Dalasi depreciation, others put pressure on domestic prices

Momodou Bamba Saho Governor of the Central Bank of the Gambia has disclosed that the expectations on the increase of food prices coupled with the strong growth in the monetary aggregates, the recent sharp depreciation of the Dalasi and high inflationary expectations are expected to exert further pressure on domestic prices.

"The predicted 2010 rainfall is that it will be above normal over large areas of the country which should increase agricultural production. According to Food and Agricultural Organisation, food prices are expected to continue to increase well into 2011. This, coupled with the strong growth in the monetary aggregates, the recent sharp depreciation of the Dalasi and high inflationary expectations are expected to exert further pressure on domestic prices," he said.

Central Bank Governor Saho was speaking at a press conference organised by the Monetary Policy Committee of the Central Bank held yesterday at the bank's premises in Banjul.

According to him, the Gambia's economy is projected to grow by 5.0 percent in 2010 compared to 5.6 percent in 2009. He noted that despite the effects of the global economic crisis on the services sector, manufacturing, wholesale and retail trade and agricultural value-added remain strong.

He said that in the country's business survey, the majority of respondents indicated that both economic and business activity was higher in the second quarter compared to the first quarter of 2010. He said the respondents also expect inflation to be higher in the third quarter compared to the second quarter of 2010.

Year-year inflation, he said, measured by the National Consumer Price Index (NCPI), was 2.4 percent at end-September 2009 before increasing slightly to 2.7 percent at the end December 2009.

"Data on the distribution of Treasury bills by maturity indicates that the 364-day bill, 182-day bill and 91-day bill accounted for 64.63%, 18.11% and 17.26% of the outstanding stock in July 2010 from 65.35% and 18.14% in December 2009," he added.

Governor Saho indicated that Africa is recovering strongly from the global economic crisis, noting that growth in GDP after averaging about 6% from 2006-2008, declined to a mere 2.5% in 2009. He said that growth is expected to rebound to 4.5% in 2010 and 5.2% in 2011 reflecting on-going rebound in global trade, rising mineral prices, prudent management of public finances and implementation of structural reforms.

He revealed that from end-December 2009 to end-July 2010, the dalasi depreciated against the US by 9.3 percent partly mirroring developments in the international currency markets, where the US dollar has been appreciating until end-June 2010.

Saho also added that sugar prices reached a 30-year high in February 2010 and has started easing on the prospect of production in Brazil and India.

"Prices of many commodities fell during the financial market shocks in May and early June, reflecting in part expectations for weakened global demand. Prices recovered some ground more recently, as concerns about the spill over of the financial turbulence has eased."