Economic performance and outlook: In 2014, the economy experienced exogenous shocks caused by erratic rainfall and spillover effects of the regional Ebola crisis, causing GDP growth to fall from 5.6% to –0.2%. Growth rebounded to 4.4% in 2015 but declined to 2.2% in 2016 due to policy slippages, electoral uncertainty, an unusually short rainy season, and a three-month border blockade by Senegalese transporters. GDP growth rebounded to an estimated 5.1% in 2017, driven primarily by agriculture and services, and is projected to stabilize around 4% over the medium-term, depending on the new administration’s ability to conduct a robust transition, attract investors, and lay the foundations for economic transformation.
Macroeconomic evolution: Higher spending pushed the budget deficit from 1.7% of GDP in 2008 to a peak of 10% in 2014, before settling at 9.5% in 2016. The deficit was financed largely from domestic borrowing. Domestic debt stock rose from 37.1% of GDP in 2013 to 67.9% in 2016, contributing to a sharp increase in total public debt stock, from 83.3% of GDP in 2013 to 120% in 2016. The 2017 budget is consistent with stabilization objectives to contain the deficit to 2.5% of GDP. Inflation reached 7.2% in 2016, up from 6.8% in 2015, driven by high food prices and depreciation of the dalasi against the U.S. dollar since November 2016. Inflation is expected to decline to 6.9% in 2018, benefitting from the normalization of monetary policy and a rebound in agricultural production. The current account deficit narrowed from 15% of GDP in 2015 to 8.7% in 2016 due to favorable terms of trade and moderate rebound in trade. The trade deficit decreased from 25.7% of GDP in 2015 to 17.9% in 2016. For 2017 and 2018, imports are expected to rise from 34% of GDP in 2016 to 38% in 2018, contributing to an increase in the current account deficit to 10% of GDP in 2018.
Tailwinds: The country has been on a difficult recovery path following the December 2016 elections, but key partners are re-engaging. The substantial resources that they have provided have increased official reserves from 1 month of imports in December 2016 to 3 months in August 2017. The political changes open a new window of opportunity. The country is preparing a long-term strategy, the National Development Plan, 2018–2021, which focuses on accelerating inclusive growth and generating employment opportunities. A donors roundtable to mobilize resources is scheduled to begin in 2018. Tourism, the second largest contributor to the national economy, is booming. To consolidate these gains, the sector needs to improve its competitiveness and address supply-side constraints that stifle growth. Remittances, which account for 10% of GDP, remain the main source of foreign exchange earnings and are expected to increase 5% a year.
Headwinds: The country remains vulnerable to shocks due to its size and overreliance on tourism and subsistence rain-fed agriculture. Energy shortages pose a major challenge. Insufficient access to electricity supply (47% at the national level) makes the cost of electricity among the most expensive in Sub-Saharan Africa ($0.26 per kWh). Rapid demographic changes are fueling intense urbanization. The poverty rate remained largely unchanged between 2010 (48.1%) and 2015 (48.6%). However, the number of poor people increased from 790,000 in 2010 to 930,000 in 2015. The high share of youth unemployment in total unemployment, about 70%, is pushing young people to seek alternative means of livelihood, including migration and illicit activities.
The responsibilities of the Central Bank and the Ministry of Finance were set out in a Memorandum of Understanding signed on 28 September 2007. A Monetary Policy Committee, chaired by the Governor of the Central Bank with two high-level representatives of the Ministry of Finance meets every two months to fix the policy rates or discount and review of monetary conditions. A Treasury Committee, chaired by the vice-governor and two representatives of the Ministry of Finance, meets weekly to agree on the distribution and details of the weekly auction next week. Treasury bills are issued to cover the needs for both monetary policy and government funding or liquidity requirements. The Central Bank does not disclose the breakdown of the bonds issued.
The proportion of external debt in relation to total public debt was 65% at the end of 2012, where a significant interest rate risk on the debt portfolio. Portfolio of domestic debt consists primarily of Treasury bills maturing in one year or less, which is a huge risk for the refinancing of the debt. In fact, 75% of domestic debt has maturity lower than 1 year. The domestic debt to GDP ratio represented 22,53% in 2012 while the external debt to GDP ratio stood at 43,01% at end 2012.
Guide to Buying Bonds
Procedures for market participation
A week before the weekly auction, it is published on the website of the Ministry of Finance, the details of the next auction.
For T-Bills, tenders above GMD 5 million are open only to specialists in government securities. Below GMD 5 million, auctions are open to everyone. Submissions exceeding GMD 100 000 should be a competitive offer. Auctions are multiple prices. In case of a successful bid, Treasury bills are issued at a yield equal to the price offered.
All bids below 100 000 GMD must use non-competitive bids. In order not to compete, the investor agrees to buy the securities weighted average yield of accepted competitive bids. In return, the investor is guaranteed to obtain Treasuries. Investors of non-competitive tender for their own account will be banned from competitive bids for their own account in the same auction.
Trading of government securities are done OTC. The buyer and the seller must execute the transfer form. The transfer form must be signed by at least two officers duly authorized to sign on behalf of the commercial bank whose signatures (one of which must be a class "A") are registered with the Central Bank.
Clearing and settlement of T-bills and Treasury bonds are made on the basis of T+1.
Residents and non-residents are subject to withholding. Treasury bonds are not taxable. However, a 3% commission applies for their rediscount before maturity.
|Rating Agency||Current rating||Outlook|
|Moody’s||No rating||No outlook|
|Fitch||No rating||No outlook|
|Standard and Poor’s||No rating||No outlook|
The 4th of April 2006, the Central Bank of The Gambia has established a Primary Dealer System (PDS) for government securities.
Primary dealers up to date:
- First International Bank Ltd,
- Guaranty Trust Bank Ltd,
- Bank for International Trade Ltd,
- International Commercial Bank Ltd,
- Standard Chartered Bank Ltd,
- Trust Bank Ltd.
Openness to international investors
There are no limits on foreign participation on the domestic debt market. There is no mandatory screening of foreign investment, but it could be done if there is suspicion of money laundering or terrorism financing.
There is no limit on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains.
Restrictions on FX and profit repatriation
There are no restrictions on the conversion of funds into foreign currency. There is no restriction on the repatriation of profits and dividends if it is done through the banking system. Most commercial banks in The Gambia now operate foreign currency denominated accounts, which were introduced by the Central Bank of The Gambia in 2001 to further facilitate international trade and foreign direct investment.