Gambia

The Gambia, a small and open but relatively liberal economy with limited financial development, fixed its currency to the pound sterling up to 1985. In 1986 the country embarked on a long period of discretion with gradual though non-linear improvements in monetary arrangements but recurring fiscal dominance. Increasing difficulties were experienced before a new government in 2017 returned to structural reform and stabilisation.

Years	Targets and attainment	Classification
1974-85	new currency from 1971, fixed to GBP, revalued 1973; central bank from 1971, relying initially on reserve ratios in a limited and foreign-owned banking system, but also setting banks’ interest rates and sometimes credit ceilings; small and highly open economy dependent on groundnut exports, with relatively liberal exchange and trade arrangements; treasury bills issued, mainly held by banks, but no secondary interbank market; 1977 liquidity ratio for banks, which typically have excess liquidity; recurring excessive fiscal and related credit expansion; failed coup 1981 leads to loose confederation with Senegal (ended 1989); 1982-3 improved control of credit, interest rates become positive in real terms; 1984 large devaluation but stabilisation targets missed, parallel market premium re-emerges; recurring issue of groundnut producer prices, subsidies to groundnut marketing board and solvency of state-owned bank which directs lending to sector	augmented exchange rate fix AERF
1986-2017	1986 exchange rate floated within interbank market, trade and exchange liberalised, treasury bills auctioned and able to be discounted, all interest rates deregulated, structural reform including groundnut trade and financing, more successful stabilisation; parallel forex premium largely disappears; by 1990 central bank uses mainly indirect monetary policy instruments, with direct credit controls abolished and increased issue of treasury and (from 1990) central bank bills taken up partly by nonbank sector, rediscount window (standing facility) and some focus on reserve money; 1992 uniform reserve requirements, central bank gets increased independence (with price stability identified as main goal); 1994 devaluation of CFA franc affects Gambia’s competitiveness; 1994 coup (with falls in tourism and donor aid) interrupts structural adjustment efforts until after resumption of civilian government in 1997 (with coup leader elected president late 1996) [note: few IMF reports and papers from 1992-97 available.]; 2001 moves to deepen treasury bill market, longer-term treasury bills and forex bank deposits introduced, efforts to improve liquidity forecasting; 2001-3 acute fiscal and monetary policy slippages, plus quasi-fiscal spending and irregular forex transactions by central bank associated with misreporting of data, leading to depreciation and inflation; as of 2004 main monetary instrument remains primary issue of treasury and central bank bills and intermediate target is broad money, but still no real interbank money market, interbank forex market limited, rediscount at central bank but no organised secondary market for treasury bills; 2004 Monetary Policy Committee; 2005-6 new central bank act increases independence in principle but needs to be realised in practice, and fiscal dominance remains issue; 2005-10 entry of new banks; 2012-13 and again in 2015 exchange pressures countered by repeated but short-lived market-disrupting presidential directives to peg rate at overvalued levels; heavy use of reserve requirements; recurring policy slippages; late 2016/early 2017 long-serving president loses election and is obliged to step down, new government moves to stabilise and reform; statistical database improves but remains poor	loosely structured discretion LSD

Selected IMF references: RED 1974 pp27-32, 50-4; RED 1976 pp33-4; RED 1978 pp34, 44; SR 1979 pp6-8; RED 1981 pp34; SR 1981 pp10, 11; RED 1983 pp46-7; SR 1983 pp9-10; SR 1984 pp5, 1-12; SR 1985 pp3-5, 8-9, 12; SR 1986 pp6, 9-11; SR 1988 pp4-6, 15-16; SR 1990 pp4, 6-7, 8; Midterm Review of Third Annual Arrangement under ESAF 1991 pp8, 11; SI 1999 pp 7, 9-10, 12, 56-7, 67; SI 2000 pp6, 9-12, 14-16; SR 2001 p18; SR 2002 pp6, 20; SISA 2004 pp18-20, 24-5, 34-5; SR 2004 pp6-7, 9-11; SR 2005 pp5-9, 16, 18-19; Monetary Policy Implementation at Different Stages of Market Development – Country Cases and Appendices (2005) pp44-53; SISA 2007 pp36-47; SR 2011 pp4, 7, 17-19; SR 2013 pp7-8, 15-16; SR 2015 pp4-11; SR 2018 pp16-19.

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