COVID-19: GCCI Intervenes for steady business

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By MOMODOU JARJU

The Gambia Chamber of Commerce and Industry (GCCI) has joined the fight against Coronavirus (COVID-19) by proposing six measures to the finance minister, in a letter, to ensure business continuity, employment, availability and affordability of services, goods and other commodities in the country.

The letter bearing the name of GCCI President, Edrissa Mass Jobe, indicated that the measures will help ensure the purchasing and selling of assets without causing a drastic change in the asset’s price, which is otherwise known as market liquidity.

The letter said GCCI welcomed the joint press release of the March 23, 2020, announcing the “Essential Commodities Emergency Powers Regulation, 2020” emanating from the Ministry of Trade, Industry, Integration and Employment; and the Ministry of Justice, aimed at stabilizing the prices of basic commodities and prohibiting hoarding of the same.

GCCI believed that the regulation by government stands a better chance of success, if it is supported and underpinned by the fiscal stimulus and the prescribed foreign exchange interventions they will recommend in order to ensure adequate market liquidity.

Below is the six measures proposed by GCCI:

The Central Bank in close collaboration with the commercial banks should establish the value of existing Letters of Credit for essential commodities falling due within the next 30 days and allocate them with the required amount of foreign exchange at the prevailing market rate using part of the existing central bank reserves. This will ensure timely settlement, timely reordering of commodities and price stability. The Central Bank currently holds in excess of $420 million in FX reserves which is believed to be equivalent to approximately 4 months import cover. The purpose of holding reserves is for use during the times of war and or national emergency. With the Covid-19 pandemic widely viewed as the most significant event in our generation, it will be prudent to proactively utilize the arsenal at our disposal to pre-empt a national disaster, social unrest and cushion the economy from unrecoverable damage.
The Central Bank should continue intermittent interventions to provide foreign exchange liquidity in a deliberate manner to protect both the Dalasi and support overall market liquidity. This will ensure basic commodities are still available and that there will be no immediate pressure on the Dalasi that will risk its devaluation causing further inflationary pressure.
The Ministry of Finance & Central Bank should encourage the commercial banks to support the government initiatives by providing “interest rate rebate or discount” for a period of 90 days. This will be in the form of an index linked structure where banks will reduce their lending interest rates to the 12-month Treasury bill rate plus say a 1.5% for a period of 90 days. A lot of businesses especially small to medium size will be significantly impacted by drop in revenue. With the current level of lending rates, high cost of energy and low productivity levels, many businesses will struggle to pay their loans resulting in closure, downsizing or completely defaulting putting pressure on the banking system.
Ministry of Finance to instruct SOCIAL SECURITY to support businesses in the Tourism sector especially their contributors by providing their salaries for the 90 days based on the current payrolls.
Ministry of Finance to waive for 90 days the payment of Payroll Tax to encourage businesses to maintain employment during these difficult times
The Gambia Revenue Authority to revert to old valuation methodology for imports until end December to avoid disruption in commodities importation.

Writing further, GCCI promised to continue monitoring the development and would accordingly adjust strategy in consultation with the health authorities, and the Ministry of Trade and Ministry of Finance.

GCCI said the Gambian economy is predominantly import driven and its main sources of foreign exchange to settle these imports are from; remittances from the diaspora; tourism; foreign aid and grants; and re-export trade.

“All these sources will be significantly impacted by the disruptions of Covid-19 and for a very long time. The situation will be aggravated by the fact that currency shipments will no longer be affected by lack of air travel, hampering local banks ability to credit their foreign accounts for LC settlement. To limit the economic fallout on the Gambian economy, there is need for an early targeted policy response notwithstanding the limited resources at our disposal,” the chamber said.

Context:

The letter also indicated that the Western Governments are already reacting to the pandemic of Covid-19 by providing economic stimulus in anticipation of a deep economic downturn, which is an inevitable consequence of this global shock.

It said the US government announced a $2 trillion stimulus package, the EU agreed a stimulus package of €820 billion and the UK is finalizing its own after swiftly signing into a law a mortgage holiday of £398 million to ease the burden on employees.

“In The Gambia, unfortunately we are not able to do any of these but can take simple effective steps to support the economy at no cost to the government or the tax payer. A swift and coordinated policy involving all sectors of society response is required to limit the impact of Covid-19,” the letter said.

In order to contribute to the professionally articulated National Response Plan under the leadership of the Minister of Health, the GCCI said it has evolved a strategy based on three pillars enumerated below:

PILLAR 1:

Fund raising: To galvanize the private sector and the community to raise funds to supplement government’s efforts as a stop gap while the more significant international and multinational avenues are being pursued.
Emergency Capacity: Enable the Ministry of Health to use these resources more quickly to build urgent capacity at the Sanatorium and acquire Personal Protective Equipment (PPE) as well as support in building capacity for doctors, nurses and other front-line workers and first responders.

PILLAR 2:

Encourage our members to work online from home and to practice social distancing.
Sensitize the public, employers and employees to heed Government advice on social distancing and personal hygiene practices.
Help to enable social distancing in the overcrowded Hospitals, Prisons, Public transport, markets and other public areas.

PILLAR 3:

Consultancy and Advisory on economic measures to help government, business and the community adapt to relevant policy responses aimed at addressing the impact of this pandemic.