South Sudan Ideological Economy
By Malith Alier, Juba, South Sudan
June 1, 2015 (SSB) — For a country that just emerges from war, everything is a necessity. Everything is a priority i.e. basic and secondary needs fall in one category. This situation has never been helped by acute shortage of experts in various fields in the country. It is really worse in the area of economic management where everybody professes to know something about South Sudan economy herein modelled on the US Dollar.
In 2005 the people in the bush, refugee camps and all over the globe just walked in and found the black gold flowing. The agreement currency, the Sudanese Pound also known SDG was just 2/1 or two per Dollar. Everybody thought that the economy functions like that only to be shocked by 2011 devaluation of the new Pound for South Sudan.
It was during this period that some South Sudanese began to boast of how strong is their currency in the region. They did not know that the Pound was “pegged” against other currencies especially the US Dollar. And there were good reasons for this; the country is a net importer of everything even to date. Also, the petrodollars were flowing in at a comfortable rate when crude prices were rising.
What the people in the new country did not contemplate was that the economic is not something that stays in one posture. Many issues can deflect the economy like inflation/ deflation, energy crisis, strikes and even at worse war.
What South Sudan is having now is the war economy and war economies are highly volatile as we witness. Who in their right mind thinks that we should maintain pre 2013 economy or revert to it at ease? It is time to forget about your two bottles of coke you used to take a day. Forget about three plates of spaghetti at Juba Grand Hotel and other meals in other five star Hotels in Juba.
You will affirm that everything we used to have is disappearing very fast. This shows that the pre 2013 lifestyle is no longer sustainable even if war stops today. It will take us more years and a hell of sweat to come back to that time of self sufficiency.
For those who think that government intervention will make a great difference, they should tighten their belts as stated by David Deng, the Finance and Economic Planning Minister immediately after the failed economic conference held in Juba in April. The country was rebuked for not producing anything but only wish to maintain strong Pound against other currencies in the region.
Proper economists long ago learned that government intervention never achieve anything good in the short and long run. Nobody else should educate south Sudanese on that. We are well aware that the government controlled the rate of US Dollar against Pound, something that has cause shortage and skyrocketing of the exchange rate in the market today.
The Parliamentary Committee on industry and commerce goes around instructing bottled water companies to maintain the unsustainable price per bottle at 1 Pound. It is the same cry by the Mayor of Juba City. Last week the new Undersecretary in the Ministry of Trade, Commerce and Industry did the same but what do you expect shortage and further shortage of bottled water in Juba and beyond.
However, some small advice is in order. Recently a lot of people thought that replacing Mr. so and so will do wonders by itself. No, changing key people frequently alone will not do anything if alternative systems are not instituted and tried.
The Letter of Credit (LC) Instituted by Central Bank was a good initiative conceived with best intentions. However, because people were not well instructed of its operations they tended to misuse and ultimately abuse for their own interest. The LC attracted opportunists as well as middlemen ultimately increasing the bank rate to what was in the parallel market. The final importer will not relax but recoup all the lost money to the middlemen and that is why Nido milk is SSP 250 in the market now.
Further, the people who were entrusted with execution of the LC were not honest brokers. They put their interest above those of the others. They started granting the LCs to their relatives and friends, their companies and those in authority. Who expected them to be different? Past scandals tell us that put your self-interests first before everyone else.
The accusing fingers were pointed to the Ministry of Trade, Commerce and Industry, Ministry of Health and Ministry of Housing and Physical Planning for failing to disburse LCs as perceived.
All in all, the Letter of Credit is good but it needs strong regulation. Those who handle LCs along with those who receive it must ensure that they delivery. Failure to strictly adhere to regulations of LCs must be punishable to deter violation. Good in theory is not good enough.
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