Financial Crime World

Foreign Exchange Policy of the Central Bank of The Gambia

Overview

The Central Bank of The Gambia (CBG) has outlined its foreign exchange policy, covering key aspects such as exchange rate regime, intervention policy, official exchange rate, market participants, regulations, and external reserves.

Key Points

Exchange Rate Regime

  • The CBG operates a free-floating exchange rate regime with no restrictions on the purchase or sale of foreign exchange.
  • This regime allows for flexibility in managing the economy and maintaining price stability.

Foreign Exchange Intervention Policy

  • The CBG intervenes in the interbank foreign exchange market to mitigate excessive volatility and maintain adequate foreign currency reserves.
  • This intervention helps to stabilize the foreign exchange market and prevent large fluctuations in the value of the Dalasi.

Official Exchange Rate

  • The official exchange rate is calculated as a mid-market rate based on trading, representing market conditions during the day.
  • It will be published daily and will reflect the average mid-market rate of buying and selling rates with volumes from participants in the foreign exchange market.

Market Participants

  • Licensed commercial banks
  • Foreign exchange bureaus
  • Microfinance institutions
  • Mobile money operators
  • Money transfer operators (MTOs)

Regulations and Code of Conduct

  • Participation in the foreign exchange market requires a license from the CBG.
  • International MTOs and Fintech companies are not allowed to engage in buying and selling of foreign exchange currencies in the domestic market.

External Reserves

  • The CBG shall maintain external reserves in forms of foreign currency, gold, or other internationally recognized reserve assets.

Implications

Market Transparency

  • The official exchange rate will provide a transparent indication of the prevailing exchange rate of the Dalasi with respect to the United States Dollar.
  • This transparency helps market participants make informed decisions and facilitates economic activity.

Government Accounting and Customs Purposes

  • The official exchange rate will be used for government accounting and customs purposes.
  • This ensures that government transactions are accurately recorded and that customs duties are correctly calculated.

Regulatory Framework

  • The CBG’s foreign exchange regulations will ensure that market participants comply with guidelines for data submission and other regulatory requirements.
  • These regulations help maintain a stable and efficient foreign exchange market.

Recommendations

Strengthen Regulatory Framework

  • Implement measures to strengthen the regulatory framework, including regular monitoring and enforcement of compliance with regulations.
  • This will help ensure that the foreign exchange market remains stable and secure.

Enhance Market Transparency

  • Continue to provide transparent and timely information on the official exchange rate to facilitate market participants’ decision-making.
  • This transparency is essential for maintaining a healthy and efficient foreign exchange market.

Foster Collaboration

  • Encourage collaboration among market participants to promote efficient and competitive foreign exchange transactions.
  • By working together, market participants can reduce transaction costs and improve the overall efficiency of the foreign exchange market.