Safer Paths Out of our Wartime Economy (Part 8): Networking Devaluation, Peace, EAC, and Troika
By Mayen D.M.A Ayarbior, Juba, South Sudan
December 21, 2015 (SSB) — In explaining the rationale behind the current devaluation of the SSP, we have heard from the Vice President, the Presidential Advisor on Economic Affairs, the Minister of Finance, and the Central Bank’s Governor that the decision is actuated, inter alia, by a strong political will to implement the IGAD-Plus peace agreement as-well-as joining the East African Community. Considering that country members in the regional economic block operate their financial system on the basis of devaluation and currency float, it would be prudent for South Sudan to adopt the same, so have they argued.
After the bold decision to devalue the SSP vis-à-vis the USD, South Sudanese analysts at home and in the Diaspora have mostly written against the decision. I have written a couple of articles where I tried hard to balance the concerns of the public whose livelihoods are temporarily affected by the decision until everyone’s income rises, and the practicality of the government’s economic hardships which ‘forced’ it to take that path. I have also considered the opportunities and link with joining EAC. Some other genuinely concerned writers, including from political parties and civil society groups, refused to take time to analyze the great opportunity behind this decision and called on the government to immediately reverse it, without elaborately stating better alternatives.
Of course, the link between devaluation and joining the EAC could not be denied by any practical economist. It is not sensible to concentrate on the internal dynamics of a devalued pound in isolation of the bigger picture. The bigger picture being averting imminent economic collapse, joining EAC, getting genuine pledges from external sources, restructuring a dysfunctional financial sector, creating a brand new economy, and implementing the peace agreement.
Devaluation and EAC:
In the East Africa Community (EAC), one thousand denominations characterize the region’s financial sector and money markets. For instance, while Uganda has a note of fifty thousand shillings (50,000) as its biggest denomination, Kenya has one thousand (1,000) note as the biggest. This avoids EAC citizens from carrying loads of money, and gives room to using small coin denominations of 100, 200, and 500. It is noteworthy that even Italy, one of the biggest six economies in the world, have a similar nominally devalued currency. One would expect our Ministry of Finance and Central Bank to follow the EAC example and print bigger SSP denominations, so that citizens should not carry bag-loads of money to the market place.
Printing one thousand, five hundred, and two hundred SSP currency denominations (notes), in addition to raising citizens’ purchasing power according to the percentages which would keep them at the same old economic status, will go a long way into joining the nominal devaluation regime in EAC. By extension, it will allow the entire markets of South Sudan to be elevated equally, considering that producers of goods will also raise their prices to cope with the new domestic financial infrastructure.
As such, there would be no reason to panic, everything will be nominal, while the parallel USD market which was sinking our economy would be gone. Our monetary market will now be trusted and ability to exchange our currency in the region enhanced. LC traders will now bring goods rather than sell money, since the latter will generate a better profit in the commodity market than the former in the money market.
While some of us preferred having South Sudanese Shillings, the fact remains that whether it is shillings or pounds is of a moral rather than practical significance. Shillings would only signify our distance from the Khartoum financial system, which could be a long term plan. As it stands, the extra cost involved in printing a whole new currency would rather be channeled towards initiating strategic projects such as agricultural schemes that will contribute to maintaining circulation of the Torika injected hard currency within the economy. Buying food stuff from East Africa is by far the biggest drainer of foreign currency out of South Sudan. A single successful agricultural season could significantly reverse that trend.
Because joining EAC will surely uplift the country and in many significant ways contribute to peace building (peace through development), the move to devalue (float) the SSP have received applauds from EAC economists and decision makers. Of course, they too will benefit from having South Sudan as a member.
Devaluation, Troika Funds and Peace Implementation:
We all know that the current peace agreement is the catalyst for the country to chart a new path towards creating the right foundation and pillars of a vibrant domestic economy. To implement it, no one can deny that Juba does not have even 20 percent of the required funds for cantoning its troops outside cities as-well-as the SPLM-IO soldiers in their designated military cantons, in addition to feeding and paying salaries to the soldiers and new bloated Transitional Government of National Unity. Without oil dollars, such funds for peace implementation must come from international financial institutions led by IMF and World Bank, and genuine friends of South Sudan, especially Troika countries (U.S.- U.K.- Norway).
Now that the Troika states have pledged to fund the implementation phase of the agreement, they have acquired an involuntary right to have a greater say on how our economy is to be shaped. Of course, I hear cynics turning the debate to be one concerned with sovereignty, instead of pure economics and peace building. Brainstorming with and accepting the arguments of well-meaning friends, who have provided immense support when South Sudanese faced an existential threat, should not automatically be taken as selling out the country. It is actually saving the country from total economic and political collapse.
The argument above is even more salient when the said friends have economically controlled the world dynamics for centuries and expected to maintain global hegemony for the foreseeable future without the need whatsoever for “our resource”. We should thus forgo the old and defunct cry of “neocolonialism!” which African populist politicians had thrived on for a while, before new generations of Africans grew to appreciate and capitalize on economic partnerships, including with China. Let us look at the benefits accruing to our economy from partnership, before looking at what others are taking from South Sudan, if at all we have anything to offer at the moment, as everything relates to our potentials.
Conclusion:
My attempt here, hopefully not futile, was to provide a basis of assurance that our friends who have stood with us throughout our protracted struggle, may not logically have any hidden agenda to destroy South Sudan’s economy. After all, they did not have a hidden agenda in providing constant food supplies to our internally displaced women and children and to soldiers through Operation Lifeline Sudan, USAID, etc. etc. Their promise to inject the necessary funds for the currency devaluation and peace implementation to work should not be doubted and taken with suspicion.
The flip side of the argument was touched upon by President Museveni of Uganda during his remarks at the Independence Day Celebration in Juba (July 9, 2015) when he drew an analogy with the screaming of fighting couples which draws neighbours (foreigners) into your own mess (affairs). When we asked for help from IMF, World Bank, and Troika to sponsor the IGAD-Plus negotiations, sponsor peace implementation, and give us grants and loans to save our economy, how do we still call it “internal affairs”?
If only we desist from nurturing a tribalistic confrontational mindset as we implement the peace agreement together with the incoming compatriots, only the few pessimists among us will continue talking of failed states and protectorates. The rest shall join an internationally and regionally supported moving peace caravan towards a New South Sudan of peaceful coexistence and economic prosperity.
Mayen Ayarbior, BA Econ Poli. Science (Kampala Int’l Univ.), MA Int’l Security (JKSIS- Univ. of Denver), LLB (Univ. of London). Author of: House of War (Civil War and State Failure in Africa) 2013. mayen.ayarbior@gmail.com.
The opinion expressed here is solely the view of the writer. The veracity of any claim made are the responsibility of the author, not PaanLuel Wël: South Sudanese Bloggers (SSB) website. If you want to submit an opinion article or news analysis, please email it to paanluel2011@gmail.com. SSB do reserve the right to edit material before publication. Please include your full name, email address and the country you are writing from.
About Post Author
