Will The Gambia’s Inflation Return to its 5% medium-term target? A Question That Still Echoes

This blog is motivated by a simple but powerful question that Dr. Momodou Jallow asked me during the recently concluded forecasting round in preparation for the Monetary Policy Committee (MPC). He turned to me and said:

“Do you think The Gambia’s inflation will return to its 5% medium-term target?”

I paused for a moment, perhaps longer than I realized. Then I answered, honestly:

“I want to believe it will not return, but I don’t have any evidence.”

That response has stayed with me. It was not an expression of pessimism. It was the recognition that our inflation dynamics today are not driven by the same forces that shaped our policy frameworks years ago. The environment has changed. The shocks have changed.

Why the Question Matters?

In economics, we sometimes treat inflation like a cold statistic. But on the ground, inflation is personal: It determines what families can afford, it shapes how businesses plan; and for policymakers, it reflects credibility.

So, when someone asks whether we will return to 5%, the real question is: Do we still live in a world where 5% is realistic? That is what kept ringing in my mind. What Has Really Changed? Over the past 5 years, the drivers of inflation have completely shifted. But before discussing what have changed, let’s take a moment to explore the nature of The Gambia’s inflation before the shift (COVID-19).

• Imported Inflation: As an import-dependent economy, almost every global shock is transmitted directly into domestic prices such as fuel, food, freight, exchange-rate swings, and supply disruptions. When over 80% of the consumption basket is imported, domestic policy alone cannot pull inflation back to 5%.
•  Climate Shocks Are Now Inflation Shocks: Droughts, erratic rainfall, crop failures, and extreme weather, these are no longer occasional events. They are macroeconomic shocks that distort food supply, weaken production, widen the current account deficit, and put pressure on the exchange rate. All of these feed directly into inflation as seen during the 2002 and 2012 episodes of drought.
• Market Structures Are Sticky: Price stickiness, market concentration, and shallow supply chains create a situation where prices rise quickly but fall slowly, even when global conditions are easing.

But there is now a fourth dimension, one that has transformed inflation worldwide.

• COVID-19 Has Permanently Changed Inflation Dynamics, Even in Advanced Economies

The COVID-19 pandemic marked a turning point in global price behaviour. Before 2020, advanced economies were more concerned about low inflation which began in the late 1980s a period characterized as “missing inflation puzzle”. However, COVID-19 has brought a new normal which can be described as the inflation volatility puzzle. COVID -19 triggered:

• global supply chains collapsed
• shipping costs surged beyond historical levels
• labour shortages emerged in key sectors
• demand rebounded faster than supply
• commodity markets became unstable

The result was the highest inflation in over 40 years in the United States, United Kingdom, and much of Europe. If the most sophisticated economies struggled to contain inflation volatility in the post-pandemic era, it is unrealistic to expect small, open, import-dependent economies to escape these global waves. The pandemic fundamentally reshaped inflation in three ways:

• More frequent supply-side shocks
• Inflation became more global than domestic
• price volatility more persistent

This new reality matters for The Gambia because it amplifies our existing vulnerabilities.

Why 5% Might Not Be the Right Question?

When Dr. Jallow asked whether inflation would return to 5%, I realized the real issue is not whether the target is mathematically achievable, it is whether the assumptions underlying the target still hold. COVID-19, climate shocks, global supply disruptions, and volatile commodity markets have altered the inflation environment. A target designed for a world of stable commodity prices and predictable external conditions may no longer reflect today’s structural realities. If the forces driving inflation have become:

• global,
• climate-linked,
• supply-driven,
• and externally transmitted,

Therefore, our inflation expectations must align with a global inflation cycle that has become far more unpredictable, even for advanced economies.

Where Evidence Must Lead Us

If I had to answer Dr. Jallow’s question again, this time informed by both local dynamics and global post-COVID realities, I would say: Inflation can return to 5%, but not under the current structure of vulnerabilities and not in a global environment where even advanced economies are struggling to stabilize prices. Achieving and maintaining 5% would require:

• stronger domestic food systems
• deeper foreign exchange buffers
•  diversified import sources
• resilient logistics and supply chains
• climate-resilient agriculture
• improved market competition
• and sustained exchange rate stability

Without these, inflation will continue to react sharply to external shocks, and global shocks have become more frequent and more severe.

A New Way of Thinking About Inflation

Perhaps my conversation with Dr. Jallow revealed something larger: Inflation is no longer just a domestic monetary issue. It is now global, structural, and post-COVID in nature; thus, our response must evolve accordingly.

Conclusion: The Value of the Question

Dr. Jallow’s question forces me to confront an important truth: The world we designed our inflation target no longer exist. The real challenge is not whether inflation will return to 5%, but whether our institutions and structural foundations are aligned with the inflation realities of a post-COVID-19 era.

Until then, my honest answer remains: “I want to believe inflation will not return to its 5%.”