Export of groundnuts projected to be strong

The Governor of the Central Bank of the Gambia (CBG) has disclosed that exports of groundnuts are projected to be strong boosted by a good harvest in 2010 and higher prices.

Amadou Colley, who was speaking Friday during a press conference by the Monetary Policy Committee of the bank, said revised estimates from the Gambia Bureau of Statistics (GBoS) indicate that the Gambian economy grew by 5.0% in 2010 driven by the strong growth of the agricultural sector.

"Growth in real GDP is projected at 5.5% in 2011. Strong performance in agriculture and telecommunications is expected to offset the continued weakness in tourism," Colley revealed.

According to the CBG Governor, global commodity prices remain elevated, driven by strong demand and supply shocks.

"Crude oil prices have surged in response to the unrest in North Africa and the Middle East and increased demand from emerging market economies, principally those in Asia," he said, adding that agricultural prices have also been boosted by strong demand and, more recently, by adverse weather conditions.

"The rise in commodity prices has pushed prices in advanced, emerging and developing countries," he further stated.

Governor Colley also noted that the banking industry remains fundamentally sound with key financial soundness indicators showing that the average capital adequacy ratio was 49.0% in March 2011 compared to 46.3% in December 2010 and over and above the minimum requirement of 8.0%.

He revealed that as at end-March 2011, gross international reserves amounted to US$164.6 million, equivalent to 4.9 months of import cover.

"The domestic debt increased to D9.3 billion (28.7% of GDP) in March 2011, or 23.9 percent from a year ago. Treasury bills, accounting for 63.0% of the debt, rose to D5.9 billion, or 12.4%," he added.

He noted that although domestic foreign exchange market remains vibrant, the volume of transactions decreased slightly to US$1.58 billion in the twelve months to end-March 2011 compared to US$1.65 billion a year earlier.

The exchange rate, he went on, remains an important indicator of macroeconomic stability as well as determinant of inflation expectations.

"Data from the latest Business Sentiment Survey indicate that inflationary expectations remain high," he stated.

Colley further stated that headline inflation was slightly below the bank's inflation target of 6%, reflecting in the main, the deceleration in food prices.

"Although the outlook for inflation is uncertain, high energy and food prices, as well as elevated inflationary expectations remain upside risks," he noted.

In concluding, Governor Colley stated that the Monetary Policy Committee of the bank has accordingly decided to leave the policy rate unchanged at 15%.

"The MPC has also taken cognizance of the high lending rates in The Gambia and decided to reduce the reserve requirement ratio by 2 percentage points to 12 percent," he said, adding that the expectation is that a corresponding reduction in the commercial bank interest rate would increase investment and growth.