2024 Budget Speech: Inflation Reached Record High 18.5% in September 2023

President Barrow and Finance Minister Keita

By Yusef Taylor, @FlexDan_YT

During the Finance Minister’s 2024 Budget Speech he highlighted that Inflation reached a record high 18.5% in September 2023 and noted some of the steps the government took bring down the cost of fuel and food in particular in an attempt to curb inflation and price increases.

Speaking in Parliament on 8th December 2023 Minister for Finance and Economic Affair Hon Seedy S Keita informed members that “tighter global financial conditions in response to multi-decade highs in global inflation rate is adversely affecting the country’s macroeconomic fundamentals, generating foreign exchange shortages, weighing on forex reserves, and exerting pressure on the Dalasi”.

The Governor of the Central Bank of The Gambia informed the media that “the dalasi depreciated moderately against three major traded currencies. From June to September 2023, it depreciated by 2.7 percent, 2.3 percent, and 0.1 percent against the US dollar, Euro, and CFA, respectively, but appreciated by 1.5 percent against the British Pound Sterling”.

This situation was aggravated by “the balance of payments [being] negatively affected by high food and fuel import bills, disruptions of cashew and elevated freight costs”.

Combined, the increase on the price of food and fuel together with a strong domestic demand this has “strengthened inflationary pressures in the country. Inflation reached a record-high level of 18.5 percent (year-on- year) in September 2023, but this has reduced to 18.05 percent in October 2023”.

Speaking on the impact of Inflation Minister Keita noted that it “continues to erode household purchasing power; monetary policy tightening in response to record-high inflation has raised cost of borrowing, restricting credit to productive sectors; China’s pace of recovery has slowed; and geopolitical tensions are far from over”.

Global Headline Inflation Down From 8.7% in 2022 to 6.9% in 2023

Minister Keita highlighted that global headline inflation was also a challenge which “is expected to decline from its peak of 8.7 percent in 2022 (annual average) to 6.9 percent in 2023. This is projected to decline further to 5.8 percent in 2024 as central banks raised interest rates to combat inflation”.

Two of the main driving factors of inflation is the cost of food and fuel which the Finance Minister made mention of in his 2024 Budget Speech. Although “food availability in the market remains generally robust across the country, there has been a notable increase in the prices of cereal crops in 2023 compared to the preceding year” said Hon Seedy Keita.

The main reason for the “price surge is primarily attributed to global inflation and the ongoing conflict in Ukraine. The Gambia's dependence on food imports has amplified the impact on the prices of basic commodities, further exacerbated by the continuous rise in fuel prices, which has subsequently led to elevated transportation costs”.

It can be recalled the price of food and transportation in particular has increased this year. Back in November 2023 the price of diesel increased by D4 and petrol by less than D1 which the Central Bank Governor said was due to the government no longer paying fuel subsidies. However, prior to that the Government was paying fuel subsidies and taking other measures to bring the price of fuel and food down.

Over D479 Million Spent in Fuel Subsidies

According to Minister Keita “Global Crude Oil Prices saw its biggest monthly increase since January, which was attributed to the decision by OPEC to cut production levels”. However the Government did take some action to alleviate this according to Minister Keita’s 2024 Budget Speech. “as at end October 2023, the Government provided subsidies on fuel products to the tune of D479,190,237.89 to ease the effects of high global fuel prices on the lives of the citizenry. Whilst this gave much needed assistance to the Gambian population, it also meant over D479 millions of forgone revenues for government, which is unsustainable given our limited fiscal space” said Minister Keita.

Over D664 Million Spent to Counter Food Inflation

Speaking on the global impact of Food Inflation Minister Keita explained that “FAO Food Price Index increased by 19.7 percent due to the suspension of the Black Sea Grain Initiative and India’s ban on exporting non-Basmati white rice. International prices of rice, in particular, continued to surge, reaching the highest level in almost 12 years”.

To alleviate this the Minister of Finance and Economic Affairs revealed that the Government spent money on “the provision of substantial subsidies on food and agriculture inputs amounting to D664,499,675 to support domestic production and to ease the effects of high global food prices on vulnerable households. The 30 percent basic salary increment implemented last year is also helping civil servants cope with the increasing cost of living”.

Meanwhile, the Government plans to implement a number of tax increases on various commodities next year such as tobacco, alcohol and other products to boost revenue collection in 2024. This week it was reported in the news that the Government has set a target for the Gambia Revenue Authority to collect D19 Billion in Taxes in 2024. In 2023 the Government set a target of D15.2 Billion for GRA to collect in taxes.

The Gambia is a country which relies heavily on importation of goods and commodities while exports are generally significantly much lower in comparison.