As confidence resumes following the sharp slowdown in 2016, economic recovery is gaining traction. Real GDP growth was an estimated 5.4% in 2018, up from 3.5% in 2017, driven largely by services—tourism and trade and financial services and insurance—which expanded by 10% in 2018, coupled with robust growth in transport, construction, and telecommunications. In tourism, the number of arrivals was expected to reach 225,000 in 2018 after surpassing its pre-Ebola peak of 171,000 in 2017.
The fiscal deficit narrowed to 3.9% of GDP in 2018 from 7.9% in 2017, thanks to increased fiscal discipline and international community support. However, the debt-to-GDP ratio stood at about 130% of GDP in 2017, and the country has been classified as being in debt distress. Inflation decreased to an estimated 6.2% in 2018 from 8% in 2017. Gross international reserves increased to 3.1 months in 2018 from 2.9 months in 2017, helped by increased financial assistance from development partners
The current account deficit remains large—an estimated 19% of GDP in 2018, down slightly from 2017. For the first half of 2018, total imports rose by 9.2% compared with the first half of 2017, while total exports increased by 8.5% to $54.9 million. The export basket contains mainly primary commodities, including groundnuts (55.6%), fish and fishery products (21.6%), and cashew nuts (10.6%). Short-term economic prospects are expected to steadily improve over the medium term. Real GDP is projected to grow by 5.4% in 2019 and by 5.2% in 2020.
Tailwinds and headwinds
Insecurity and political instability pose risks in 2019 with the withdrawal of the Economic Community of West African States mission and possible contention over the three-year presidential term limit. In addition, high public debt will continue to crowd out government spending in key socioeconomic sectors such as health, education, and infrastructure development unless the government restructures its debt.
Other headwinds likely to affect the economic outlook include a resurgence of political instability, the large increase in public spending, delays in implementing structural reforms, and adverse weather that could weaken rain-fed agriculture.
The budget deficit remains a challenge for policymakers, and fiscal consolidation is a key pillar in the National Development Plan 2018–21, which garnered $1.7 billion in commitments from donors at a May 2018 conference in Brussels. Disciplined implementation of the reform agenda for state-owned enterprises, lower domestic borrowing, and greater commitment to administrative austerity measures could help reduce the deficit. Overall, policies must focus on enhancing efficiency in service delivery using limited government resources.
Addressing energy and water shortages remains a vital policy priority. Access to electricity is 47% nationally but only 13% in outlying provinces. Only 60 MW of the 106 MW of total installed capacity are available, with transmission and distribution network losses reaching 26% in 2016. Unreliable electricity supply also affects availability of water in Greater Banjul, compounding the problem of limited access to piped water.
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.