconomy in 2008 leading to decline of exports and remittances and decline ofmanufacturing production, wholesale and retail trade, transport and telecom (Table-2.1).

However, thanks to bumper crops contributed by favorable monsoon at home and highinternational prices of food grains, and very good performance by electricity, telecomand financial sectors, the real GDP growth at constant 2004 market prices improvedfrom 6% in 2007 to 6.3% in 2008 (Table-2.1 and Figure-2.1).

As per the Revised Estimates of the GBOS, real GDP growth in 2009 at constant marketprices is estimated to be 5.6% supported by a growth of 9.8% in agricultural production,2.1% by industrial production and 4.3% in services production.

With expected normal monsoons, agricultural production is expected to perform well in2010. However, given the high base already achieved, the agricultural growth is likely todecelerate. Consequently, real GDP growth in 2010 at constant market prices isprojected to be 5% supported by a growth of 4.6% in agricultural production, 5.1% byindustrial production and 4.9% in services production.

Share of agriculture in GDP at constant factor cost increased from 21.6% in 2007 to26.2% in 2010, while share of industry declined from 14.7% to 13% and that of servicesdeclined from 63.7% to 60.7% during the same period. Increase of agricultural sharewas contributed by increase in share of crops, while decline in industrial share was dueto decline in shares of manufacturing and construction, and decline of services sharewas mainly due to decline of share of wholesale and retail trade, hotels and restaurants,and transport and communications.

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Figure-2.1: Trends of sectoral growth rates during 2001-2010 (in percentage)

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2007-2010 (in %)

Sectoral Growth Rates(in percentage) Sectoral Shares in GDP-FC(in percentage)Items 2007

Actual2008

Actual2009

Actual2010Proj.

2007Actual

2008Actual

2009Actual

2010Proj.

GDP at 2004 basic price 6.0 6.3 5.6 5.0 107.5 105.6 105.7 105.9Agriculture and allied -1.9 26.6 9.8 4.6 21.6 25.3 26.3 26.2

-- Crops -15.2 55.2 14.3 4.6 9.5 13.6 14.8 14.8-- Livestock 11.9 4.3 4.5 4.5 9.4 9.0 8.9 8.9-- Forestry -4.0 1.0 0.7 2.0 0.6 0.6 0.5 0.5-- Fishing 18.0 3.5 5.1 5.5 2.1 2.0 2.0 2.0

Industry 2.5 -1.2 2.1 5.1 14.7 13.4 13.0 13.0-- Mining and quarrying -14.1 8.8 12.0 10.0 1.9 1.9 2.1 2.2

-- Manufacturing 3.9 -8.3 -2.8 3.2 7.0 5.9 5.4 5.4-- Electricity, gas, water 59.1 1.7 6.2 10.0 1.6 1.5 1.5 1.6-- Construction -4.3 5.0 3.0 1.0 4.2 4.1 4.0 3.8

Services 8.3 4.2 4.3 4.9 63.7 61.3 60.7 60.7-- Wholesale/retail trade 9.7 -2.3 6.0 1.0 29.5 26.6 26.7 25.7-- Hotels/ restaurants 14.3 2.9 -26.8 3.7 3.9 3.7 2.6 2.6-- Transport / telecom 7.0 -8.0 5.0 7.6 13.0 11.0 11.0 11.3-- Financial -0.9 28.2 13.2 8.0 7.0 8.3 9.0 9.2-- Real est., business 1.4 0.0 2.5 0.1 3.3 3.0 3.0 2.8-- Public administration 12.9 42.1 2.0 8.5 2.8 3.7 3.6 3.7-- Education -6.4 38.2 2.7 16.7 1.4 1.8 1.8 2.0

-- Health

28.3 25.4 8.0 15.7 2.0 2.3 2.4 2.6-- Other services 67.4 8.9 2.8 11.0 0.7 0.7 0.7 0.7

GDP at FC 5.1 8.3 5.4 4.8 100.0 100.0 100.0 100.0

GDP at Basic Price 5.6 8.4 5.1 5.0 96.6 96.7 96.4 96.6

Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2009 and projections for 2010

are made by the Research Team.

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2.2 Consumer Price Index and Inflation

As measured by the Consumer Price Index (CPI), annual point-to-point CPI inflationaccelerated significantly from 2.3% in Sept 2009 to 6.2% in Sept 2010. However, the 12-month average inflation rate decelerated from 5.6% in Sept 2009 to 4.2% in Sept 2010.

Food and drinks (with weights of 55.1% in overall CPI) recorded an annual point-to-pointinflation rate of 8.2% in Sept 2010, up from 2.6% a year ago, and contributed 70.8% tooverall inflation in Sept 2010.

Non-food items (with weights of 44.9% in overall CPI) recorded annual inflation rate of2.9% in Sept 2010, up from 1.9% a year ago and contributed 29.2% to total inflation.

Among other groups, transport recorded an inflation of 24.3%, clothing 1.8%, utilities2.2%, restaurants and hotels 9.4% and miscellaneous items 7.5% in Sept 2010.

Table-2.2 CPI Inflation Rates in September 2010 (in percentage)Items Weights

Wi (%)Sept 2009

IndexSept 2010

IndexInflation

(%)Wi (CPIi1

CPIi0)Contributio

n3 (%)Overall 100.0 121.75 129.34 6.23 815.5 100.0Food 55.1 127.39 137.87 8.23 577.0 70.8Tobacco 0.7 106.40 107.77 1.29 0.9 0.1Clothing 11.2 111.82 113.8 1.77 22.3 2.7Utilities 3.4 122.64 125.28 2.15 9.0 1.1Furnishing 5.2 115.70 116.92 1.05 6.4 0.8Health 1.2 101.80 101.91 0.11 0.1 0.0Transport 4.4 119.97 149.12 24.30 128.3 15.7Telecom 3.0 102.02 102.54 0.51 1.5 0.2Recreation 8.1 105.07 106.32 1.19 10.1 1.2

Education 1.5 102.99 102.95 -0.04 -0.1 0.0Hotels 0.4 117.08 128.08 9.40 4.0 0.5Misc. 5.9 126.75 136.2 7.46 56.0 6.9Non-food 44.9 114.82 118.17 2.92 150.6 29.2

Source of basic data: Gambian Bureau of Statistics (GBOS). http://www.gbos.gm

3Contribution of an item to overall inflation is estimated by the following formula:

Contribution of Item (i) = W i (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 = WiFor example, contribution of food to overall inflation is estimated as 100 X 577 / 815.5 = 70.8%.

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6.28.2

1.3 1.8 2.2 1.1 0.1

24.3

0.5 1.2

0.0

9.47.5

2.9

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

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2.3 Projection of CPI inflation for the year 2010

On the basis of CPI trends until Sept 2010 and monthly seasonality, we have made threealternative projections of inflation rates for the year 2010, under the following assumptions:

(1) Alternative-1: It is assumed that the CPI variation for a month over the previous month

in 2010 will be the average CPI variation for the month over the previous month in lasttwo years (2009 and 2008). Thus, Oct 2010 CPI is estimated by the following formula:

Projected CPI for Oct 2010 = Sept 2010 CPI + [Oct 2009 CPI Sept 2009 CPI + Oct 2008 CPISept 2008 CPI]/ 2. For subsequent months, CPI is projected by the similar formula.

(2) Alternative-2: It is assumed that the variation of CPI for a month over the previousmonth in 2010 will be the same as that for the respective month over the previous monthin 2009. For example, CPI for Oct 2010 is estimated by the following formula:

Projected CPI for Oct 2010 = Sept 2010 CPI+ (Oct 2009 CPI Sept 2009 CPI). For thesubsequent months, CPI is projected by the similar formula.

(3) Alternative-3: Average of inflation rates underAlternatives 1 and 2.

Results are presented in Table 2.3 which indicates that CPI inflation rate is expected to remainin the range of 3.6% to 6.3% during 2010, and the year-end 12-month average CPI inflationrate is expected to be around 5.1%.

Table-2.3: Projections of CPI inflation for the year 2010 (in percentage)2007Index

2008Index

2009Index

2010-Alt1

2010-Alt2

2008Inf.rate

2009Inf.rate

2010-Alt1

2010-Alt2

2010Alt3

Jan 106.86

112.31

120.13

124.42

124.42

5.1 7.0 3.6 3.6 3.6

Feb 107.01

112.34

120.25

124.78

124.78

5.0 7.0 3.8 3.8 3.8

Mar 109.36

112.73

120.30

125.08

125.08

3.1 6.7 4.0 4.0 4.0

Apr 111.64

113.21

120.36 125.30

125.30

1.4 6.3 4.1 4.1 4.1

May 112.05

113.83

120.51 125.50

125.50

1.6 5.9 4.1 4.1 4.1

Jun 111.98

114.48

120.61 126.02

126.02

2.2 5.4 4.5 4.5 4.5

July 111.95

116.21

120.84 128.32

128.32

3.8 4.0 6.2 6.2 6.2

Aug 112.0

9

117.6

5

121.15 128.58 128.58 5.0 3.0 6.1 6.1 6.1

Sep 111.86

118.96

121.75 129.34 129.34 6.3 2.3 6.2 6.2 6.2

Oct 111.95

119.29

121.99 129.63 129.58 6.6 2.3 6.3 6.2 6.2

Nov 112.13

119.54

122.7 130.11

130.29 6.6 2.6 6.0 6.2 6.1

Dec 112.2 119.9 123.1 130.5 130.78 6.8 2.7 6.0 6.2 6.1

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6 3 9 5Q1 107.7 112.5 120.2 124.7

6124.7

64.4 6.9 3.8 3.8 3.8

Q2 111.9 113.8 120.5 125.61

125.61

1.7 5.8 4.2 4.2 4.2

Q3 112.0 117.6 121.2 128.75

128.75

5.0 3.1 6.2 6.2 6.2

Q4 112.1 119.6 122.6 130.09

130.22

6.7 2.5 6.1 6.2 6.1

Ave 110.9 115.9 121.1 127.30

127.33

4.5 4.6 5.1 5.1 5.1

Note: Projections are made by the Research Team. Alternative projections 1, 2 and 3 are defined in thetext above.

2.4 Producer Price Index (PPP) for March 2010

Starting with March 2010 the GBOS has decided to prepare and publish the Producer PriceIndex (PPI) on quarterly basis. The PPI indicates the average increase of basic producer pricefor domestic industries and excludes prices of exports. The definition and concepts employed byGBOS are in conformity with other International Economic Standard; but adapted to Gambiaspecification (ISIC, Rev 3.1 of 1990). The basket of goods and services are drawn from the listof manufacturing establishments covered during the 2005/2006 Economic Census comprising of108 large manufacturing enterprises employing at least 10 people, whose output is mainly soldon the domestic market or for export. Currently, the PPI covers 182 items of goods andservices, out of which food items constitute 32% and non-food items 68%. The point of pricing isthe establishment and the price is the selling price received by the producer for the selectedproduct as it leaves the factory gate. Thus the PPI is not affected by changes in taxes andduties, and prices quoted are exclusive of all taxes on products but inclusive of subsidies. Asindicated in Table-2.4, the overall annual inflation in terms of PPI was 9.9% in March 2010contributed by 10.9% inflation in food products and 11.9% inflation in non-food products.

Table-2.4: Producer Price Index (Base 2009=100)

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2.5Government Fiscal Performance in January-Aug 2010

Columns (4), (5) and (6) ofTable-2.5.1 present major item-wise revenue realization andexpenditure of the government in the first 7 months (i.e. Jan-Aug) of 2008, 2009 and 2010respectively. Columns (7) and (8) indicate annual percentage changes of major items ofrevenues and expenditure in Jan-Aug 2009 and Jan-Aug 2010 respectively over those in the

corresponding period of the previous year.

Governments fiscal performance was not satisfactory in Jan-Aug 2010 compared withJan-Aug 2009. Tax revenues in Jan-Aug 2010 showed no growth over Jan-Aug 2009compared with a growth of 18.1% in Jan-Aug 2009 over Jan-Aug 2008. However, there wasbetter performance of non-tax revenues in Jan-Aug 2010 than in Jan-Aug 2009.

In Jan-Aug 2010, total expenditures & net lending declined by 11% over Jan-Aug 2009compared to 115% growth in Jan-Aug 2009. Overall there was a fiscal deficit of (-) D577million in Jan-Aug 2010, higher than fiscal deficit of (-) D194 million in Jan-Aug 2009.

Despite significant contraction of expenditure, Basic Balance was in deficit at (-) D134million in Jan-Aug 2010 due to stagnation in tax revenues. However, Basic Primary Surplusat D420 million in Jan-Aug 2010 was higher than that at D414 million in Jan-Aug 2009.

Table-2.5.1 Government Financial Performance in Jan-Aug 2010 (Million Dalasi)Items 2009

Actual2010

Budget2008

Jan-Aug2009

Jan-Aug2010

Jan-Aug

Ja-Aug-09% ch overJa-Aug 08

Ja-Aug-10% ch overJa-Aug-09

(1) (2) (3) (4) (5) (6) (7) (8)Revenue and grants 4893.0 5474.1 2435.7 3442.9 3167.3 41.3 -8.0

Domestic Revenue 3904.9 4413.2 2327.6 2712.1 2765.8 16.5 2.0Tax Revenue 3517.5 3991.3 2078.6 2454.3 2453.9 18.1 0.0Nontax Revenue 387.4 421.9 249.0 257.8 311.9 3.5 21.0

Grants 988.1 1061.0 108.2 730.8 401.5 575.5 -45.1

Exp & Net Lending 5631.9 5769.7 2659.2 3637.0 3744.3 36.8 3.0Current Expenditure 3625.1 4013.7 2066.0 2361.8 2609.2 14.3 10.5Personnel Emoluments 1191.8 1499.3 605.6 730.7 945.1 20.7 29.3

Other Charges 1691.9 1752.0 953.0 1103.5 1110.6 15.8 0.6Interest 741.4 762.4 507.3 527.6 553.5 4.0 4.9

External 153.2 176.3 103.6 110.2 105.8 6.3 -4.0Domestic 588.3 586.1 403.7 417.4 447.8 3.4 7.3

Cap Exp & Net Lending 2006.8 1756.0 593.2 1275.1 1135.1 114.9 -11.0Capital Expenditure 1889.1 1692.0 512.3 1182.5 1146.1 130.8 -3.1

Externally financed 1300.1 1360.0 309.7 811.0 844.9 161.8 4.2Net Lending 117.7 64.0 81.0 92.7 -11.0 14.4 -111.9

Overall Fiscal Balance -739.0 -295.6 -223.5 -194.1 -577.0 -13.2 197.3Basic Balance -427.0 3.4 -21.9 -113.9 -133.6 419.1 17.3Basic Primary Balance 314.5 765.8 485.4 413.7 419.9 -14.8 1.5Nominal GDP (GBOS) 25805 28425

2297825805 28425 12.3 10.2

Source: Statistics and Special Studies Unit, MOF.Notes:(1) Overall balance = (Revenue and Grants) minus (Expenditure and Net Lending);(2) Basic Balance = (Domestic Rev) less (Exp. and Net Lending excluding externally financed capital exp) and(3) Basic Primary Balance = Basic Balanceplus interest payments

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2.6 Additional Fiscal Measures taken by the Government

Government has taken a number of fiscal measures since June 2010 to improve fiscalbalance. These include (a) Reinstating the collection of domestic excise taxes, includingGMD 11 per liter on beer; (b) Reforming the mechanism for setting retail prices forpetroleum fuels, which incorporates a GMD 5 per liter increase on premium motor spiritsand GMD1 per liter on diesel and a general sales tax of 15 percent on all petroleum basedfuels; (c) a freeze on non-priority hiring in the public sector; and (d) reducing the monthlycash allocations to spending agencies in line with the requirements to achieve a cumulativebasic balance of D265.1 million by end-September 2010.

Column (2) to (6) of Table-2.5.2 indicates the item-wise fiscal performance of thegovernment, as percentage of GDP, for 2009-outturn, 2010-Budget, Jan-Aug 2008, Jan-Aug2009 and Jan-Aug 2010 outturn respectively. It is observed from the table that in terms ofpercentages of GDP the fiscal performance in Jan-Aug 2010 is not satisfactory. The 2010Budget has targeted at zero basic balance as per commitment under the IMF ECF fundedProgram. But, there was a Basic deficit at (-) 0.5% of GDP in Jan-Aug 2010.

The Budget for 2010 has targeted total revenue and grants at 19.3% of GDP (higherthan 19% in 2009-Outturn) and total expenditure and net lending at 20.3% of GDP (lowerthan 21.8% of GDP in 2009-Outturn) resulting in an overall fiscal deficit at 1% of GDP(compared to fiscal deficit of 2.9% of GDP recorded in 2009-Outturn). Significant reductionin total expenditure is sought to be achieved through drastic cut in capital expenditure from7.3% of GDP in 2009-Outturn to 6% of GDP in 2010 Budget. Such a cut in capitalexpenditure may be good to maintain fiscal sustainability, but may affect adverselydevelopment activities unless funds are supplemented by donors aid.

Table-2.5.2 Government Financial Performance in 2009 and Jan-Aug 2010(As % of GDP at current market prices)

Items 2009 2010 2008 2009 2010

Actual Budget Jan-Aug Jan-Aug Jan-Aug(1) (2) (3) (4) (5) (6)

Revenue and grants 19.0 19.3 10.6 13.3 11.1Domestic Revenue 15.1 15.5 10.1 10.5 9.7

Tax Revenue 13.6 14.0 9.0 9.5 8.6Nontax Revenue 1.5 1.5 1.1 1.0 1.1

Grants 3.8 3.7 0.5 2.8 1.4Exp & Net Lending 21.8 20.3 11.6 14.1 13.2Current Expenditure 14.0 14.1 9.0 9.2 9.2Personnel Emoluments 4.6 5.3 2.6 2.8 3.3

Other Charges 6.6 6.2 4.1 4.3 3.9Interest 2.9 2.7 2.2 2.0 1.9

External 0.6 0.6 0.5 0.4 0.4Domestic 2.3 2.1 1.8 1.6 1.6

Cap Exp & Net Lending 7.8 6.2 2.6 4.9 4.0Capital Expenditure 7.3 6.0 2.2 4.6 4.0

Externally financed 5.0 4.8 1.3 3.1 3.0Net Lending 0.5 0.2 0.4 0.4 0.0

Overall Bal Inc. grants -2.9 -1.0 -1.0 -0.8 -2.0Basic Balance -1.7 0.0 -0.1 -0.4 -0.5Basic Primary Balance 1.2 2.7 2.1 1.6 1.5

Source: Statistics and Special Studies Division, MOF.Notes: For definitions of overall fiscal, basic and primary balance, see footnotes in Table 2.5.1.

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2.7 Domestic Debt and Treasury Bills Outstanding

(a) Including CBG support, the total outstanding domestic debt increased to D7.8 billion(27.5% of GDP) at end-Sept 2010, from D6.9 billion (26.8% of GDP) a year ago.Outstanding Treasury bills increased by 5.9% to D5.3 billion at end-Sept 2010.

(b) The share of Treasury bills in debt stock declined from 72.3% at end-Sept 2009 to67.7% at end-Sept 2010, that of Sukuk Al-Salam increased from 1.7% to 2.1%, that ofGovt. bonds increased from 3.6% to 26.8%, that of NIB treasury bills declined from 7.9%to nil while share of TMA overdraft declined from 13.3% to 2.1% over the same period.

Table-2.7-A Outstanding Domestic Public Debt as on 30 Sept 2010Type of debt Million Dalasi % change

in Sept 2010over Sept 2009

Composition (in %)

30 Sept2009

30 Sept2010

30 Sept2009

30 Sept2010

Treasury Bills 5005 5302 5.9 72.3 67.7Sukuk Al-Salaam 120 168 39.8 1.7 2.1Govt Bond 0 1850 0.0 23.6

Bridge loan 0 10 0.0 0.1Non-mark.Govt Bond 5125 7330 43.0 74.0 93.6Non MarketableGovt. Bond

250 250 0.0 3.6 3.2

Total InterestBearing Debt

5375 7580 41.0 77.6 96.8

Govt N.I.B.Treasury Notes

547 0 -100.0 7.9 0.0

TMA OverdrawnPosition

918 165 -82.0 13.3 2.1

GNPC Ltd. 85 85 0.0 1.2 1.1Total NonInterest BearingDebt

1549 250 -83.9 22.4 3.2

Total DomesticDebt Outstanding

6925 7830 13.1 100.0 100.0

Nominal GDP 25805 28425 10.2 As % of GDP 26.8 27.5

Excluding overdraft 23.3 27.0

Sustainability of Public Debt

As judged by selected sustainability indices given in Table-2.7-B the public debt situation ofGambia is manageable and cannot be considered to be unsustainable over time. However,government needs to continue with sound macroeconomic policies and strict fiscal disciplinewhich act as the first line of defense against any debt trap.

Table-2.7-B Selected Sustainability Indicators for Public Debt (in percentage)Item 2005 2006 2007 2008 2009 2010 Est.

1. Public debt/GDP ratio 125.1 126.2 58.4 57.1 61.1 57.22. External debt/GDP ratio 99.0 101.7 36.2 31.4 37.1 35.13. Domestic debt/GDP ratio 26.1 24.5 22.1 25.7 24.0 22.0

4. Interest/revenue ratio 43.4 30.5 23.5 20.5 19.4 18.05. Debt service/revenue ratio 59.2 46.3 41.0 32.0 33.1 28.26.Ext.debt service to exports ratio 11.9 12.1 10.8 6.5 7.1 6.7

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2.8 Treasury Bills Yields

Yields on treasury bills fluctuated widely in recent months. As expected, the higher thematurity of treasury bills, the higher is the yield. However, despite stability in depositrates and significant decline of annual point-to-point CPI inflation rate from 7% in Jan2009 to 2.8% in Dec 2009, average yields on the 91-day bills increased from 10.5% in

Jan 2009 to 11% in Dec 2009 and yield on 182-day bills from 12.1% in Jan 2009 to12.9% in Dec 2009.

In view of the declining trend of inflation rates, the Monetary Policy Committee reducedthe policy rate by 2 percentage points to 14% with effect from December 2009.Subsequently, due to inflationary pressures, the policy rate was raised to 15% with effectfrom 31 Aug 2010. Average yields of the 91-day, 182-day and 364-day bills haddeclining trend since Dec 2009 until July 2010 followed by increasing trend since then,and stood at 10.6%, 10.1% and 12.3% respectively in Sept 2010.

Table-2.8 Average yields on treasury bills (in percentage per annum)

2008 2009 2010

91-D 162-D 364-D 91-D 182-D 364-D 91-D 182-D 364-DJan 10.6 11.4 13.6 10.5 12.1 14.4 10.3 12.0 13.6

Feb 10.9 11.9 13.7 11.1 12.8 14.4 10.7 11.7 13.2

Mar 11.0 12.1 13.6 11.4 12.7 14.4 11.3 11.5 12.9

Apr 10.9 11.9 13.3 12.0 13.0 14.6 11.0 11.5 13.1

May 10.2 11.3 13.0 12.5 13.8 15.3 9.8 10.8 13.3

Jun 10.0 11.2 13.3 13.0 13.8 15.6 9.3 10.4 12.9

Jul 9.6 10.6 12.6 11.5 12.0 14.4 9.3 10.3 13.1

Aug 8.8 10.2 12.1 10.2 11.2 13.3 9.6 10.2 13.0

Sep 8.9 11.0 13.1 10.4 11.7 14.3 10.6 10.1 12.3

Oct 10.3 11.4 13.6 10.8 12.1 14.2

Nov 10.1 13.4 13.7 10.8 12.3 14.0Dec 9.9 12.5 14.0 11.0 12.9 14.3

Trends of Yields of Treasury Bills during 2007-2010

2.9 Money Supply

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Broad money supply (M2) recorded an annual growth of 19.5% in Aug 2010, comparedto 18.9% a year ago. Quasi money increased by a faster rate of 26.4%, than the growthrate of 11.7 percent by narrow money.

On the supply side, 19.5% growth of broad money in Aug 2010 was supported by 14.4%growth in currency in circulation outside banks, 10.3% growth in demand deposits,11.1% growth in savings deposits and significant growth of 45% in time deposits.

On the demand side, growth was mainly due to 39% growth in net domestic assets netwhile net foreign assets declined by 23.1 percent over a year.

Domestic credits increased by 39.1% from D6.7 billion in Aug 2009 to D9.4 billion inAug 2010, supported by 67% growth in government borrowing and 28.4% growth incredits to the private sector, while credits to public entities declined by 8.5% over oneyear.

Table-2.7 Money Supply and Demand in Aug 2010

Components Aug2008

MillionDalasi

Aug2009

MillionDalasi

Aug2010

MillionDalasi

Aug2009

%share

Aug2010

%share

Aug-09% ch.over

Aug-08

Aug-10% ch.over

Aug-09

1.Money Supply (M3) (2+3) 8741 10390 12411 100 100 18.9 19.52.Narrow Money (2.1+2.2) 4,40

2

4903 5477 47 44 11.4 11.7

2.1 Currency 1,484 1,661 1,901 16 15 11.9 14.42.2 Demand deposits 2,918 3,242 3,576 31 29 11.1 10.33.Quasi money (3.1+3.2) 4,33

9

5487 6934 53 56 26.5 26.4

3.1 Savings deposits 2,603 3,012 3,345 29 27 15.7 11.13.2 Time deposits 1,735 2,475 3,589 24 29 42.6 45.0Demands for money (1+2) 8741 10390 12411 100 100 18.9 19.51.Net foreign assets (1.1+1.2) 3482 3267 2513 31 20 -6.2 -23.11.1 Monetary Authorities 2,829 2,540 2154 24 17 -10.2 -15.2

1.2 Commercial banks 653 727 358 7 3 11.4 -50.7

2.Net Dom. Assets (2.1+2.2) 5259 7123 9898 69 80 35.4 39.02.1 Domestic credit 5726 6752 9389 65 76 17.9 39.1(a) Credits to government 2,255 2,616 4369 25 35 16.0 67.0

(b) Credits to public entities 428 802 734 8 6 87.5 -8.5

(c) Credits to private sector 2,860 3,322 4265 32 34 16.2 28.4(d) Credits to forex bureau 183 12 21 0 0 -93.5 -

2.2 Other items, net -467 371 509 4 4 -179.5 37.2

Source: Central Bank of Gambia

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2.10 Performance by Commercial Banks

(a) The Gambian banking industry now consists of 14 banks compared to 13 banks in 2009.However, the industry is dominated by three large banks holding 61 percent of the totalassets, although their share has declined over the years.

(b) The banking industry continues to show increasing signs of resilience with growth inassets, capital and reserves. The industrys total assets increased to D15.6 billion in June2010, up by 18.4% over a year, and the asset quality is satisfactory.

(c) The average risk-weighted capital adequacy ratio increased from 18.1% in Dec 2009 to18.7% in March 2010 and was well above the statutory norm at 8% and all the bankssatisfied the minimum requirement.

(d) However, nonperforming loans as a ratio of gross loans deteriorated from 12.0% inDecember 2009 to 16.9% in March 2010. This was due to the Central Banks inclusion ofrestructured loans in non-performing category. However, all loans were adequatelyprovisioned.

(e) Loans and advances to the private sector, accounting for 51% of total domestic credit,increased by 10.5% to D4.9 billion in June 2010 from D4.4 billion in December 2009.

(f) Credit to agriculture, manufacturing, tourism and financial sectors increased by 27%,25.4%, 27.2% and 29% respectively. Similarly, credit to distributive trade, transportationand other commercial loans rose by 10.4%, 11.7% and 43.6% during the same period.

(g) In contrast, loans and advances to fishing and personal purpose declined by 12.1% and31.9% respectively.

Table-2.8 Sectoral Distribution of Bank Loans (Million Dalasi)

Items

December

2009June2010

Composition (%)GR (%) of

June-2010 Over

Dec-2009Dec-2009June-2010

Agriculture 262.5 333.5 5.9 6.8 27.0

Fishing 16.9 14.9 0.4 0.3 -12.1

Manufacturing 217.4 272.6 4.9 5.6 25.4

Construction 499.0 507.4 11.3 10.4 1.7

Transportation 312.7 349.2 7.1 7.2 11.7

Trade 1160.7 1280.9 26.3 26.3 10.4

Tourism 211.2 268.7 4.8 5.5 27.2

Financial 146.4 188.9 3.3 3.9 29.0

Personal loans 816.8 556.5 18.5 11.4 -31.9

Others 769.3 1105.1 17.4 22.7 43.6

Total 4413.0 4877.7 100.0 100.0 10.5Source: Central Bank of Gambia (CBG)

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2.11 Commercial Banks Assets

Total assets of the commercial banks increased by 18.2% on year-on-year basis fromD13.7 billion at end-July 2009 to D16.2 billion at end-July 2010.

Gambian banks do not have large exposure to foreign assets or foreign liabilities. Atend-July 2010, foreign assets constituted only 8.6% of total assets (foreign exchange2.4%, balances abroad 4.8% and foreign investment 1.3%), up from 7.1% a year ago(foreign exchange 1.5%, balances abroad 4.8% and foreign investment 0.8%).

Gambian banks also do not have large contingent liabilities. At end-July 2010 contingentliabilities increased by only 7.3% over one year and constituted only 13.3% of totalliabilities, down from 14.6% a year ago.

At end-July 2010, loans and advances increased by 28.4% over a year and constituted28.8% of total assets, compared to 26.6% a year ago.

At end-July 2010, investments in government Treasury Bills by the banks increased by20.8% over a year and constituted 25.4% of their total assets. As expected, three largebanks had the dominant share.

At end-July 2010, loans and advances to the public sector declined marginally by 0.5%over a year, while those to the private sector increased by 34.4% over a year ago.

Table-2.11 Commercial Banks Assets at the end-July 2010 (Million Dalasi)

July-2009 July-2010

1. Notes and coins 164.9 279.5 272.6 2.0 1.7 69.5 -2.5

2. Foreign exchange 222.7 201.4 395.9 1.5 2.4 -9.5 96.5

3. Local Bank balance 1,055.0 1,179.4 1,490.4 8.6 9.2 11.8 26.4

ii. CBG 1,047.4 1,076.2 1,231.6 7.8 7.6 2.7 14.4

iii. Banks locally 7.6 103.3 258.8 0.8 1.6 1259.0 150.6

4. Balances abroad 785.6 664.4 779.4 4.8 4.8 -15.4 17.3

5. Bills purchased 137.1 98.3 70.4 0.7 0.4 -28.3 -28.4

6. Loans and advances 2,769.6 3,642.7 4,675.9 26.6 28.8 31.5 28.4

i. Public sector 282.9 629.7 626.3 4.6 3.9 122.5 -0.5

ii. Private sector 2,486.7 3,013.0 4,049.6 22.0 25.0 21.2 34.4

7. Investments 3,353.2 3,644.5 4,410.3 26.6 27.2 8.7 21.0

i. Govt Treasury Bills 3,117.2 3,409.8 4,118.1 24.9 25.4 9.4 20.8

ii. Others 157.1 122.4 77.4 0.9 0.5 -22.1 -36.7

iii Foreign Investments 78.9 112.3 214.8 0.8 1.3 42.3 91.3

8. Fixed assets 748.5 1,075.7 1,168.9 7.8 7.2 43.7 8.7

9.Contingent liabil ities 1,351.7 2,007.3 2,154.1 14.6 13.3 48.5 7.3

10. Other assets 865.9 923.9 798.8 6.7 4.9 6.7 -13.5

11. Total assets (1 to 10) 11,454.2 13,717.0 16,216.7 100.0 100.0 19.8 18.2

12. Net Balance (11-9) 10,102.5 11,709.8 14,062.6 85.4 86.7 15.9 20.113.Foreign Assets 1,087.2 978.1 1,390.2 7.1 8.6 -10.0 42.1

%ch. Jl10

over Jl09

Assets (Million

Dalasi)

July-2008 July-2009 July-2010 Composition (%) %ch. Jl09

over Jl08

Source: Central Bank of Gambia.

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2.12 Commercial Banks Liabilities

As mentioned earlier, Gambian banks do not have large exposure to foreign liabilities.At end-July 2010, external sector related liabilities constituted only 1.8% of total liabilities(non-residents deposits 0.8%, balances with banks abroad 0.1% and external debt0.9%), marginally up from 1.7% a year ago (non-residents deposits 1.2%, balances withbanks abroad 0.1% and external debt 0.4%).

At end-July 2010 bank deposits increased by 21.5% over a year, aided by a growth of11.1% in demand deposits, 15.6% in savings deposits and 42.2% in time deposits.

At end-July 2010 banks capital and reserves declined by 0.3% and bank balancesincreased more than eight-fold, while borrowings increased by 62.3% over a year.

Table-2.10 Commercial Banks Liabilities at the end-July 2010 (MillionDalasi)

July-2009 July-2010

1. Capital and reserves 1,484.5 1,669.7 1,664.8 12.2 10.3 12.5 -0.32. Demand deposits 2,829.7 3,219.3 3,577.7 23.5 22.1 13.8 11.1

i Residents 2,526.8 2,725.3 3,327.4 19.9 20.6 7.9 22.1

ii Non residents 15.9 17.8 15.6 0.1 0.1 11.5 -12.3

iii Government entities 287.0 476.3 234.8 3.5 1.5 66.0 -50.7

3. Savings deposits 2,633.1 2,971.7 3,435.9 21.7 21.2 12.9 15.6

i Residents 2,546.4 2,885.5 3,331.7 21.0 20.6 13.3 15.5

ii Non residents 73.4 77.9 91.8 0.6 0.6 6.3 17.8

iii Government entities 13.4 8.3 12.3 0.1 0.1 -38.0 48.7

4. Time deposits 1,777.1 2,471.6 3,513.9 18.0 21.7 39.1 42.2

i Residents 1,305.0 1,771.4 2,711.1 12.9 16.7 35.7 53.0

ii Non residents 16.6 72.8 18.0 0.5 0.1 337.7 -75.3

iii Government entities 455.5 627.4 784.7 4.6 4.8 37.7 25.1

Total deposits 7,240.0 8,662.7 10,527.6 63.2 65.0 19.7 21.5

5. Bank Balances 153.6 13.1 121.1 0.1 0.7 -91.5 825.7

i Head office & branches 72.8 11.6 106.5 0.1 0.7 -84.0 817.3

ii Other banks abroad 80.8 1.5 14.6 0.0 0.1 -98.2 892.3

iii. Banks locally - - - 0.0 0.0 - -

6. Borrowings from 296.6 516.8 838.8 3.8 5.2 74.2 62.3

i Cent. bank of Gambia - - - 0.0 0.0 - -

ii Other banks locally 46.2 35.0 53.0 0.3 0.3 -24.2 51.4

iii Head office & branches 115.0 424.0 562.3 3.1 3.5 268.7 32.6

iv Other banks abroad 135.4 57.8 151.5 0.4 0.9 -57.3 161.9

v. Other sources - - 72.1 0.0 0.4 - -

7. Contingent liabilities 1,351.7 2,007.3 2,154.1 14.6 13.3 48.5 7.3

8. Other liabil ities 927.8 847.5 880.3 6.2 5.4 -8.7 3.9

9. Total liabilities (1 to 8) 11,454.2 13,717.0 16,186.7 100.0 100.0 19.8 18.0

10. Net balance (9-7) 10,102.5 11,709.8 14,032.6 85.4 86.7 15.9 19.8

11.Foreign liabil ities 322.1 227.8 291.5 1.7 1.8 -29.3 28.0

Liabilities (Million

Dalasi)

July-2008 July-2009 July-2010 %ch. Jl09

over Jl08

%ch. Jl10

over Jl09

Composition (%)

Source: Central Bank of Gambia

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2.13Interest Rates and Central Bank Policy Rates

Interest rate on treasury bills declined from 31% in 2003 to 14.9% in 2006 and further to 13.7%in 2007. It ranged in between 13.1% to 14.7% in 2008 and between 12.3% to 14.3% in 2009.The bank rate of the CBG declined from 29% in 2003 to 9% in 2007, but was raised to 10% atthe end of 2007 to check effective demand and inflationary pressures on the economy. It has

remained at 10% since then. However, with the introduction of the Monetary Policy Committee(MPC) Policy Rate, the Bank rate has become ineffective and non-operational.

In response to tight monetary conditions and against a backdrop of falling inflation, the CBGreduced the statutory minimum reserve requirement of banks from 16% to 14% in March 2008.The CBG rediscount rate declined from 34% in 2003 to 14% in 2004. In order to counteremerging inflationary pressures, the CBG raised its rediscount rate by one percentage pointfrom 14% to 15% in June 2007, and further to 16% in October 2008. The rediscount rateremained unchanged at 16% since then until November 2009. In view of the declining trend ofinflation rates, the MPC reduced the policy rate by 2 percentage points to 14% with effect fromDecember 2009. Subsequently, due to inflationary pressures, the policy rate was raised to 15%with effect from 31 Aug 2010. Average yields of the 91-day, 182-day and 364-day bills stood at

10.6%, 10.1% and 12.3% respectively in Sept 2010.

Despite significant fall of the yields on treasury bills in recent years, maximum short-termdeposit rates and commercial banks lending rates remain very high, and there exist wideinterest rate spreads. Successful disinflation allowed the weighted yield on treasury bills to fallfrom over 25% in early 2005 to 10.5% in June 2010. By contrast, commercial banks lendingrates remained sticky above 20% due to high operating costs and high risks of bank credits.

Table-2.13 Trends of Nominal Interest rates (per cent per annum, end period)

Items 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Bank lending rare- min 18 18 17 21 21 21 18 18 18 18Bank lending rare- max 24 24 24 36.5 36.5 30 28 27 27 27

Deposit rate (SB) min 8 8 8 8 10 5 5 5 4 4Deposit rate (SB) max 10 10 10 17 17 10 7 7 7 7Time dep (3 months) min 9.5 9.5 6 7 8 5 5 5 5 5Time dep (3 months) max 12.5 12.5 13 22 22 14 8.5 12.9 13.6 15.5Time dep (6 months) min 10 10 6 8 8 7 6 6 6 6Time dep (6 months) max 12.5 12.5 13 22 22 15 13 12.9 13.6 15.5Time dep (12 month) min 11 11 7 10 12 7 6 7 7 6Time dep (12 month) max 12.5 12.5 13 22 23 13 13 12.9 13.6 15.5Govt. treasury bills 12 15 20 31 30 16 12.8 13.7 13.6 14.2CBG Bank Rate 10 13 18 29 28 14 9 10 10 10CBG Rediscount Rate 15 18 23 34 33 19 14 15 16 16

Range = Maximum-MinimumBank lending rate 6 6 7 15.5 15.5 9 10 9 9 9Deposit rate (SB) 2 2 2 9 7 5 2 2 3 3

Time deposits (3 months) 3 3 7 15 14 9 3.5 7.9 8.6 9.5Time deposits (6 months) 2.5 2.5 7 14 14 8 7 6.9 7.6 9.5Time deposits (12 month) 1.5 1.5 6 12 11 6 7 5.9 6.6 9.5

Factors Influencing Interest RatesInflation (GDP-Deflator) 3.6 14.9 15.0 22.9 13.6 3.9 0.0 2.0 8.0 4.7CPI-Inflation 0.9 4.5 8.6 17.0 14.3 5.0 2.1 5.4 4.9 4.5Real GDP-Growth Rate 5.5 5.7 0.7 2.4 2.1 -0.1 3.1 6.3 6.3 5.0Exch. Rate change (%) 12.2 22.7 27.0 43.2 5.3 -4.8 -1.8 -11.4 -9.8 15.9

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2.14 BOP, Foreign Exchange Reserves and Exchange Rates(a) BOP Situation in 2009

The overall BOP situation in 2009 was better than expected earlier. The revised balance of

payments estimates for 2009 indicate an improvement in the overall BOP situation from a

deficit of US$23.35 million in 2008 to a surplus of US$6.79 million in 2009.

While the current account improved to a surplus of US$63.29 million compared to a surplus

of US$12.35 million in 2008, the capital and financial account balance recorded a decline

from US$11 million in 2008 to (-) US$70.08 in 2009.

The goods account worsened from a deficit of US$68.25 million in 2008 to US$85.98 million

in 2009, but below the 2009 projection of US$141.20 million. Exports and imports declined

by 8.5% and 3.7% to US$170.91 million and US$261.10 million compared to a year ago.

Net services declined from US$33.37 million in 2008 to US$21.65 million in 2009, net

income improved from a deficit of US$34.26 million in 2008 to a lower deficit of US$8.13

million in 2009, while net transfers improved significantly from US$89.49 million in 2008 to

US$135.75 million in 2009 due to increase of both official and non-official transfers

including remittances by the Gambians living abroad.

(b)BOP Situation in 2010-Q1

The year 2010 has started with a significant improvement in the overall BOP situation ascompared with that in the first quarter of 2009. Current account recorded a surplus of D642million in 2010-Q1 compared to a deficit of (-) D108 million in 2009-Q1, due to significantimprovements in exports and current transfers in 2010-Q1.

Capital and financial accounts also recorded an increase from (-) D751.31 Dalasi to D104million in 2010-Q1.

Consequently, the overall balance of payments showed a surplus of D746 million in 2010-Q1 compared with a deficit at (-) D859 in 2009Q1.

Data from the Gambia Tourism Authority (GTA) indicates that Tourists arrivals in 2010-Q1declined by 33% over 2009-Q1 reflecting the weaker global economic situation. Similarly,data on remittances showed only a modest recovery, lower than expected earlier.

(c) Foreign Exchange Reserves

Volume of transactions in the domestic foreign exchange market, measured by aggregatesales and purchases of foreign exchange in the first five months of 2010 amounted toD16.69 billion or US$691.02 million compared to D13.72 billion or US$520.50 million in2009.

As at end-April 2010, gross international reserves, including the SDR allocations, stood atUS$177.63 million, equivalent to 7.0 months of import cover compared to US$116.3 millionor 4.9 months of import cover a year ago.

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Table-2.12 Balance of Payments in 2008-2009 and 2010Q1 in Million GDand US$

Period

2008Million

GD

2008MlnUS$

2009Q1Million

GD

2009Q1MlnUS$

2009million

GD

2009MlnUS$

2010Q1million

GD

2010Q1mlnUSD

1.Current A/C=2+3+4+5 207.1 12.3 (107.6) (4.1) 1,692.7 63.3 642.5 23.8

2.Goods (2.1+2.2) (1,558.4) (68.2) (683.9) (26.1) (2,282.5) (86.0) (416.7) (15.5)2.1 Exports FOB 4,536.5 202.8 934.5 35.7 4,646.0 175.1 1,103.7 41.0

-- Exports trade stat 1,691.1 76.1 239.1 9.1 1,706.1 64.3 466.9 17.3

-- Re-exports 2,489.1 110.7 660.9 25.3 2,829.6 106.6 620.9 23.0

--Goods in transit 356.2 16.0 34.5 1.3 110.3 4.2 15.8 0.6

2.2 Imports FOB (6,094.8) (271.1) (1,618.4) (61.8) (6,928.5) (261.1) (1,520.4) (56.4)

--Imports trade stat (7,111.8) (316.3) (1,888.4) (72.2) (8,084.6) (304.6) (1,774.1) (65.9)

--For re-exports 1,017.0 45.2 270.0 10.3 1,156.1 43.6 253.7 9.4

3. Services 713.5 33.4 367.2 14.0 571.1 21.7 156.1 5.8

--Transportation (434.1) (19.4) (123.6) (4.7) (480.2) (18.1) (224.6) (8.3)

--Travel 1,624.1 73.5 612.7 23.4 1,421.7 53.7 447.4 16.6

--Communications 214.4 9.8 52.4 2.0 264.0 10.0 93.7 3.5

--Insurance (146.0) (6.5) (38.0) (1.5) (165.9) (6.3) (33.4) (1.2)--Construction 76.0 3.5 12.9 0.5 66.3 2.5 (2.5) (0.1)

-- IT (70.9) (2.8) (23.6) (0.9) (35.9) (1.4) - -

--Other Business (550.0) (24.7) (125.5) (4.8) (499.0) (18.8) (124.5) (4.6)

4. Income (757.4) (34.3) (74.8) (2.9) (214.9) (8.1) (126.0) (4.7)

--Investment income (931.4) (42.1) (115.1) (4.4) (374.9) (14.2) (103.4) (3.8)--Compensation of

labor 174.0 7.8 40.3 1.5 160.0 6.0 (22.5) (0.8)

5. Current transfers 1,809.3 81.5 283.9 10.8 3,619.1 135.7 1,029.0 38.2

5.1 Government 137.2 6.3 108.3 4.1 798.6 30.0 248.8 9.2

5.2 Remittances 1,195.8 52.6 420.0 16.0 1,741.6 65.7 242.6 9.0

5.3 Other transfers 476.4 22.6 (244.4) (9.3) 1,079.0 40.1 537.6 20.06.Capital-Fin.A/C=7+8 463.4 11.0 (751.3) (28.7) (1,864.3) (70.1) 104.2 3.9

7. Capital 24.4 1.1 - - - - - -8.Financial=8.1+8.2+8.3 439.1 9.9 (751.3) (28.7) (1,864.3) (70.1) 104.2 3.9

8.1 FDI 1,555.7 70.1 262.7 10.0 1,050.9 39.6 262.7 9.8

8.2 Other inv.=A+B+C (1,308.5) (68.1) (827.8) (31.6) (1,029.8) (39.3) 119.1 4.4

(A) Assets=i+ii 93.5 0.2 (197.1) (7.5) 543.3 20.2 276.5 10.3

(i) Loans 251.1 11.5 62.8 2.4 378.7 14.2 94.7 3.5

(ii) Deposits (157.6) (11.3) (259.9) (9.9) 164.7 6.0 181.8 6.7

(B) Liabilities=i+ii (1,401.9) (68.3) (630.7) (24.1) (1,573.1) (59.6) (157.3) (5.8)

(i) Trade credits (1,472.0) (69.3) (528.3) (20.2) (2,357.8) (88.9) (595.1) (22.1)

(ii) Govt Loans=a+b 16.4 0.6 214.2 8.2 526.1 19.8 224.3 8.3(a) Disbursements 339.6 15.1 276.8 10.6 798.5 30.1 292.2 10.8

(b) Amortization (323.2) (14.5) (62.5) (2.4) (272.4) (10.3) (67.9) (2.5)

(C) Curr. & dep. 53.7 0.4 (316.7) (12.1) 258.7 9.5 213.5 7.98.3 Reserve Assets(increase if negative) 191.8 7.9 (186.2) (7.1) (1,885.4) (70.3) (277.7) (10.3)Overall Balance

670.5 23.4 (858.9) (32.8) (171.6) (6.8) 746.6 27.7

SOURCE: Central Bank of The Gambia.

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2.15 Exchange Rate

Over one year, in August 2010 Dalasi depreciated against UK by 3.1%, US$ by 7.6%,

SEK by 11.6%, CHF by 0.8%, CFA by 1.5%, and against Euro by 1.3%.

Table-2.15 End-period mid-market exchange rates (Dalasi per unit of

foreign currency)Year Month UK US$ SEK(10

0)CHF CFA(500

0)Euro

2009 Jan 37.25 26.07 325.12 20.85 262.81 33.52

Feb 37.38 26.11 305.29 22.04 257.78 33.6

Mar 38.18 26.38 309.62 23.31 259.30 35.22

Apr 39.05 26.80 321.49 23.00 262.17 35.32

May 41.40 26.74 325.95 22.40 265.98 37.00

June 43.13 26.87 347.89 21.96 272.87 37.04

July 43.31 26.79 346.46 24.42 277.53 38.06

Aug 43.80 26.63 326.25 24.36 281.45 37.68

Sept 42.99 26.95 325.34 25.47 283.58 38.61Oct 43.48 26.91 377.70 26.07 297.13 39.61

Nov 43.88 26.93 348.88 26.65 295.53 40.15

Dec 43.04 26.94 348.01 25.81 288.26 39.87

Ave 41.41 26.68 334.00 23.86 275.37 37.14

2010 Jan 43.01 26.94 362.62 25.29 289.32 39.03

Feb 42.32 26.94 372.91 25.27 284.26 39.02

Mar 40.79 27.01 364.08 25.09 273.22 37.11

Apr 41.00 27.25 368.69 25.03 281.41 36.05

May 39.11 28.73 353.12 25.67 280.85 36.72

June 41.77 27.86 345.71 24.08 286.26 36.13

July 43.20 28.03 362.19 25.04 281.81 36.97Aug 45.18 28.65 364.00 24.56 285.78 38.18

Rate of appreciation (-) / depreciation (+) of Dalasiover the same period of previous year (in Percentage)

2009 Oct 7.4 8.1 14.4 29.4 15.1 20.4

Nov 8.2 2.5 8.5 32.8 14.4 20.6

Dec 7.2 1.5 -8.3 12.5 11.2 11.8

2009 Average 0.7 19.3 0.0 19.5 10.6 14.0

2010 Jan 15.5 3.3 11.5 21.3 10.1 16.4

Feb 13.2 3.2 22.1 14.6 10.3 16.1

Mar 6.8 2.4 17.6 7.6 5.4 5.4

Apr 5.0 1.7 14.7 8.8 7.3 2.1May -5.5 7.4 8.3 14.6 5.6 -0.7

June -3.1 3.7 -0.6 9.7 4.9 -2.4

July -0.2 4.6 4.5 2.5 1.5 -2.8

Aug 3.1 7.6 11.6 0.8 1.5 1.3Source: Central Bank of Gambia (CBG)

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3. Recent Policy Developments and Development Issues

3.1 Budget Call Circular for the Preparation of Budget for 2011

As in earlier years the Ministry of Finance has issues a Budget Call Circular to all ministries andbudgetary agencies indicating the policy guidelines and procedures for the preparation of the

fiscal year 2011 budget proposals. The Circular provides the overall macroeconomic and fiscalpolicy framework and the indicative expenditure ceilings for all budgetary agencies for FY 2011;communicates the policy and administrative guidelines and procedures in the preparation of theFY 2011 budget consistent with public financial management reforms; and set the schedule ofbudget preparation activities. All Ministries/Departments/Agencies (MDAs) have been requestedto prepare their Budgets for FY 2011 and submit them to the Ministry of Finance (MOF) not laterthan 6 August 2010 at the latest.

Budget Strategy

The budget shall give priority to major programs/activities that are geared towards achieving thePRSPII objectives and the MDGs. For FY 2011, the focus for funding shall be mostly directed to

the following priority areas, determined in the context of the PRSPII:i) Infrastructure development including roads construction and improvement in

energy supply and accessii) Basic and secondary education services to increase efficiency in deliveryiii) Health services to pave the way for meeting the Millennium Development Goals

(MDGs), especially:a. Increasing population access to the basic clinical care packageb. Increasing the production and retention of skilled health care workersc. Improving essential drugs security in the countryd. Increasing access to public health protection servicese. Gradually meeting the tertiary care needs of the population

iv) Agricultural development to help improve food security, value addition and raisefarmers income and foreign exchange earnings;

v) Further improvement in Information Technology including telecommunicationvi) Deepening public financial management, especially to build capacity of MDAs in

the area of strategic planning and budgetingvii) Human capital formation through job creation programs/activities and the

acceleration of the public service reform processviii) Good governance and respect for the rule of lawix) Environmental development to help establish an effective response to climate

change

Macroeconomic Framework

The preparation of the FY 2011 budget proposals shall be based on the Macroeconomicframework as presented in Table-1 and Table-2.

Fiscal Framework: Table-3 presents the fiscal envelope for 2011 Budget.

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Table-1: Key Macroeconomic Parameters/Assumptions for 2011

Parameter2009(actual)

2010(estimate)

2011(projected)

1 GDP real growth % 5.6 5.0 5.4

2 Inflation % 4.6 3.9 5.0

3 91 days TB rate % 11.3 10.0 9.5

4Foreign Exchange(Dalasi/USD)

26.68 27.48 28.30

5GDP (million dalasi, IMFestimate)

25,805 28,425 31,434

6 Debt to GDP ratio % 61.1 57.2 53.3

- External debt 37.1 35.1 33.6

- Domestic debt 24.0 22.0 19.7

Source: MEPID, GBOS, CBG, IMF and SSSD/MOF

Table-2: Sectoral Growth Rates and Shares in GDP at factor cost (in

percentage)

Sectors Growth Rates (%) Sectoral Shares (%)

2009 2010 2011 2009 2010 2011

Agriculture 9.8 4.3 4.3 26.3 26.2 26.0

Crops 14.3 4.5 4.5 14.8 14.8 14.7

Livestock 4.5 4.0 4.0 8.9 8.9 8.8

Forestry 0.7 2.0 2.0 0.5 0.5 0.5

Fishing 5.1 4.3 4.3 2.0 2.0 2.0

Industry 2.1 5.1 4.7 13.0 13.1 13.0

Mining & Quar. 12.0 11.5 11.5 2.1 2.2 2.3Manufacturing -2.8 3.1 3.1 5.4 5.4 5.3

Utilities 6.2 11.6 11.6 1.5 1.6 1.7

Construction 3.0 1.0 1.0 4.0 3.8 3.7

Services 4.3 4.8 5.3 60.7 60.7 60.9

Trade 6.0 1.3 2.0 26.7 25.9 25.1

Hotels -26.8 1.0 1.5 2.6 2.5 2.4 Transport &Comm.

5.0 8.0 8.511.0 11.3 11.7

Financial 13.2 7.0 7.0 9.0 9.2 9.3

Real estate2.5 3.0 3.0

3.0 2.9 2.9Public admin 2.0 9.0 9.0 3.6 3.8 3.9

Education 2.7 11.5 11.5 1.8 1.9 2.0

Health 8.0 12.7 12.7 2.4 2.5 2.7

Community 2.8 12.4 12.4 0.7 0.7 0.8Source: GBOS and SSSD/MOF.

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Table 3: Indicative GLF Resource Envelope for FY 2011 (in Million Dalasi)

Outturn2009

Budget2010

Projected 2011

Variance

2010/11

Variance %

1 Revenue and Grants 4,069 4,838 4,844 6 0.1%

- Tax 3,391 3,991 4,228 237 5.9%

- Non Tax revenue 380 422 443 21 5.0%

- Grants 298 425 173 (252) -59.3%

2a Expenditure & NetLending 3,870 4,428 4,907 478 10.8%

- Debt interest 845 762 773 11 1.4%

- External 147 176 194 18 10.0%

- Domestic 698 586 579 (7) -1.2%

2b Other expenditure 2,968 3,604 4,084 480 13.3%

- Personnel 1,035 1,486 1,472 (14) -0.9%

- Other current 1,583 1,752 1,611 (141) -8.0%

- Capital GLF 350 365 1,000 635 173.8%

2c Net Lending andInvestment 57 62 50 (12) -19.4%

- Investments 86 84 88 4 4.8%

- Net Lending (29) (22) (38) (16) 72.7%

3 Gross Surplus/Deficit 199 410 (63) (472) -115.3%

4 Financing (199) (392) (399) (7) 1.7%- Domestic borrowing(net) 167 (10) (91) (81) 808.6%

- Amortization (303) (336) (372) (36) 10.6%

- Arrears (117) (110) - 110 -100.0%

- Capital revenue 55 64 64 - 0.0%

5 Net surplus/deficit 0 17.2 (462) (445) -2790.6%

6 MDA resourceenvelope 3,172 3,815 3,710 (105) -2.8%

Annual increase inresource envelope -1.5% 20.3% -2.8%

Memorandum Items:GDP (nominal, MD, IMFest)

25,805 28,425 31,434

Revenue/GDP ratio 15.8% 17.0% 15.4% 10.6%

Expenditure/GDP ratio 15.0% 15.6% 15.6%Gross deficit/surplus toGDP 0.8% 1.4% -0.2%

Net deficit/surplus toGDP 0.0% 0.1% -1.5%

Resource envelope toGDP 12.3% 13.4% 11.8%

Source: MOF

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3.2 Tax Policy Measures Taken in June 2010

As mentioned earlier, the fiscal performance during the first half of 2010 was not satisfactorydue to shortfalls of government revenues, although the expenditures were within the budgetedallocations. In order to improve revenue realizations and to achieve positive basic balance at theend of the year, the government introduced the following measures in June 2010:

a) Reinstated domestic excise taxes of GMD 11 per liter of beer which will raise about

GMD 19 million in 2010;

b)Reformed the mechanism for setting retail prices for petroleum fuels, which

incorporates an excise tax of GMD 5 per liter on premium motor spirits and GMD 1 per

liter on diesel, and applies the general sales tax rate of 15 percent on all petroleum

based fuels. The new formula for retail prices will be adjusted at regular intervals to

allow the pass-through of changes in world fuel prices and the exchange rate.

c) Allowed business class air travel for only ministers and others having higher ranks;

d) Put a freeze on non-priority hiring in the public sector; and

e) Reduced monthly cash allocations to spending agencies in line with the requirements to

achieve a cumulative basic balance of D265.1 million by end-September 2010.

3.2 IMF Technical Missions

At the request of the authorities of the Gambia an IMF Technical Assistance Mission (MSA)on revenue administration comprising David Kloden (Head), Patrick Fossat and Maureen Kiddvisited Banjul during April 30-May 13, 2010 and produced a report entitled The Gambia-

Building on the Gambia Revenue Authority (GRA) Success- a Tax Reform Program Anchoredon VAT. The missions purpose was to evaluate the state of revenue administration with aspecific focus on the administrative measures and preparations necessary to launch andimplement VAT by January 2013 in accordance with the regional commitments under theEconomic Community of West African States (ECOWAS). The mission has given valuablesuggestions and advice on tax policy and designs, tax administration, restructuring GRA,particularly strengthening the customs administration, and VAT administration plan.

In response to a request by the Honorable Finance minister another IMF Technical AssistanceMission (MSA) on public financial management comprising Duncan Last, Florence Kuteesaand Camille Karamaga visited Banjul during June 14 to 24, 2010 to advise on strengthening thebudget preparation process, as well as the prioritization and sequencing of the public financial

management (PFM) reform strategy over the medium term. The mission held a half dayworkshop on budget reforms attended by senior officers of ministries and local governments.The mission advised that as a first step towards PFM reforms, the MOF may implementprogram budgeting within the Medium Term Expenditure Framework (MTEF) in three pilotministries in 2012 budget, and then rolling over to other ministries during 2013-2014. TheMission has produced a report entitled The Gambia- Strengthening Budgetary Managementand sequencing Reformswith detailed action plans and time lines.

gambia monthly economic bulletin october 2010

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