Central Bank’s Optimistic Inflation Outlook Faces Renewed Setbacks in 2025

Serrekund Market © KMC

By Edward Francis Dalliah

The Central Bank of The Gambia’s hopes of bringing inflation under control in 2025 are facing renewed setbacks, despite current signs of progress. While headline inflation eased to 8.1% in April from 10.2% in early 2025, the lowest rate since early 2023, it remains significantly above the Bank’s medium-term target of 5%, underscoring persistent price pressures and structural vulnerabilities in the economy.

In a press release issued on 12th June 2025, the Monetary Policy Committee (MPC) of the Bank noted that core inflation, which excludes volatile food and energy prices, rose to 6.9%, reversing earlier declines from 5.7%. The MPC stated that this rise “highlights persistent underlying price pressures in housing, utilities, and services.” The Committee also flagged ongoing external risks, including global commodity price volatility, geopolitical tensions, and climate-related supply disruptions, which threaten to undermine the recent gains.

These external pressures are compounded by domestic challenges, most notably The Gambia’s widening trade deficit. According to the Gambia Bureau of Statistics (GBoS), the country recorded a record trade deficit of D64.6 billion in 2024, driven by a sharp rise in imports and a narrow, undiversified export base. This trend reflects the country’s heavy reliance on imported goods, leaving it increasingly vulnerable to external shocks that feed into domestic inflation.

In the first quarter of 2025, the trend continued to deteriorate. Imports surged by 37%, rising from D15.8 billion in the first quarter of 2024 to D21.6 billion in the first quarter of 2025. By contrast, exports declined by 3%, falling from D1.18 billion to D1.15 billion during the same period. This resulted in a trade deficit of D20.6 billion in the first 3 months of 2025, reinforcing concerns over The Gambia’s mounting dependence on foreign goods and its limited export capacity, factors that further complicate the Central Bank’s efforts to reduce inflation.

While the MPC noted that the economy is expected to maintain its growth momentum, projecting 6.5% GDP growth in 2025, supported by infrastructure development, tourism, financial services, and telecommunications, it warned that the domestic economy remains vulnerable to external shocks, including commodity price swings, trade fragmentation, and climate-related risks.

These risks are amplified by The Gambia’s dependence on key imported goods such as cement, rice, sugar, and vegetable oil, which topped the “Selected Imported Products” list in GBoS’s first quarter of 2025. trade data.

Source GBOS