By: Haddy Touray
Dr. Ousman Gajigo, senior member of the Gambia For All Party has raised questions about the effectiveness of the Central Bank of The Gambia’s (CBG) recent monetary policy rate (MPR) cut in stimulating economic growth.
The CBG recently announced the reduction in its key interest rate at a recent press conference, while projecting strong economic growth. The MPR is the main tool used by the central bank to guide market interest rates and influence borrowing costs.
Lower interest rates can, in theory, boost growth by encouraging firms to borrow for investment and consumers to spend more. Increased investment can lead to higher output and employment, while affordable credit may stimulate household purchases.
However, Dr. Gajigo noted that several structural conditions must be in place for this mechanism to work. According to him, banks need to lend for long-term investment, and firms must operate in an environment conducive for expansion. He highlights persistent constraints in The Gambia which includes a poor business environment, weak reform implementation and lack of sectoral prioritization.
He says local banks also face limitations in providing private financing, partly due to high government borrowing. “Domestic debt has reached D52 billion, a 36% increase since 2021, which absorbs a significant share of banking resources through treasury bills and bonds. This situation reduces funds available for private sector lending,” Dr. Gajigo observed.
On the consumer side, he says, the Gambia’s economy does not heavily rely on credit-driven spending, as most purchases are made in cash. Consequently, lower interest rates are unlikely to significantly influence household consumption.
Dr. Gajigo stressed that while the CBG’s rate cut is not necessarily unwise expectations of immediate growth are unrealistic given current economic conditions. He emphasized that fiscal measures—such as prudent government spending, prioritization of productive sectors, and broad regulatory and institutional reforms—remain critical for sustained economic growth.
“Monetary policy plays a supporting role through regulation and influencing lending incentives,” he said, “but the main drivers of growth lie on the fiscal side.”
