Market beat: The dalasi update

Good Monday morning Gambia and welcome to Dalasi Update (DUD).

This week, the Dalasi continues its gallant performance against major world currencies, notably the Pound Sterling and US Dollar. The good news is that almost all the banks have registered minor gains against almost all currencies this week.

Gains: ACCESS BANK is the only bank this week to register gains in all its trading currencies and ECOBANK is also registering all gains in all currencies except one where it is a non-mover.

Non-movers: FIB is a 100% non-mover this week on all its currency trading. This is the fourth week running for FIB and please do keep it up.

Mixed picture: All other banks registered some gains and some non-movers with SCBG and AGIB being the only two banks registering minor losses this week. Generally, the buying and selling of foreign currencies within our banks have been very impressive this week. There is much fear of what will unfold in the months ahead in our finances globally but in The Gambia, it is so far, so good and the Dalasi is doing very well as at now.

Transcript of press briefing  -African Finance Ministers

Market Beat wishes to bring you extracts of an interview of African Foreign Ministers for The Gambia, Kenya and Cameroon, on October 11th, 2008, when the world was struggling with the immediate impacts of the world financial turmoil. However, due to space limitation and relevance, we will restrict our coverage to the questions put to and answered by our own SoS for Finance and Economic Affairs.

This interview will also help us analyse whether at that time, the Department of State for Finance and Economic Affairs had any clue as to what was likely to happen to the Gambian economy or that as early as October last year, they were on top of their game about the whole financial tsunami and its effects on economies like ours. This interview was organized and culled from the IMF External Relations, Department of Public Affairs and Media Relations.

Mr. Essimi Menye, Minister of Finance, Cameroon
Mr. John Michuki, Ag. Finance Minister, Kenya
Mr. Mousa G. Bala-Gaye, Secretary of State for Finance & Economic Affairs, The Gambia

Mr. Bala-Gaye: I will make my opening statement by stating the present state of the macroeconomic performance of The Gambia, as well as dealing with some of the policy challenges posed by the rising food and oil prices. The Gambia's macroeconomic performance continues to be very, very strong following robust growth in real GDP averaging 6.5 percent per annum between 2003 and 2006 and thereafter, releasing an impressive growth rate of 7.7 percent in 2007. For 2008, we are projecting a growth rate of about 5.6 percent premised by an increase in value-added in telecommunications, tourism, and construction.

However, the uncertainties in the global economy can negatively impact growth. Recent developments in international commodity markets pose challenges and constraints in the fight against poverty in developing countries, promoting food self-sufficiency, and maintaining broad macroeconomic stability.

In The Gambia, the availability of basic commodities, the appreciation of our national currency, the dalasi, and the relatively tight monetary policy stance have helped contain the impact of high prices. After increasing sharply in 2007, driven by rising global oil and food prices, consumer price inflation decelerated in 2008. Year-on-year inflation rose from 1.4 percent in December 2006 to 6 percent in December 2007 before declining to 1.4 percent in April 2008. However, inflation accelerated to 2.2 percent, 3.85 percent in June, July, and August 2008. Our expectations are that inflation will remain within the end-December 2008 target of 6 percent.

This is purely based on the policy measures implemented by the government of The Gambia, including reducing the sales tax on rice and essential commodities in the consumption basket of most households in The Gambia from 15 percent in July 2007 to 0 in May 2008, maintaining a market-driven price mechanism for petroleum products, and the continued implementation of fiscal and monetary policies. Mr Moderator, given that the increases in global food and oil prices are likely to become a permanent feature of the global economy in the near to medium term, combating food price inflation can negatively impact growth, employment, poverty reduction, and the attainment of the Millennium Development Goals.

Thus, to enhance the effectiveness of policy responses over the medium to long term, and avoid negative spillovers, the Government of The Gambia plans to implement a set of structural reforms geared towards increasing food production.

Now, these measures include increasing land acreage allocated to food production, provision of agricultural extension services to farmers, provision of farm inputs such as fertilizers, farm implements, and high-yielding and drought-resistant seeds; promotion of mechanized farming through the provision of tractors and cost-effective farming technologies; and improving access to finance to the farming community. The implementation of the above-measures and policies are not without costs to governments' investments and programs.

As a result, substantial resource flows from our development partners in the form of budget support, balance of payments support, and other forms of aid will significantly assist in giving governments an enlarged fiscal space for increased pro-poor spending, sustained output growth, and maintaining broad macroeconomic stability. Beyond that, a collective global effort is required to eliminate barriers to the flow of capital and trade expertise to areas where they can make a difference. In a forum such as this, and also in the oil and food and agricultural organizations, efforts must be made to eliminate the policy constraints and distortions that impede fuel and food supply increases if we are to put a lid on global inflation. I thank you for your attention.

Questioner: Thank you. I have a question for all three ministers. To what extent are your national financial systems already affected by the current credit crunch? Mr. Bala-Gaye: As far as The Gambia is concerned and from what we have been informed, at the level of the commercial banks, they are really insulated. Our central bank, too, in terms of where it deposits its own reserves, I think we were also informed that the central bank is insulated. I mean, there is no doubt that the effects will be felt in the economy. I mean, with the credit crunch, we are anticipating that there will definitely be a drop in our tourism receipts as well as remittances from Gambians in the diaspora.

Questioner: My questions go to the three ministers, and I have a question for my own minister. First of all, for the three ministers, in facing the financial crisis, the food and many things now in Africa, do you think it would be appropriate now to have a single currency so that we end this problem? The second question that I am going to ask is for my own minister of finance, Minister Bala-Gaye. What strategic plans do you have with this financial crisis for our country, The Gambia? Thank you very much.

Mr. Bala-Gaye: Yes, the first question has been very well answered by my two colleagues. Trade is the basis for a single currency and certainly one that we are trying to forge in West Africa. I mean, if you cannot develop trade between yourselves, among ourselves, I think a single currency will serve very little purpose.

Now, coming to the other question, I mean, that I have already answered; I have already spelt out the effects of the financial crisis in The Gambia. My colleagues have already talked about the issue of aid, which is very, very important, that aid flows will dry up because of the present financial crisis, and what do we do when that happens? This is what all of us are thinking about, that we must now look inward; we must now be in a position to raise adequate domestic resources so that we can finance growth and development in our own countries.

We must also try to develop South-South cooperation in this context and see what cooperation we can forge among ourselves, even if it is not financial but in terms of technical assistance and other forms of cooperation among ourselves. So, we are all looking at the situation. Immediately I cannot tell you that we have defined a strategy. It has just come on to us, as the Kenyan minister has said. We will work through it, but the basis of it all is that we must be self-reliant in the medium and the long term. That is the answer to all this, that the countries must strive to be self-reliant, and this is where The Gambia is going to.

Mr. Bala-Gaye: I think questions on what would have been the impact of food and oil prices on the African economies would have been much more appropriate. Now, talking of the financial global crisis, my colleague, the Kenyan minister, has said we need to understand this first. The African Development Bank, we are told, will be organizing a conference in Tunis in November. Documents will be prepared before that conference so that the implications of the global financial crisis in Africa would have been well discussed and recommendations as to how we go from there would have ensued from the conference. I think this is all that I can say.

Mr. Bala-Gaye: This is a medium-sized question and we will all try to give our own views. We have to come to Washington for the Annual Meetings because we are shareholders in both the IMF and the World Bank. This is an annual general meeting of shareholders, so that is one. Coming here, you can see that we have been very busy in the days leading up to the meetings on Monday and Tuesday, and most of these meetings were on a bilateral basis.

There are relationships individually as countries with the fund, and also with the bank and the institutions of the bank. So, all of us have programs with the IMF. We come here and review and discuss these programs.

There are also interventions by the bank in our various countries, as well as we discuss future interventions with the bank. There are other multilateral and bilateral donors who are present in Washington, and we interact with them; we deal with them. But at the global level there is the Development Committee and the IMFC, and those meetings have started today. Communiqués will be issued at the end of those meetings.

We are represented in those meetings. All of us cannot participate, but in our constituencies we have elected representatives that will represent the constituencies in those meetings.