Safer Paths Out of our Wartime Economy (3)
5 min readA Respectful Confutation of a Vice Chancellor, Prof. John Akec’s Economic Outlook
By Mayen D.M.A Ayarbior, Juba, South Sudan
November 17, 2015 (SSB) — In Africa, while it is always difficult to write an article which aims at proving a good leader wrong without getting a non-academic recoil, it is even more so when such a leader is a renowned and learned educator. As I read an article written by non-other than the Vice Chancellor of Juba University himself, Prof. John Akec, I found myself disagreeing with his academic argument that South Sudan should close its budget deficit through total abolition of currency controls. I hope that the VC shall take this rebuttal as he has surely been considering academic critiques of well-established scientists, which is so much encouraged and promoted in the academic fraternity.
Having written an article in the October 26th edition of Juba Monitor, and as a learned citizen who happened to also be an economist, I found it imperative to write this confutation so that when inflation becomes galloping after the central bank abdicates its responsibility over currency stabilization, some of us will say that we presented our hypothesis but it was thrown onto the garbage bin.
Professor began his article with a simple economic truth that “like humans all economies get sick…., require fixing,….and each demands appropriate diagnosis and right prescription in order to recover.” However, as he proceeded to diagnose this dangerous economic ailment afflicting our country, his prognoses of worst and best case scenarios were in form of policy proposals which the economic giants of this besieged country might take to the president and parliament for action.
According to Prof. John Akec, “the best case scenario is to abolish the fixed exchange rate as soon as possible, irrespective of our financial standing.” From designating this as THE “best case scenario,” it is obviously the preferred option which Professor would want South Sudan to go through and, according to him, it stood diametrically opposite to the majority of the economists of this country as-well-as learned MPs who are all depending on no plausible propositions.
Quote: “This is the favoured scenario by the majority of our economists and members of legislative assembly. They argue that we do nothing until our financial standing improves (a buffer to defend the pound when demand for dollar at market price increases. This is in complete defiance of inverse relation between demand and prices. And doing nothing, fortunately, does not require lengthy explanation to understand.”
From the brief outline above, it seems that holding against the pulling and destructive force of the black market through the official rate is misdefined by Professor as “doing nothing.” Ironically, in fact, what Prof. Akec has prescribed is that the government should “do nothing” and let market forces determine the exchange rate. Quote: “the best case scenario is to abolish the fixed exchange rate as soon as possible, irrespective of our financial standing.”
The catch phrase any updated economists would take from here is: “irrespective of our financial standing.” My question to Prof. Akec would be: what could be the definition of doing nothing more than abolishing the fixed (controlled) exchange rate irrespective of the fact that wartime economies are characterized by distorted market positions which should be taken to account when making economic prognoses.
Ironically still, as professor tries to use the father of modern economics (John Maynard Keynes) as his reference, his position is the exact opposite of what Keynes stood for, which was that government should not allow market forces determine price levels.
In essence, Prof. may have confused “the worst case scenario” of doing nothing with throwing our economy to the dogs of free markets. He argues against the wait and see approach which is currently popular among parliamentarians who have correctly attributed our current market distortions to the fact that it is associated with every wartime economy worldwide, hence a peacetime assessment would be a wiser approach.
Not to repeat my argument against devaluation as a means of closing a budgetary deficit (which is in the October 26th edition of Juba Monitor), the common South Sudanese are going to be taken from the frying pan of war into the fire of economic collapse if Professor’s recommendation finds its way into policy making corridors.
After all, a budget deficit is nothing but a negative discrepancy between projections of various government expenditure and the actual money expected to accrue to its coffers over 12 months. If loans, such as the recent grant of $350 million passed by the U.S. Congress for South Sudan, and pledges made by Troika and other countries could cover a substantial part of this wartime budget deficit, what is the argument for forcing the central bank to join the black market, which might still run away from the new rate? Does it mean the black market should set the exchange rate henceforth?
Mayen Ayarbior, BA Econ Poli. Science (Kampala Int’l Univ.), MA Int’l Security (JKSIS- Univ. of Denver), LLB (Univ. of London). mayen.ayarbior@gmail.com.
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