By: Lamin Camara
The inflation of the Gambia according to GBOs CPI reports for April 2022 hits 11.7 percent
This is a difficult macroeconomic challenge for a small growing economy like the Gambia all basically due to the overlapping external shocks of the COVID 19 impact and as the country is recovering with strong resilience the Rusian/ Ukrainian war erases the gains. If my memory can serve me well, The Gambia had maintained single-digit inflation for more than fifteen years until April 2022. The implications are that the increase will worsen the disposable income of consumers and ultimately reduce private sector investment.
The Gambia had been enjoying a low-interest rate since 2017 due to the Government policy of bringing the policy rate as low as around 11 percent. But with this trend, can the government continue to maintain a lower policy rate, lower than the inflation rate? The tendency is that most economies will increase policy rates to avoid going into a negative real effective interest rate which will be a disincentive to any investment and increasing it will also mean a possible crowding out of the private sector.
This experience of the Gambia is what is affecting countries all over the world including the United States facing the worst inflation in 42 years.
Now the big question is, should we wait for this unfortunate scenario to destroy all our hard-earned gains and government efforts to bring development.? The answer is no. As the world faces these difficult times with the overlapping crises and the downside risks are still there, barely there will be an econometric model to forecast the best for the future for any country. Most countries now resort to addressing issues domestically and The Gambia cannot be an exception.
Now looking at the CPI basket, the big animals triggering our inflation include oil and fats- the biggest, cereals and bread, Alcohol and beverages, food and food items, and meat. Undoubtedly identifying these items is the starting point of designing great policies to weather these external shocks, hence:
We should be ready to invest in Agriculture to promote the production of our oil. Let us go back to those glory days in the 80s when Sesame, sunflower, and groundnut oil productions were promoted. Government can now replicate the same – invest in oil milling machines and encourage people to farm for oil. At Least with this move, the demand for oil from outside will reduce and will help reduce inflation.
– Cereals and bread are also misbehaving. There is a lot of government doing in rice cultivation but the impact is not felt yet. There should be more attention in terms of monitoring because with the investment in the rice sector, the country should not be crying for rice as an item triggering inflation. If Nigeria and Senegal can do it, we definitely can. The same argument also goes for bread.
– As a country, we have a lot of opportunities to produce our food, and no doubt we can.
– With the right agricultural policies and implementation strategy, we will certainly overcome these shocks. AGRICULTURE IS THE WAY TO GO.
May the load be easy for His Excellency President Adama Barrow and his new Cabinet.
