By Tabora Bojang
The Governor of the Central Bank of The Gambia, Buah Saidy has warned against the introduction of price control on food commodities in the country arguing that such a move is not an efficient way of managing an economy.
There is a growing concern that food prices are sky-rocketingly high due to increasing government tax on businesses and absence of a national price control framework.
But addressing a press conference at the Monetary Policy Committee meeting yesterday, Governor Saidy said a variety of forces contribute to rising food prices including structural problems at the Ports and the dire economic straits brought by the Covid-19 pandemic.
Saidy, who is a long-time employee of the CBG dating back to the 1980s, said it is not “accurate to blame the food price inflation on government tax” policies.
“The tax increase has nothing to do with the increase in prices and in The Gambia, the major commodities which continue to increase like rice have zero tax. So it is not the tax but a structural cause and this is being addressed by the government with plans to improve the efficiency of the Ports,” Saidy said.
The Governor said since the Economic Recovery Program ERP of 1985-86, “food prices in the Gambia have been liberalised and for a good reason.”
“Price controls have prominent disadvantages and once you start to controlling prices businessmen will start hoarding and this will defeat the intent of price control. So it is not an efficient way of managing an economy,” he added.
He however admitted that the commodities emergency power regulations of 2020 invoked by the president during the start of last March’s lockdown, have yielded temporary stability in prices of basic food commodities.
Asked what steps are being taken by the CBG to address the inflation of food prices, the Governor said government is trying to increase the jetty at the Ports to address the structural problems.
“They are trying to increase the jetty to be able to accommodate at least 3 ships at a time. Under normal circumstance we at the CBG our main objective is to ensure that there is price stability and if we see inflation pressures going up, naturally the first weapon we reach is the interest rates. We would increase the interest rates to deal with the increasing prices, but could not and therefore still maintain it at 10% because we are dealing with two things: the pandemic and the inflation pressures, so there has to be room for monetary accommodation to provide liquidity to the financial sector to grow.”
Meanwhile the CBG’s quarterly business sentiment survey paints a gloomy economic outlook, reflecting largely the impact of the outbreak of the Covid-19 new variants. Majority of respondents reported negative sentiments about the current and expected level of business activity. The survey also revealed heightened inflation expectations for the first quarter of 2021.