Since last year, the Gambian currency, the Dalasi has been experiencing serious depreciation of value in terms of major international currencies such as the US dollars, the British pounds and the Euro. Many attempts to curb its degrading value have failed. The velocity at which the currency depreciates has threatened the economy, given the limited sources of foreign exchange facing the country.
The Gambia operates a floating exchange rate system. This means there is no need for the government to interfere with the established exchange rate. In a floating exchange rate system, the exchange rate is determined by the forces of demand and supply. The exchange rate or exchange value of the Dalasi to international currencies is a reflection of its levels of demand and supply. The higher its demand is, the stronger its value becomes. On the contrary, the higher the supply of the Dalasi the weaker, its value becomes.
Like other currencies, the demand for the Dalasi (i.e. the quantity of dalasis people wish to buy at a given rate of exchange) would be determined by the Gambia’s volume of exports, income received or sale proceeds, from foreign assets, inwards of foreign direct investment and transfers received from abroad. The supply of the Dalasi (i.e. the quantity of dalasis available in the market wanting to buy foreign currency at a given rate of exchange) is usually determined by the country’s level of imports of goods and services, purchase of foreign assets, outward foreign investment and transfer of foreign currency by residents (including the government) to other countries.
Studying the above scenario and the depreciating value of the Dalasi, it’s either the Dalasi is suffering from excess supply pressures or demand for it, is excessively low. I am, therefore with the opinion that, any analysis and explanations should feature around these areas. Similarly, any corrections and adjustments have to center around the same areas.
A country without any major export, the Gambia depends largely on foreign aids and tourism for foreign currency. Other sources include transfers by residents in abroad and foreign loans from international lenders. In this situation, it will be hard for the government to keep enough exchange reserves to influence the exchange rate in a floating exchange rate regime. Therefore, it’s imperative to manage these sources well to avoid jeopardy. To execute this, genuine economic relationship and dispensation of diplomatic maturity are paramount.
Despite the troubles surrounding the dalasi value, and its negative repercussions on the country’s economy, Jammeh’s government is yet to come out and explain to the public what is responsible for the currency depreciation. Given the importance of a stable foreign exchange market to any country, the authorities are expected to engage into genuine consultation programmes to find out and inform the public about the causes of the issues and what plans are put in place to regularise the market
So far the only information the residents got about the depreciation of the Dalasi comes from Jammeh’s useless press releases, which only informed about his contradicting decisions of ‘pegging and floating’ the exchange rate. These press releases only have the effects of increasing the volatility of the market. They are neither based on consultation nor on research, which rendered them completely erroneous and misleading.
Merely using excessive executive powers by Jammeh to issue press releases, blaming exchange dealers and even arresting them is not a solution. It rather highlights the blatant abuse of power by the President. Jammeh’s meddling with the country’s monetary affairs shows how unorganised his government is and it also questions the roles of the Central Bank and the Ministry of Finance.
I believe that the Central Bank and the Ministry of Finance are the relevant authorities to investigate into the matter, design a solution, and inform the public accordingly. Therefore, I challenge them to shoulder their responsibilities rather than leaving them to the irresponsible hands of the president’s office. Let them come out and inform the people what is going on. It’s their responsibilities to feed the public with clear information, instead of watching foreign exchange dealers being charged for what are apparently the authorities’ failures.
The silence of the authorities over these appalling issues of the economy is a clear indication of the ineffectiveness and dependency of the National Assembly. In situations like this, National Assembly Members are obliged to demand explanation from the executives. It’s disgusting to see parliamentarians who are expected to speak on behalf of their people maintain silence over troubles that threaten to destabilise the economy.
This is not the first time the Central Bank maintained silence over what is clearly their responsibilities as managers of the country’s monetary affairs. In 2012, when Jammeh suddenly pegged the rate, they not only refused to comment, but were hiding from journalists. I am confident it’s not that they don’t know what the problem is. The way Jammeh handles the problem is what keep them away and protect their jobs. This is definitely detrimental to the foreign exchange market and the economy as a whole.
I am convinced that Jammeh’s interference doesn’t make sense. He is on the gamble but doesn’t know what he is doing. Jumping to conclusions before getting the facts will neither stabilise the exchange rate nor will it bring about economic prosperity. Instead, his undesirable actions will backfire on the whole economy. This could only be avoided if he changes his attitude and allow a consultative style of leadership. He needs to recognise and respect the roles of other officials so as to allow them execute their duties professionally and independently.