Examining the Exchange Rate Policy in RSS: Who was Right between Parliament and the Bank of South SudanPosted: March 6, 2014 by PaanLuel Wël in Commentary, Economy, Featured Articles, Garang Atem
Examining the exchange rate policy in South Sudan – who was right between Parliament and the Bank of South Sudan
By Garang Atem
In a circular dated 11 November 2013, the governor of Central Bank of South Sudan directed banks and other stakeholders about a regulatory change it made to exchange rate policy that the dollar was to sell at 4.5 SSP from 3.16 SSP. This directive was to move the exchange rate to dirty float were banks and bureaus will bid for dollars instead of allocation at predetermined rate.
On 13th November 2013, the Bank rescinded the directive after parliament summoned the governor and asked him to reverse his decision. Key issues in the devaluation debate were sustainability of a fixed regime and impact of devaluation on domestic prices and economic activities.
The implication of rescinding the devaluation policy was to bring back the flaws that have dogged South Sudan exchange rate market. First, it enhances growth of shallow financial institutions that are building long-term financial instability in the future.
As at end of November 2012, there were about 18 banks and 68 bureaus whose incomes were mainly from currency trading. In 1990s, Kenya went through turbulent financial stress as most of its shallow were going through financial instability.
Secondly, allocating dollars to banks and bureaus has accelerated inequality and distributive injustices in the country, as there is a shortage of hard currency, bureaus and banks only allocated dollars to well-connected and at time with kick-backs.
Thirdly, allocation of dollars has institutionalized rent-seeking behavior through licensing and allocation and finally a fixed rate passes the obligation to Central Bank to maintain the exchange rate at 3.16 SSP even at times when reserves wither; a case was during oil shutdown or as it maybe now as conflict has interrupted production in key oil fields.
With the above flaws, and mandated by Central Bank Act 2011, the Bank had incentive to evaluate its exchange rate policy and change the policy if appropriate including opting devaluation as it did.
The type of exchange rate chosen by a country is determined by its integration into global financial system, country specifics economic disturbances exposure, economic structure, and exchange rate risks. For the case of South Sudan, as an import country, the impact of devaluation on prices was going to be critical and sustainability of fixed regime.
During devaluation debate, the parliament took a short term comfort by forcing the Bank to rescind its proposed devaluation policy to keep imports prices low. The Bank proposed to devalue the pound in my view so as to reduce the sustainability obligation. With insecure and unreliable partner in the Khartoum, sustain must have been a parameter from the side of the Bank.
Now the worst is here, South Sudan has a fixed exchange regime with a troubled oil export. Sustaining a fixed regime must a great headache to the Bank while parliament has since fast forgotten the harm it has caused.
I am sure the Bank had challenges during the oil shutdown and these lessons form the basis of the Bank policy position on exchange that was overruled by parliament.
During the exchange rate debate last year, most comments were that devaluation will increase export as theorized by economic. However, the unique constraints of insecurity, lack of infrastructure, capital, attitudinal problems, lack of capital, and lack of entrepreneurship skills. However in my view, these impediments break down the devaluation as tool improve exports.
Second, weak financial system that is not integrated into global economy renders helpless Fleming–Mundell of feedback and self-regulating view through the capital market. Supported by specific country risks, freely floated exchange rate will skyrocket the imports’ prices.
As I argued now and before, the exchange rate policy will never and can never with current economic fundamentals can be used to improve export and to improve international competitiveness.
In the light of all the foregoing illustrations, an appropriate exchange rate policy was one that was going keep to inflation reasonable, prioritizes sustainability and ignores international competitiveness till such a time structural problems of the economy are sorted.
In this regard, I agreed with the proposal by the Bank to allow banks and bureaus to bids for hard currencies, this would have minimized problems that are currently being witness under a fixed regime.
Second, I disagreed with the part of the policy that advocated for increasing the dollar price from 3.16SSP to 4.5SSP immediately. This should have been done gradually to ensure rate at which pound is depreciated is monitored and hence control inflation within reasonable rate.
Had the devaluation been done gradually, parliament intervened in a professional way by allowing only a specialize economic committee to debate with the Bank, South Sudan would have got a better deal – an outright devaluation or fixed regime are not a better deals for South Sudan based on her current economic fundamentals.
Neither sure nor aware how the Bank intends to manage fixed regime under such circumstances, the clear lesson is that by encroaching on the role of the Bank, the parliament has ignored independence of the Bank as defined in the Act.
As South Sudan navigates the tough economic waters, the policies and decisions should be based on a holistic view of the current and the future, in part this article was meant to call for use of professional in decision making – with due diligence on impacts of the decisions. As for now, sustaining a fixed regime remains a true challenge to the Bank of South Sudan not the parliament.
Gabriel Garang Atem Ayiik is an independent economic commentator based in South Sudan.
Riek Machar and Taban Deng agreed to reconcile with President Kiir: SPLM internal reconciliation initiative aims to move stalled South Sudan peace talks
ADDIS ABABA (5 Mar.)–
A high-level internal reconciliation initiative within the SPLM is expected to start today or tomorrow in Addis Ababa as negotiations between the government and opposition forces remain stalled.
Luka Biong, a member of the National Liberation Council of the SPLM and a former minister in the Office of the President, told Radio Tamazuj that the reconciliation will be facilitated by representatives of the ruling parties of Ethiopia (EPRDF) and South Africa (ANC) as they have experiences relevant to the current crisis in the SPLM.
The initiative was referred to by IGAD mediators in their statement on Monday, disclosing that “a team of SPLM leadership will convene shortly, in Addis Ababa, Ethiopia, to develop an agenda, modalities, and timeframe for Review and Self-Assessment of the SPLM.”
Envoys for the regional body IGAD chaired by the Ethiopian Prime Minister further pointed to “the need for an SPLM intra-party dialogue, and the positive contribution it could make to the broader political dialogue and national reconciliation.”
According to Biong, the party chairman Salva Kiir has appointed a preparatory committee to discuss the agenda for the next meeting of the SPLM Political Bureau. The committee includes Taban Deng, the main negotiator of the opposition forces, who is charged with treason.
Four members of the SPLM Political Bureau are set to arrive from Juba – Daniel Awet, Paul Mayom, Akol Paul, and Jemma Nunu, representing the group still aligned with Kiir, while the other four already in Addis Ababa – Deng Alor, John Luk, Kosti Manibe and Taban Deng – are either part of the opposition or the so-called ‘third party’.
Former minister of cabinet affairs Luka Biong suggested the new move will try to address the crisis in South Sudan through reconciliation within the SPLM. “Civil society organizations and other political parties should make sure that their voices are heard in setting the agenda for the SPLM Political Bureau,” he added.
Trial of four detainees
The trial of four detainees, including former SPLM secretary general Pagan Amum, and the former chief of staff, Oyay Deng, together with Majak Agoot and Ezekiel Lul is expected to begin on 10 March in Juba.
Luka Biong assumes that the detainees do not have resources to hire competent lawyers except few national lawyers who volunteer.
“As President Salva has shown a commitment to reconciliation within the SPLM as reflected in his appointment of Taban Deng, who stands as well to be tried for treason charges, we expect him to show the same commitment and spirit to the release of the four detainees,” he said.
He urges “civil society organizations and peace-loving people of South Sudan and the world to call for clemency from President Salva to release Pagan, Oyay, Majak and Ezekiel for sake of peace, reconciliation and stability in South Sudan.”
“Whatever effort you can exert for the release of the four detainees will be a big service not only to the families of the detainees but also to the peace and stability in South Sudan,” Luka Biong says.
Biong is currently a fellow at the Carr Center for Human Rights Policy at Harvard Kennedy School. He is now in Addis Ababa to advise on the meetings.
Sudan Tribune: Kiir forms committee for SPLM leadership meeting
South Sudan president Salva Kiir has formed a preparatory committee tasked with making the arrangements for an upcoming meeting expected to bring together rival groups within the leadership of the SPLM.
The committee is a mixture of government loyalists, rebels and former detainees or third bloc officials. Its members are Daniel Awet Akot, Paul Mayom, Akol Paul, Jemma Nunu, Deng Alor, John Luk Jok, Kosti Manibe and Taban Deng Gai.
The eight-member committee will be primarily responsible for preparing the agenda for the next meeting of the SPLM political committee, which was proposed in the Ethiopian capital, Addis Ababa, by the mediators of the Intergovernmental Authority on Development (IGAD).
It is not clear what issues the committee will discuss, but multiple sources and officials with direct knowledge of the arrangement have told Sudan Tribune that the focus of the meeting would be on internal reconciliation among the party’s leaders.
However, the spokesperson for the rebel leader, Riek Machar, questioned the legality by Kiir to form such a joint committee including their senior rebel leaders.
“First of all, the proposal for internal reconciliation between the two SPLMs, as a new mechanism to try and resolve the ongoing violent conflict, was not initiated by Salva Kiir. Further, he is not the leader of some of those groups he has appointed to his committee, and therefore the formation of such a joint committee is unnecessary and procedurally illegal,” said Machar’s spokesperson, James Gatdet Dak in statements to Sudan Tribune on Thursday.
He said the forum proposal was initiated by members of the IGAD mediating team, which he said the two parties had to simply study, and if acceptable, they would develop their respective positions or listen to the mediators if they have a draft.
“Kiir knows very well that, for instance, comrade Taban Deng Gai is our Chief Negotiator, whom he has no authority over him. He also dismissed him [Gai] from memberships of both the Political Bureau and SPLM party as well as charged him of alleged treason,” Dak wondered, saying the leadership of the opposition was surprised to read about it in the media.
He said the president who also chairs the party was the very person who resisted numerous calls to hold the political bureau meeting in 2013, which the rebel leader’s spokesperson said would have resolved the misunderstandings that have now “consequently culminated in the ongoing violence.”
He further added that if the government was “excited” to form a committee which included members of the opposition, the first attempt they should have procedurally done was to ‘reverse Kiir’s decrees that were based on one man’s decision to charge and dismiss at will officials from the party.”
Dak however said if there will be need for specialised committees from both sides to tackle the reconciliation process, each side in the conflict will appoint its respective committee.
The government of South Sudan has expressed optimism of the support member countries of the Arab League could provide to address its conflict. Foreign Affairs minister, Barnaba Marial Benjamin told Sudan Tribune on Tuesday that the Secretary of the Arab League of nations had invited him to participate in the forthcoming meeting of the Arab foreign ministers on the situation in the new nation.
AT THIS CRITICAL TIME, LET’S REMEMBER THE WORDS OF DR. JOHN GARANG, NOT JUST ON HIS DISPUTATION OF BIASED NORTHERN STEREOTYPING OF THE SOUTH, BUT MORE SO, ON HOW WE SHOULD AND MUST BE MASTERS OF OUR OWN FATE IN OUR OWN HOUSE, THERE IS NO ANY HELP OUT THERE WHATSOEVER. THIS IS A BROTHERLY QUARREL, FRATRICIDE AS IT MAY OR COULD BE. IT IS NOT THE REASON TO AUCTION OFF OUR DIGNITY AND INTEGRITY AS A NATION. ENOUGH OF SELF-DEFEATISM PRESIDENT KIIR!!!
We are not anybody’s burden; we are masters in our own house. We are confident in ourselves and of the future. There are those who might entertain the false beliefs that we cannot govern ourselves, we should not and cannot let their thought patterns influence us. Let us collectively go down in history as the generation of South Sudanese that turned Sudan around by putting an end to discrimination, racism, inequality, division, exploitation, and marginalization at best, and slavery and casual murder at worst. Let us unite against ethnic, religious, and racial divides to restore personal dignity for all. Let us move from total economic dormancy to total vibrancy; from relegation and resignation to a cycle of poverty, destitution and misery to activism, hope, and excitement. Let us reject being mere spectators in life, to becoming masters of our own destiny. A Bishop friend of mine yesterday told me a joke that three people went to see God, and the Almighty asked them what they wanted. One of them said he wanted wisdom, the second said he wanted riches, and the third, a Southern Sudanese, said he was only accompanying the other two. You will guess who wanted wisdom and who wanted riches, but what I want to tell Southerners is to stop accompanying others and be masters of their own destiny; I say the same for all Sudanese and for all people of Africa.…I have been commanding the SPLA officers and men of various ranks in this war; many of them have paid the ultimate sacrifice. If my turn comes to pay the ultimate sacrifice, and indeed it comes, then be it. We are in this war to win or die for the national goals and objectives we believe in. I am just an officer; a commander-in-chief of a patriotic army and one officer just like many of you. If death comes my way I shall die like many of our compatriots who have already laid down their lives in this war. SPLM/A Oye!
Power-sharing, on the other hand, is likely to mean a return to a status quo ante – with Salva Kiir and Riek Machar as President and Vice President master-minding a sharing of posts down the ranks. Understandably, the very suggestion of power-sharing as a solution evokes cynicism. When asked by the New York Times how he imagines the current crisis in South Sudan to end, Jok Madut Jok, one of the country’s leading intellectuals, answered with obvious resignation, referring to President Kiir and his former deputy Riek Machar: “The two men will eventually sit down, resolve their issues, laugh for the cameras, and the thousands of civilians who have died will not be accounted for.” Without political reform, reconciliation and power-sharing will more than likely be a dress rehearsal for another crisis. The alternative would combine meaningful political reform with reconciliation and power-sharing. Reconciliation without political reform would be no more than window dressing. The difference between power-sharing in end-of-apartheid South Africa and in post-CPA South Sudan is the difference between meaningful and cosmetic reconciliation.
By David Aoloch Bion
This is Age of Reason. We should use of our rationalism to establish whether a given argument, statement, problem or situation is true, half-true or false. We should also apply our moral Philosophy to separate facts from fictions.
The Government of South Sudan detained 11 men in connection with the coup attempt on December 15. The Government released seven men on the condition that they tried to “overthrow the government through mass mobilization”. She kept the four, namely Pagan Amum, Dr Majak Agoot, Gen. Oyai Deng, Ezekiel Lol on condition that they tried to “overthrow the government through military force” , this is fiction
Before December 15, the Government had been planning to punish Pagan and Majak for their big talk in social gathering like funerals and weddings.
For example President was quoted in Citizen Newspaper saying, some politician are using funeral, and wedding to make political statement, he was referring to Majak and Pagan.
The following is the record of some of their big talk that annoyed the Government.
Let’s begin with Pagan. Pagan is always impulsive. In 1996, the Sudan government said, it captured SPLA strong of Nimule. Pagan was contacted by the BBC Focus on Africa in Asmara Eritrea; he confirmed that the SPLA lost Nimule. , which was false.
In Khartoum, as Minister of Cabinets Affairs, he said in an Interview that Sudan is “failed State”. President Omar el Bashir fired him for making that’s statement.
Around 2009 he was quoted in the Media saying “CPA should be renegotiated.’’ This annoyed the Government and SPLM later he said, he was misquoted
When Deng Alor and Kosti Manibe were sacked he said this would ‘’ cause tribal conflict’’. For the above, the Government was planning to punish Pagan.
Majok Agot is also of the same calibre. When he was Commander in Bar el gazal during the liberation war he was quoted verbally saying “Dinka Bare el gazal are foolish majority”.
In the funeral of Journalist Isaiah Abraham, who was assassinated in Juba he narrated Fable of the Cow that does not give milk that could not be bought by neighbor thus, it should be slaughtered on the butchery. What is the meaning of the fable of the cow? Everyone has his own interpretation. Some sources closes to President Kiir said that Fable put the relationship between Majak and the President to its lowest level.
Another sources says , the bodyguards of President saying they always see with twisted mouth when President is speaking in public, this is contemptible posture according to them
The Author has no ideas about Ambassador Ezekiel Lol , he is obscure diplomat, who has never been quoted in public talking politic Oyai is disciplined officer, whose name was not heard in secret activities.
In conclusion, the government must separate Loose Tongue from Coup plot. These four men are not Coup makers because if they were involved Military Coup, they would have left on December 15 night like Riek Machar. They would have not stayed on their houses until they were arrested. The fact is that they were sympathetic to Coup plotters. And being wisher of something does not qualify as participant, they are millions coup sympathizers now in Juba What is unique about them ? let them go The government and the Ministry of Justice must be Judicious in handling the citizen cases. The Government or state must not witch-hunt its people for unimportant unjustified reasons. It must not equate the big talk of Majak and Pagan with Coup. Majok and Pagan are victim of loose talk. Oyai and Lol are just scapegoat or the companion of the former.
So Mr. President you have been magnanimous all along, release your men before they are traumatize… They are hundred percent better than those, you pardoned and granted them amnesty before. Release them. let them go.