Store Away South Sudanese Pound in Favour of US Dollar
By Malith Alier, Juba, South Sudan
April 30, 2015 (SSB) —- South Sudan’s independence in July 2011 arrived while the country was unprepared in many fronts. The controversial transitional Constitution was rushed in at the last minute so as to allow the swearing-in of the first president of the Republic.
On the economic front, the country was at the horns of dilemma whether to use local currency or US Dollar instead. Perhaps the level of unpreparedness was a result of the bickering over sticking CPA issues like the border demarcation, share of assets and liabilities as well as the explosive share of petroleum revenues.
Most of these issues continue to dog South Sudan today in a bad way. The convertibility of Pound to other major and regional currencies is the case this author weighs in through this piece. The architects of the South Sudan economy most likely envisaged that using US Dollar was not a good start but the realities on the ground proved this otherwise. The fact that this country continues to be a net importer of everything is the antithesis in the whole argument.
Many economists in this country believed that the South Sudanese Pound is simply overvalued against other currencies and therefore, nobody, country or individual is ready to trade on it. Also refer to article authored by Garang Atem Ayiik on the Pound and its convertibility on this blog.
A scan of neighbouring countries currencies shows that our pound is the strongest against all; Ugandan Sh2800/1, Kenyan Sh90/1, Sudanese SDG8/1, compared to South Sudanese Pound officially at SSP3.16/1. However, the black market in South Sudan is precisely reliable than you think. The South Sudanese is SSP9.00 per Dollar as we speak. It is only at this rate one can find willing buyers and sellers. The official rate cited above is the rate at which the government supplies Dollars to banks and other financial institutions.
Faced with this economic despair, the government attempted to unify the two parallel rates i.e. the black market and official into one in November 2013 something vehemently opposed by the lawmakers arguing that the country can’t afford it. The reverse to the status quo thus far prove unsustainable. Therefore, the government is once again preparing to convene an economic conference involving economists from the country and the region to discuss this pervasive unification of the parallel markets. Most likely, some recommendations will emerge among them; I think is the adoption of USA currency, the Dollar as the official currency for South Sudan.
This proposition is not farfetched. Many countries had done so in the past and it helped their economies weather the challenges they faced. According to Wikipedia, countries like Panama, Ecuador, Es Salvador, East Timor or Timor Leste, Zimbabwe, Palau, Federated States of Micronesia, Marshal Islands, British Virgin Islands, Turks and Caicos Islands have successfully adopted the US Dollar as home currencies and are comfortable using it to transact day to day business with ease. Some of these countries have accustomed its use simultaneously with their home currencies.
Zimbabwe on the African continent, adopted the US Dollar in recent years at the time when its ZimDollar was affected by hyperinflation. Zimbabwe printed trillions of its valueless Dollars to be carried in bags and counting became a major problem along with storage.
South Sudan is facing similar situation as Zimbabwe. The country’s pound is losing value very fast and it was revealed that the country is contemplating printing more many. Its reserves to last for five years mentioned in 2011 have dried. There is the shortage of foreign currency as oilfields are rundown by the raging conflict. The military expenditure is billion Dollars overnight.
The way out is to adopt the US Dollar as the country’s official currency to stop the headache around the ill-fated Pound. The adoption of the US Dollar does not affect the country’s sovereignty. The adopted currency will only act as the medium of exchange, store of value, unit of measurement or simply a legal tender full stop.
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