South Sudan: How ‘Managed Float’ is managed
By Mayen Ayarbior, Juba, South Sudan
January 8, 2016 (SSB) —- Many of our citizens and leaders have contended that the policy of devaluation, financial restructuring or managed float (not free float) could be what we needed on our way to joining the East African Community (EAC). But some also qualified that argument with an assertion that the policy will not succeed on its own. It must stand on a firm economic foundation which is geared toward creating vibrant domestic markets that are able to stand on their own without need for external help in terms of goods and services.
As it stands today, we have not yet built any semblance of a national economy as urban centers are isolated units. For example, the people of Juba cannot trade with any surrounding markets, including such productive neighbors as in Yei, Tali, and Bor, let alone Yambio, Renk and Awil who are farther away. Our domestic markets are very isolated and have no means of integrating and self-enforcing.
The connections between the current policy of managed float and internal markets are many, depending on the various angles of analyses one could employ. One such link could be deduced from the management strategy of injecting $20 million dollars into the veins of commercial banks, hoping that the injected sum will force the dollar price down. Since that could be true (i.e. dollar going down) to some extent, the unclear aspect is what happens afterwards.
Because of existing structural loopholes that could lead to massive forex leakages, the banks in South Sudan could be used as agents of unscrupulous businessmen and senior citizens in their quest to launder easily accessible SSP. In many ways, the policy of injecting such a huge amount of USD every couple of weeks has an obvious potential for being abused, no matter how well intentioned its proponents may be.
Developing countries get dollars in the hard way for one, and only one reason. That is, to pay for infrastructural development. Injecting dollars for the sole purpose of saving a local currency from sinking is quite an anomaly, since the pound is a currency independent of the dollar. To make it more clearly, saving the pound is not going to depend on the dollar alone, but on whether we have interdependent domestic markets or not.
In turn, targeting domestic markets is more people oriented than targeting the business community which is externally oriented. Those who want to go abroad to buy goods which they will sell for profit could not be more important than the people who need services. After all, the business community is not responsible for our physical and social infrastructural development. In essence, even they will benefit from better infrastructure like the rest of their countrymen and countrywomen.
Surely, if we translate the monthly $40 million into infrastructure terms, such money could pay for so many imperative projects, including lifesaving and life enhancing ones. If we could thank Kuwaiti investors on national TV because they have pledged to construct a “modern hospital” in Gurei (a Juba neighborhood) at the cost of $5 million, then the $20 million given to banks every two weeks are equal to four modern hospitals thrown away every two weeks. Or say $10 million for building needed dormitories and lecture rooms at each of our three or four major Universities so that the growing number of students could have conducive environments for becoming better educated citizens.
This is not in any to suggest that money should not be injected into commercial banks. Surely, they (banks) have a crucial role to play in economic growth and development, but the money at hand (as injected) is beyond the absorbing capacity of the banks in South Sudan. Furthermore, it would be a better strategy to invite banks such as Barclays which will come in with their own capital and they attract investor confidence. Banks that take your dollars and fail to pay back, such as the case with our regional banks in Juba, are not worthy such huge injections.
In addition, the policy of injecting such huge sums of dollars into banks is incommensurate with the objective of enhancing economic growth, which means directly enhancing the lives of the people. The banks’ role in enhancing people’s lives could not be as direct as physical and social infrastructures; unless others think otherwise as they try to force a complex theory which says banks are more important than bridges, hospitals and schools.
As expected, the decision to inject that huge sums into banks must have come from those who are lending South Sudan. The IMF and World Bank must have imposed that injudicious condition on our Central Bank and Ministry of Finance, for our own leadership who know our people’s miserable economic needs must have learned hard lessons from the last decade; a decade when billions that could create a developed country in the desert had evaporated in thin air.
As such, any acquiescence to that foreign decision to waste more billions in intangible polices would be unforgivable. It should be time to consider the true meaning of liberation as meaning liberation from fear, abject poverty, illiteracy and want. There is no better strategy than injecting dollars into building infrastructure.
Mayen Ayarbior has a Bachelor Degree in Economics and Political Science from Kampala International University (Uganda), Masters in International Security from JKSIS-University of Denver (USA), and Bachelor of Laws (LLB) from the University of London. He is the author of “House of War (Civil War and State Failure in Africa) 2013” and currently the Press Secretary/ Spokesperson in the Office of South Sudan’s Vice President, H.E. James Wani Igga. You can reach him via his email address: mayen.ayarbior@gmail.com.
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