The Resident Representative of the International Monetary Fund has said that The Gambia government’s decision to fix the exchange rate of the country’s depreciating currency, the dalasi, against major currencies of the world will make matters worse for the economy.
Gaston Mpatswe, who was yesterday briefing journalists barely a month after IMF approved a 10 million US dollar bailout for the country, said the sooner the authorities lift the restrictions on the foreign exchange, the better for the economy.
He said: “The depreciation of the dalasi is a symptom of what is happening in the economy. It is just a symptom of the problems that were in the economy over a period of time. And we believe that fixing the exchange rate is not helping the economy. When you fix it, people will keep their foreign currency and that will make matters even worse. It also will increase speculation, excess demand pressure, makes export of Gambian goods and services expensive and it will have direct impact on the poor because it will not reduce inflation or depreciation of the dalasi and families that are relying on remittances will have to spend on those expensive goods after the exchange rate has gone down. The recovery of the dollar also affected the dalasi.
“We have engaged the government on economic implications of fixing foreign exchange rate. We will have a consultation with the government on the economy in future and we will provide fiscal advice on what the government might do to tackle certain problems in the economy.
“Gambia has been registering a volatile growth rate over the years. The country needs 3.3 percent over a sustained period to be able to reduce poverty. I cannot say if The Gambia is in an economic recession; the economy is facing severe challenges that have to be corrected. The economy is at a crossroads. The government has been borrowing to finance its increasing deficit, both domestically and externally. The Gambian economy needs structural adjustment.
“The export of the country is around $107.3 million while import is around $306.6 million. The fiscal deficit has steadily increased; it was estimated at 4.45 billion dalasis at the end of 2014, against a surplus in 2007. The Gambia’s first challenges are related to structure of the economy and repeated spending pressures that have been affecting the country over a period of time.”