South Sudan Central bank says oil revenues flow smoothly

Posted: September 2, 2011 by PaanLuel Wël Media Ltd. in Economy

A man from South Sudan displays new currency notes outside the Central Bank of South Sudan in Juba July 18, 2011. REUTERS/Benedicte Desrus

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By Hereward Holland

JUBA (Reuters) – South Sudan has converted more than 75 percent of the currency that was in circulation into new South Sudanese pounds after splitting away from the rest of Sudan in July, the south’s newly appointed central bank governor said on Thursday.

Governor Kornelio Koriom Mayik told Reuters in an interview that oil revenues were flowing into the south smoothly but a dispute over the fate of foreign reserves that had been held by the united country’s central bank remained unresolved.

Despite a relatively smooth split, disputes linger. The south took about 75 percent of the united country’s 500,000 barrels per day of oil production but has complained it is now being charged high transit fees to use a vital pipeline via the north.

“From July up to now oil revenues have been flowing well. We have currently been receiving revenues in good schedule,” said Mayik, who was previously the deputy governor.

Shortly after independence on July 9, the south said it was introducing its own currency to replace the Sudanese pound. Khartoum has also said it would issue a new currency.

“We have now (switched) over 75 percent of the total that was estimated to be circulating in the economy of South Sudan,” Mayik said, adding that a constant movement of currency between South Sudan and Sudan to the north meant it was impossible to reach 100 percent.

Thursday was the last day of the 45-day period that was assigned to switch to the new currency.

The South Sudanese pound is officially valued at about 3.30 to the U.S. dollar, but is trading at about 3.80 on the unofficial market, roughly where the Sudanese pound in the north is unofficially trading.

Mayik said he expected the South Sudanese pound to strengthen, adding that the central bank would be supplying more dollars to southern financial institutions.

“We did not supply the required dollars to the financial institutions. It is something we are going to address and we started to work on it yesterday (Wednesday) and within the next few days the situation is going to change gradually,” he said.

Mayik was sworn in as the new governor on Tuesday.

Asked where he saw the exchange rate moving for the South Sudanese pound in the next three to six months, he said: “We are going to see the rate be nearer to 2.50 or 2.60.”

The previous central bank governor had said in August that the southern central bank had enough reserves to pay for the basic needs of the state for a few months, even if it did not receive oil revenues.

“There is still a dispute over the previous foreign reserves because some of the reserves that were meant to flow to the south couldn’t flow,” the new governor said.

“There are problems there and these problems are yet to be resolved. This will not be resolved through the banking sector, they contain issues which are more political than banking,” Mayik added, without giving further details.

The war-ravaged and underdeveloped new state has been trying to build up efficient institutions and develop an economy that is at present totally dependent on oil.

© Thomson Reuters 2011 All rights reserved

http://af.reuters.com/article/investingNews/idAFJOE78100P20110902?sp=true

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