By Fatou Sillah
The Monetary Policy Committee of the Central Bank of The Gambia (CBG) announced on Tuesday that it has raised the monetary policy rate by 1.0 percentage points to 17.0%.
The decision was made at a meeting of the MPC, which is the apex monetary policy decision-making body of the CBG. The MPC is responsible for setting the policy interest rate in The Gambia, which is used to influence the cost of borrowing and lending money.
The MPC said that the decision to raise the policy rate was taken in response to the rising domestic inflation rate. Inflation in The Gambia and around the world has been on the rise in recent months. The MPC believes that raising the policy rate will help slow down the growth of inflation.
Speaking at the press briefing, the Governor of the Central Bank of the Gambia, Buah Saidy gives an overview of the deliberation that informed the committee’s decision.
“The global economic conditions have improved since the last MPC meeting in May of this year. Economic activity continues to recover, although there remain significant uncertainties. Positive developments include the recovery of the global supply chain and the reassuring end to fears of a broader banking crisis following bank failures in the US and Europe early this year.
“However, there are still significant headwinds that continue to drag global economic activities down. The high level of inflation is eroding purchasing power, compounded by the high cost of borrowing attributed to the monetary policy stance and the ongoing geopolitical tensions. Against this backdrop, the IMF in July 2023 upgraded its global economic growth forecast by 0.2 percentage points to 3.0 percent for 2023, which is still lower than the 3.5 percent recorded in 2022,” he said.
The governor further states that global inflation continues to moderate, partly reflecting the aggressive interest rate hikes by central banks.
“Global inflation continues to moderate, partly reflecting the aggressive interest rate hikes by central banks, but the pace of disinflation is slow. The easing of the general price level also reflects the improvement in the global supply chain that resulted in lower global energy and food prices. A recent forecast by the IMF predicts a continued slowdown in global inflation, dropping from an average of 8.7 percent in 2022 to 6.7 percent in 2023 and further down to 5.2 percent in 2024,” he added.
The Governor highlighted the resilience of the Gambian economy, which is being supported by strong private demand.
“The Gambian economy continues to exhibit remarkable resilience, supported by strong private demand, a recovery in tourism, and public and private sector consumption and investments. The Bank’s Composite Index of Economic Activity (CIEA) registered a growth of 3.5 and 5.2 percent in the first and second quarters of 2023, respectively.
“Which indicates a robust level of economic activity. These factors have contributed to a positive economic outlook for 2023, with the Bank projecting real GDP growth to surpass 5.0 percent. This represents a 0.7 percentage point upward revision from the May forecast. However, the balance of risk to the growth outlook is tilted to the downside. Major risks that could hinder the growth prospects include the high level of inflation, structural rigidities in the domestic economy, volatile global commodity prices, and the unstable global geological environment,” he said.