Who Is to Blame for the Dwindling Fortunes of The South Sudanese Pounds?
By Abel Majur Leek, Juba, South Sudan
March 31, 2016 (SSB) —– It is no longer news that the South Sudanese Pounds has depreciated in value since the outbreak of war two years ago. This is the widest gap between the free market value and the Central bank of South Sudan rate in the history of the nation. Who exactly is to blame for the abysmal performance of the South Sudanese Pounds?
Many factors influence exchange rates. Differentials in inflation and interest rates, Public debt, and terms of trading and Political stability are some of the exerting factors. High inflation and interest rates, large-scale deficit financing and decreasing terms of trade are all bound to make the pounds depreciate in value.
The recent depreciation in the value of the pounds is largely linked to the fall in the price of crude. The forces of demand and supply largely determine the price. The demand for crude has declined globally.
As a nation, our demand for the dollar is absurd. We import virtually everything (despite our vast natural resources) no export. Since the price of exports has risen by a highest rate than that of our imports, the Pound has decreased in relation to its trading partner’s currency. Heightened demand for the dollar has increased its price since our main source of foreign exchange (crude oil sales) is not yielding much as before.
The Government as a matter of urgency needs to be more proactive at this time of dwindling resources. The government has to be policy driven. Governance is a continuum and well-thought-after policies should transcend from one government to another. The current Administration need to detriment effect on the economy, which resulted in the economic slowdown, we are currently experiencing.
The move to curb the ‘dollarization’ of the economy is not a bad one in its entirety. However, we should holistically look at the factors that necessitated the need to trade with foreign currencies in South Sudan in the first place. It will always be cheaper to refine our own crude. Refining our own crude oil will also free South Sudanese from the stronghold of oil marketers who hold us to ransom at the slightest opportunity.
It is within our power as a nation to be a manufacturing based economy. You cannot continue to import every raw material and remain competitive globally. Self-sustainable nations usually get it right when it comes to agriculture. Feeding ourselves alone will save us millions of dollars annually which we use to import items like rice, Maize and many other.
The private sector has a part to play but that is largely dependent on the government creating an enabling environment. Meeting the power and infrastructural needs of the private sector will significantly reduce the cost price of goods and services available to the South Sudanese people.
The opinion writer can be reach:abeleek2@gmail.com
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