There is a need for stakeholders in the Forex market like the Central Bank of The Gambia, Association of Licensed Forex Bureaux (ALFOB), Money Transfer Operators (MTOs), foreign exchange bureaux, the parallel market and others to put hands together to find an amicable solution to the rapid inflation of the prices of goods and services in the country, mainly caused by the foreign-exchange situation.
While decisions have been planned by the State authorities to tackle the problem through a new reference rate by Central Bank, we should be careful so that actions taken to redress the problem do not rebound negatively on the nation.
This is because the Forex bureaux under the umbrella body of ALFOB have decided to cease operation to the general public effective tomorrow May 3rd, 2023. If this situation is not properly handled, it may bring severe repercussions to the economy since remittance from abroad is playing a major role in feeding the country's economy.
The value of remittances from Gambians in the diaspora stands at US$712 million, according to 2022 interim figure, which amounts to 60% of GDP, as revealed by Dr Sireh Jallow, first deputy governor of the Central Bank of The Gambia, on 13 January 2023.
Mr President, another related problem that should be tackled is the difficulty of transiting goods to The Gambia from the Dakar Ports.
According to the business community, people are finding it very difficult and costly to bring goods to the country from Senegal.
They say for them to bring goods into The Gambia from Senegal, they would have to pay many charges, as well as exorbitant transport fares, hence the prices of goods will definitely be increased for them to make a profit.
On the other hand, the Central Bank of The Gambia (CBG) should encourage Commercial Banks to make foreign currency available to business people so that they don't find it very difficult to access or get forex from the banks, a challenging phenomenon which usually leads people to the parallel market.
Mr President, following the CBG directive on the use of the reference rate, it is safe to say the aim of the reference rate directive has been largely achieved since its introduction about two weeks ago. Official rate dropped from 63.50 levels to 60.20 levels. Parallel rate dropped from 64.50 levels to 62-63 levels.
CBG’s control of cash shipment and with a clear intention to centralize the shipment to the CBG effective May 1st, somehow drew the reins on the parallel market activities reducing the effects of speculative activities.
This has led to retaliation from the market, as expected, by FX bureaux threatening to close up shop from 3rd May 2023. CBG further strengthened their stance in a memo sent on 28 April to all MTOs and Financial Institutions directing them to share margins within the +|-2% of the reference rate. Margins will be really squeezed and the risk of Parallel market non-compliant activities is raised if not properly policed by the respective authorities and those found culpable should face the full force of the law to deter such activities that will deny banks the much-needed foreign exchange to settle Letters of Credits (LCs) and International Bills for Collection.
Mr President, the Central Bank of The Gambia must be consistent in the application of these directives and we believe they have done a thorough market study to effectively force and sustain the reference rate directive.
We expect the central bank to line up adequate buffers to intervene in the market to settle LCs as they fall due; otherwise banks will be in default situation as LCs and other trade bills fall due. This will affect not only their credibility with their confirming banks but also their ability to open new LCs for vital imports like energy and commodities into the market.
Good day!