Political sketch
Formerly part of British West Africa and Senegambia. Independent from the United Kingdom on 18 February 1965.
Portuguese explorers sighted the Gambia River in 1455. In 1588 the Portuguese sold trading rights on the river to British merchants, but it was not until 1663 that the British acquired an island in the river and built a Fort James there. In 1681 the French established the fort of Albreda on the opposite bank of the river, and in 1779 they destroyed Fort James. The 1781 treaty of Versailles reserved the Gambia River for the United Kingdom but recognized the French claim to Albreda. In 1816 the British founded another fort, at the mouth of the river, to block the slave trade. It was Bathurst, in 1973 renamed Banjul, which would become the capital. In 1857 France ceded Albreda to the United Kingdom, and in 1889 the two countries demarcated the boundaries of The Gambia, which was surrounded by the French colony of Senegal. The British declared a protectorate over Gambia in 1894. Gambia became independent from the United Kingdom on 18 February 1965. The first president was Dawda Kairable Jawara. After an unsuccessful attempted coup against him in 1981, suppressed with Senegalese help, Gambia and Senegal agreed to form a limited confederation, within which each country would, however, remain independent. Gambia withdrew from the federation in 1989. The military, led by Yayah Jammeh, seized power from Dawda Kairable Jawara in a bloodless coup on 22 July 1994. In the multiparty presidential election of October 2001, Jammeh won. Peanuts, other agricultural products, and fish are the most important exports.
Wars since 1500
None.
Convertibility
The sterling area:
On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
Gambia alone:
Gambia left the sterling area on 23 June 1972, and ceased giving special treatment to countries of the former sterling area on 7 March 1977. It suspended its Exchange Control Act in 1986 and repealed it on 30 November 1992.
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1986-1990 (foreign currency bank debt).
Reinhart and Tokatlidis (2000: 33) dating of recent financial liberalization: Domestic (notably interest rates) 1986, external (notably foreign-exchange market and participation by foreign financial institutions) 1988.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Moderate problems 1985-1992, connected with a government-owned bank.
Frankel and Rose (1996) list of currency crashes: 1984.
References
Primary sources:
--Laws and decrees:
Gambia. Gazette. 1893-present. The Gambia Government Gazette (1893-1944); The Gambia Gazette (1944-present). Bathurst/Banjul (name changed 1973): Government Printer.
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
--Publications of monetary authorities:
Central Bank of Gambia. Annual report. 1971/1972-present. Annual Report. Bathurst/Banjul (name changed 1973): Central Bank of Gambia.
Central Bank of Gambia. Bulletin. 1971-present. Bulletin. Bathurst/Banjul (name changed 1973): Central Bank of Gambia.
Gambia Currency Board. Annual report. 1964-1971. Report of the Gambia Currency Board for the Period Ended 31st December, 1964 (1964); Report for the Year Ended 31st December, 1965 [etc.] (1965-1971). Bathurst: Gambia Currency Board.
Great Britain (United Kingdom). West African Currency Board. Annual report. 1913/1914-1972/1973. Report of the West African Currency Board for the Period Ended 30th June 1914 (1913/1914); Report of the West African Currency Board for the Year Ended 30th June ... (1914/1915-1971/1972); Final Report of the West African Currency Board for the Period 1st July, 1972 to 31st October, 1973 (1972/1973). London: Darling and Sons for His Majesty's Stationery Office (1913/1914-1917/1918); His Majesty's Stationery Office (1918/1919-1919-1920); Waterlow and Sons (1920/1921-1972/1973).
West African Currency Board. See Great Britain (United Kingdom). West African Currency Board.
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.cbg.gm>
--Other publications or Web sites:
Loynes, J[ohn] B[arraclough de]. 1961. Report on the Problems of the Future Currencies of Sierra Leone and the Gambia. Gambia Sessional Paper No. 12/61. Bathurst: Government Printer.
Main secondary sources:
Barclays Bank (Dominion, Colonial and Overseas). 1938. A Banking Centenary: Barclays Bank (Dominion, Colonial and Overseas), 1836-1936. Plymouth, England: Mayflower Press, for private circulation.
BCEAO. 1966. Banque Centrale des États de l'Afrique de l'Ouest. Notes d'information et statistiques, issue "L'Afrique des monnaies," January 1966. Paris: Banque Centrale des États de l'Afrique de l'Ouest.
Chalmers, [Sir] Robert. 1893. A History of Currency in the British Colonies. London: Eyre and Spottiswoode for Her Majesty's Stationery Office.
Fry, Richard. 1976. Bankers in West Africa: The Story of the Bank of British West Africa Limited. London: Hutchison..
Gray, John M. 1966 [1940]. A History of the Gambia, reprint edition. London: Frank Cass and Company.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Loynes, J[ohn] B[arraclough de]. 1962. The West African Currency Board 1912-1962. London: West African Currency Board.
Vice, David. 1983. The Coinage of British West Africa and St. Helena, 1684-1958. Birmingham: Peter Ireland (Format) Ltd.
World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.
Monetary authorities: Gambia
| Dates | Type | Name | Source | Remarks |
| 1820
-1826 |
government issue | promissory notes of British Army Captain Alexander Grant (headquarters Bathurst [now Banjul], Gambia) | Gray (1966 [1940]: 322) | Captain Alexander Grant of the British Army issued £2,000 of promissory notes in 1820 and a further £1,000 in 1821 while supervising the construction of a military post at Bathurst (today Banjul). The notes had no formal legal sanction but were accepted by the local government. Before this there was an English fort at Saint James from 1651 and a French fort at Albreda from 1679-1697. |
| 1826
-1902 |
coins only | pound sterling (coins issued by Royal Mint [headquarters London, England]; notes issued by Bank of England [headquarters London, England], a quasi central bank until 1844 and a central bank thereafter) | Gray (1966 [1940]: 322) | Gambia's colonial government redeemed Grant's notes. Notes were little used because the hazards of heat, humidity, and insects made them perish. |
| 1902
-25 June 1913 |
dollarization | pound sterling (issued by central bank Bank of England [headquarters London, England]) | United Kingdom, incorporation papers of Bank of British West Africa, 31 March 1894, cited in Richard Fry (1976: 26); charter of Colonial Bank, 1 June 1836, reprinted in Barclays Bank (Dominon, Colonial and Overseas) (1938: between pages 26-7); act of Parliament 1916 extending bank's branching rights, cited in Barclays Bank (Dominon, Colonial and Overseas) (1938: 59) | The first bank was the Bank of British West Africa (headquarters Liverpool, later London, England), in Bathurst (now Banjul), in 1902. The second bank was the Colonial Bank (headquarters London, England), in Bathurst (now Banjul), in 1918. |
| 26 June 1913
-30 September 1964 |
joint currency board (as part of a currency union) | West African Currency Board (headquarters London, England) | United Kingdom, Secretary of State for the Colonies, Memorandum Defining the Constitution, Duties and Powers of the West African Currency Board, 6 December 1912, reprinted in West African Currency Board annual report, 30 June 1914: 7; Order in Council of 7 May 1913, cited in West African Currency Board annual report, 30 June 1914: 4; Secretary of State for the Colonies, Memorandum Defining the Constitution, Duties and Powers of the West African Currency Board, 2 September 1949, reprinted in West African Currency Board annual report, 30 June 1949: 15 | The United Kingdom established the West African Currency Board to capture seigniorage for the colonial governments of Gambia, the Gold Coast (now Ghana), Nigeria, and Sierra Leone. Local proclamations of 26 June 1913 (cited in cited in West African Currency Board annual report, 30 June 1914: 4) allowed the British Order in Council of 7 May 1913 to enter into force. The board's original constitution only allowed it to issue coins, which were more widely used by Africans than notes. A revision of 25 November 1915 (reprinted in West African Currency Board annual report, 30 June 1916: 6-7) allowed it to issue notes; the first notes in Gambia were issued in March 1918. The board first started investing in local securities in January 1957 (Loynes 1961: 20; West African Currency Board annual report, 30 June 1957: 18). It held less than West African £2 million of Sierra Leone securities, which was less than 2% of its assets until the board was reduced to a rump in Sierra Leone and Gambia on the way to extinction. |
| 1 October 1964
-28 February 1971 |
currency board-like | Gambia Currency Board (headquarters London, England) | United Kingdom, Secretary of State for the Colonies, United Kingdom, Secretary of State for the Colonies, Regulations Defining the Constitution, Duties and Powers of the West African Currency Board; Supplementary Regulations Defining the Constitution, Duties and Powers of the Gambia Currency Board, 23 March 1964; both these reprinted in West African Currency Board annual report, 30 June 1964: 20-2; Gambia, Currency Ordinance, No. 15, 13 May 1964, cited in West African Currency Board annual report, 30 June 1964: 8; West African Currency Board annual report, 30 June 1964: 9 | Other members of West African Currency Board had by this time established their own central banks. The Gambia Currency Board formally succeeded the West African Currency Board on 1 October 1964, put its own notes into circulation starting 5 October 1964, and put its own coins into circulation starting 21 November 1966 (West African Currency Board annual report, 30 June 1967: 3). Notes of the West African Currency Board ceased being legal tender on 1 June 1968 (West African Currency Board annual report, 30 June 1968: 5). The minimum foreign reserve of the Gambia board was 85%, versus 100% for the West African board for most of its life (BCEAO 1966: 6; I have been unable to consult the annual report of the Gambia Currency Board on this point). Gambia joined the IMF on 21 September 1967. |
| 1 March 1971
-present (2005) |
central bank | Central Bank of The Gambia (headquarters Bathurst/from 1973 known as Banjul, The Gambia) | Gambia, Central Bank of The Gambia Act, February 1971, cited in Central Bank of The Gambia annual report 1971/1972: 7 | Established a central bank as a supposedly more modern monetary authority. |
Exchange rate arrangements: Gambia
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1807
-29 November 1808 |
pegged, local $1 = Spanish silver $1 | Sierra Leone, decision of local Council, 1 January 1796, cited in [source to come] | In practice, a clean? float. | Gambia was administratively part of Sierra Leone from its beginning as a colony in 1807 until 1843. On 1 January 1796 the local dollar replaced the pound as the unit of account in Sierra Leone. Locally issued notes in Sierra Leone were be depreciated against the coins into which they were nominally convertible. |
| 30 November 1808
-1816 |
peged, local £1 = UK£1 | Sierra Leone, governor's recall of dollar-denominated notes, 29 November 1809; see Fyfe 1962: 107-8, 655 | In practice, a clean? float. | The government of Sierra Leone recalled its dollar-denominated notes and replaced them with pound-denominated notes, reflecting the governor's preference for a unit of account like that of the United Kingdom. |
| 1816
-1822 |
fixed (see Remarks); local £1 = UK£1 | Fyfe (1962: 117, 646) | The Sierra Leone government withdrew from circulation its notes, which had often depreciated from par value. Promissory notes issued in Gambia by British army captain Alexander Grant seem not to have depreciated from their par value. I do not count them as introducing a pegged exchange rate because they had no formal legal sanction, but this is a borderline case. | |
| 1822
-1825 |
fixed; Spanish silver $4 = UK£1, or Spanish silver $1 = UK 5 shillings (60 pence) | Sierra Leone, decision of local Council, 1822, cited in Fyfe (1962: 142, 660) | Sierra Leone established a legal rating for the pound sterling. Recall that in British monetary system of the time, £1 = 12 shillings (s.) and 1 shilling = 12 pence (d.), so £1 = 240d. See the country table on Sierra Leone for the story of how the rating was established. | |
| 1825
-29 September 1843 |
fixed, bimetallic | United Kingdom, Order in Council, 23 March 1825; Chalmers (1893: 209) | In practice, Spanish silver $1 = UK 4 shillings 4 pence (52 pence), the rate set in the Order in Council of 1825. | British currency became legal tender along with the Spanish dollar. Spanish and other silver dollars and gold doubloons were the most common larger coins of this period; "cut dollars," dollars divided into four, were widely used as quarter-dollars. |
| 30 September 1843
-1880 |
fixed, bimetallic | United Kingdom, two Orders in Council, 10 June 1843; Gambia, proclamation of 30 September 1843, cited in Chalmers (1893: 220n.) | In practice, Spanish silver $4.80 = UK£1, or Spanish silver $1 = UK 4 shillings 2 pence (50 pence), the rate set in one of the Orders in Council of 1843. | British coins and French 5-franc silver pieces predominated; certain French, and Spanish coins were also legal tender in British possessions in West Africa. In 1852 US gold coins were made legal tender in British possessions in West Africa (United Kingdom, Order in Council and Proclamation, 20 June 1852; Gambia, proclamation of 13 November 1852, cited in Chalmers 1893: 220n.). They were never widely used. Belgian, Italian, and Swiss silver 5-franc pieces were later made legal tender alongside French pieces (United Kingdom, Order in Council and Proclamation, 27 November 1874; Gambia, proclamation of 5 January 1875, cited in Chalmers [1893: 211]). |
| 1880
-25 June 1913 |
fixed; used pound sterling | Gambia, Ordinance No. 2, 1880, cited in Chalmers (1893: 220) | The ordinance demonetized the dollar. Latin Monetary Union 5-franc silver pieces predominated, with British silver and copper coins supplying the smaller units. Some French, Spanish, and United States gold coins were also legal tender. | |
| 26 June 1913
-30 September 1964 |
fixed (as part of a currency union); West African £1 = UK£1 | United Kingdom, Secretary of State for the Colonies, Memorandum Defining the Constitution, Duties and Powers of the West African Currency Board, 6 December 1912, reprinted in West African Currency Board annual report, 30 June 1914: 7; Order in Council of 7 May 1913, cited in West African Currency Board annual report, 30 June 1914: 4; Secretary of State for the Colonies, Revised Regulation Defining the Constitution, Duties and Powers of the West African Currency Board, 11 July 1924, reprinted in West African Currency Board annual report, 30 June 1924: 5 | The British government gave its West African colonies their own currency. Local proclamations of 26 June 1913 (cited in cited in West African Currency Board annual report, 30 June 1914: 4) allowed the British Order in Council of 7 May 1913 to enter into force. The appreciation of silver up to 1920 caused hoarding and shortages of West African silver coins, even though they were not full-bodied. Technically, West African Currency Board coins were initially redeemable in gold, though in practice, the pound sterling was always the anchor. The constitution of the currency board was amended in 1924, when Britain was off the gold standard, to allow notes and coins to be directly redeemable in pounds sterling. French silver 5-franc pieces, known locally as dollars, continued to be widely used, and were even made legal tender in Gambia and Sierra Leone in 1913 at UK 3 shillings 10.5 pence (United Kingdom, Sierra Leone and Gambia Coinage Order and another order in council, both 7 May 1913, cited in West African Currency Board annual report, 30 June 1914: 4). The first | |
| 1 October 1964
-7 July 1968 |
pegged; West African £1 = UK£1 | Gambia, Currency Ordinance, No. 15, 13 May 1964, cited in West African Currency Board annual report, 30 June 1964: 8 | A currency board-like system replaced the previous currency board, changing the exchange rate from fixed to pegged. | |
| 8 July 1968
-28 February 1971 |
pegged; West African (Gambian) £1 = UK£1 = US$2.40 = 2.13281g gold | IMF ARER (1969: 172) | Gambia registered a gold parity with the IMF. By this time the rump of the West African Currency Board was operating as a local currency board-like system in Gambia only. On 23 July 1970, the par value of the Gambia pound was officially defined in terms of gold only (Gambia, Currency [Amendment] Ordinance Act 1969, cited in IMF ARER 1981: 161), but in practice, the link to the pound sterling continued. | |
| 1 March 1971
-30 June 1971 |
pegged; Gambian £1 = UK£1 = US$2.40 = 2.13281g gold | Gambia, Central Bank of The Gambia Act, February 1971 | The Gambian pound replaced the West African pound. | |
| 1 July 1971
-15 August 1971 |
pegged; 5 Gambian dalasi = UK£1, or 1 Gambian dalasi = US$0.48 = 0.426562g gold | apparently Gambia, Central Bank of The Gambia Act, February 1971, cited in Central Bank of The Gambia annual report 1971/1972: 7 | Introduced a decimal currency, the dalasi, at 5 Gambian dalasi = Gambian £1. Dalasi, in the local Mandingo (Malinka, Malinke) language, perhaps originates ultimately from the word "dollar." Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. | |
| 16 August 1971
-18 March 1973 |
pegged; 5 Gambian dalasi = UK£1, or 1 Gambian dalasi = 0.426562g gold (nominally) | Central Bank of The Gambia annual report 1971/1972: 2; IMF ARER (1972: 172) | Gambia followed the pound sterling rather than the US dollar after the United States abandoned the gold standard. | |
| 19 March 1973
-31 March 1978 |
pegged; 4 Gambian dalasi = UK£1, or 1 dalasi = 0.426562g gold (nominally) | Central Bank of The Gambia, announcement of 17 March 1973, cited in Central Bank of The Gambia annual report 1972/1973: 10 | Revalued the dalasi after the pound sterling experienced depreciation. | |
| 1 April 1978
-4 November 1981 |
pegged; 4 Gambian dalasi = UK£ | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") | The system of gold par values officially ended by agreement of IMF members. | |
| 5 November 1981
-24 February 1984 |
pegged, dual rate; official rate 4 Gambian dalasi = UK£ | Central Bank of The Gambia annual report 1981/1982: 46; IMF ARER (1982: 185) | The government required that the domestic-currency counterpart of external payments arrears be deposited in the central bank and paid at an interest rate of 2%, which was considerably below the market rate. | |
| 25 February 1984
-19 January 1986 |
pegged, dual rate; official rate 5 Gambian dalasi = UK£1 | Central Bank of The Gambia bulletin, January-March 1984: xii; IMF ARER (1985: 217) | RR: Parallel market premium below 20% from January 1985, when data begin. | Devalued in an attempt to solve problems with the balance of payments. |
| 20 January 1986
-1987 |
independent float, dual rate | Central Bank of The Gambia annual report 1985/1986: 45; IMF ARER (1987: 226) | RR: Parallel market premium in single digits. Freely falling / freely floating to February 1987; freely floating from March 1987. | Floated, but retained a dual exchange rate market for some time afterwards. The second rate was the official rate plus a 6% tax (World Currency Yearbook 1986-1987: 84). |
| 1987
-29 June 2002 |
independent float | IMF ARER (1988: 216, 545) | RR: Parallel market premium variable; in single digits from September 1996-December 1998, when data end. Freely falling / freely floating to February 1987; freely floating March 1987-September 1991; de facto crawling band around US dollar October 1991-December 2001, with a band width of +/-2% and a maximum parallel market premium of about 30%. | Apparently unified the exchange rate in 1987. |
| 30 June 2002
-present (2005) |
managed float | IMF ARER (2003: 375) | The IMF reclassified the exchange rate. The basis of the change was apparently, as IMF ARER (2004: 374) later remarked, that the central bank actively intervened in the foreign-exchange market. |