Sabally says CBG governor’s calls for banks to fund gov’t projects ‘misguided’


By Omar Bah 

A former Central Bank of The Gambia (CBG) economist has said the call by the bank’s governor for commercial banks to fund government projects is “misguided”.

Addressing journalists at the bank’s last monetary committee press briefing, Governor Buah Saidy, said commercial banks in the country should use the D700 million excess liquidity released to them after government decreased the reserve requirement of the banks to fund some development projects of the government.


Governor Buah Saidy said this is necessitated by a severe contraction of D2.1 billion in government revenue and grants amid the Covid-19 pandemic.

Reacting to this, Sabally who also served as director of budget at the Ministry of Finance, contended: “It does not bode well for soundness of our financial system and macroeconomic stability. Financial system soundness is a sine qua non for macroeconomic stability and hence growth. Central Bank strives to achieve this through myriad measures including the reserve requirements imposed on commercial banks.

“If the governor is brazen enough to tell commercial banks to lend to the government because this reserve requirement has been reduced for such purposes, then the whole country is in trouble. We need to fasten our seatbelts and get ready for a rough macroeconomic ride in this political season and beyond.”

Sabally said he is privy to “reliable information” that a leading bank currently being overseen by CBG “is giving loans in the hundreds of millions of dalasis to close associates of President Adama Barrow to be used to purchase food items for sale at a discount for political reasons”.

“This has created some jitters for people whose funds are lodged at this bank. If the central bank is then bold enough to subtly threaten banks, as their regulator, to give funds to the government, then does this not create a possibility of panic and hence a run on the banks?

Mr Sabally said for the governor to inform Gambians a few months ago that the stock of domestic debt is at D35.84 billion and now subtly “twisting the arms” of commercial banks to further lend to the government amid a worsening inflationary situation “is disconcerting for anyone with a modicum of knowledge in economics”.