Madi Njie, AfricaNews reporter in Serekunda, Gambia
The
International Monetary Fund has indicates that the local currency, the
Gambian Dalasi, may be overvalued by 17 percent. According to IMF
report, "a number of complementary approaches were adopted to assess
whether the Gambia's exchange rate is aligned with fundamentals.
These
alternative approaches proposed by the IMF Consultative Group on
Exchange Rate issues include the macroeconomic balance approach, the
external sustainability approach and equilibrium real exchange rate
approach.”
According to the report, the purchasing power parity approach was also
involved in the assessment, pointing out that these alternative
approaches produce somewhat different results.
“The macroeconomic balance approach suggests that the Dalasi may be
overvalued by 17 percent. The country’s underlying current account
deficit is 12 Percent of Gross Domestic Product (GDP). The underlying
fundamental driving this result is the large fiscal deficits in recent
years.
Temporary factors such as Government’s financial external payments for a
large telecommunications project also played a role. With an estimated
current account norm of about 2 percent, roughly in line with estimates
in past assessments, a depreciation of 17 per cent would be needed to
restore sustainability.”
The report outlined that the external sustainability approach indicates an overvaluation of 8½ percent.
The report published by Gambia local newspaper- Foroyaa, adds, “With an
underlying current account balance of 12 Percent of GDP, The Gambia’s
long run net foreign assets would be unsustainable at about -138 percent
of GDP in order to bring the NFA to a sustainable level of -70 percent
of GDP, that the exchange rate would require a depreciation of 8 ½
percent with a corresponding current account deficit of 6 ½ percent of
GDP”, the report states.
--
-Laye
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"With fair speech thou might have thy will,
With it thou might thy self spoil."
--The R.M
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