Dalasi Strength Forecast to Contain Inflation Pressure

The Dalasi remains strong in its appreciation against all major currencies like the US dollar, Pound Sterling, Euro and CFA by 32.0 per cent, 25.8 per cent, 22.7 per cent and 21.9 percent respectively, the monetary policy committee (MPC) of the Central Bank of The Gambia report indicated.

The indication, according to the monetary policy committee’s report, is that the dalasi would continue to be relatively strong in the medium term. This is predicated on continued maintenance of fiscal and monetary discipline, continued US dollar weakness, increase in foreign exchange to service external debts due to prospective debts relief.

The monetary policy committee report also reveals that the near-term outlook for The Gambia is favourable as the macro-economic fundamentals remain strong and the appreciation of the Dalasi is expected to contain inflationary pressures. The report however added that there are risks to the forecast particularly relating to marked increase in oil prices.

Taking into consideration the above-mentioned factors, including the risks to the inflation outlook, the monetary policy committee has decided to maintain the rediscount rate, the policy rate, at 15.0 per cent. The MPC would continue to monitor change in economic conditions and respond appropriately in order to discharge its mandate to maintain price stability, the report stated.

According to the report the inter bank foreign exchange market continues to be vibrant with transaction volumes increased to D31.6 billion in the nine month to end of September 2007, compared to D23.9 billion in the corresponding period of the previous year.

The interbank foreign exchange market experienced an unprecedented appreciation of the dalasi during the third quarter.

The appreciation of the dalasi against currencies began in 2005 on the back of strong fiscal and monetary policies, rebounding economic growth and increased foreign exchange inflows, the report indicated.

It further revealed that the banking sector in The Gambia continues to function efficiently as banks have sufficient capital and liquidity to meet their funding commitments.