How to Curb the Detrimental Effect of Dollarization Proliferation on South Sudan’s Economy

By Longar Mathiec Wol, Juba, South Sudan

Sunday, September 13, 2020 (PW) — The term dollarization in layman language is simply the domination effects of the U.S dollar on economy and domestic currency. In this situation, the dollars are use mostly in transaction instead of local currency. In short, it is the lost of the country’s currency value and usefulness as medium of exchangeto dollars. When the national currency lost its value, citizens will start to hate it and turn to dollar making dollar the most wanted currency and in the process dominate the local transactions.

In South Sudan as the dollarization continues to proliferate as fueled by parallel market as strategy to sabotage national economy, it is obvious and clear that if it is not stop then this country inflation is likely to increase exponentially. The dollarization as it is today is not longer a normal dollarization we know, but it is being use as political tool by the black market or parallel market dealers and controllers to tarnish the image of the ministers of finance (past and current) making them look as if they are not capable, putting them under unnecessary pressure to unseat them. 

In dollarization crisis, the foreigners colluded with nationals to fuel the situation. There is no doubt that in Juba almost all the apartments, hotel, price tags of some goods especially electronic are put and paid in dollars. Due to the loopholes and in efficiency in the system the foreigners and some nationals continue to trade in currencies unabated. The fact that the official interest rate differ from parallel market rate encourages the vice. These individuals took advantage of that, convert the severe and alarming situation into business making speculation and arbitraging a lucrative business.

The effects of dollarization is being felt across the nation, because whenever there is slight increase in price of dollar, it always lead to an increase in all the prices of essential commodities in the market making the innocent people’s lives unbearable. In order to stop this unnecessary increase of the prices in the market there is a need for de-dollarization policies and enforcement mechanism. If anything is not done the market might spin out of control, it is time to control it now.

In circumstance the control fails, we should not be surprise to see our currency becoming useless since they are already on that path. We should learn of the effects of dollarization from the countries that went a head of us. Some good example, of such countries exist in Africa, Zimbabwe being the leading followed by many others. In other part of the world, countries like Ecuador, El Salvador, Marshall Island etc are few of many countries that had been dollarized.

The disadvantages of the dollarization will be felt extensively. With seemingly dollarized economy at hand in the country where civil work force is poorly paid, it is likely that this poorly paid civil servants for them to match the standard of that dollarized economy they will have to be involved in corruption,meaning if dollarization is not address it will fuel corruption. 

As we have seen, the unexpected changes or shifts of dollar prices in parallel market has negative impact on commodities’ prices since dollar’s price increase equates to an increase of commodities’ prices in the market. As the dollarization continues to increase, it might lead to an increase in speculation and arbitraging businesses in the country which is not healthyeconomic wise. In the process its negation and sensational impact on national monetary policy, specifically monetary planning will be great.

Nevertheless, in market control by foreigners ranging from small businesses to big ones. There are probability that if this matter is not swiftly address it may lead to exploitation of citizens by foreigners, because it gives foreigners a free ticket to overcharge citizens by charging them in dollars term which to them seems to be cheap, but converting it into pounds since we all earn pounds becomes huge amount and too expensive and unaffordable. In process of charging in dollars it will weaken local currency and usually lead to hyperinflation as we are experiencing now. 

When dollarization allows to flourish it will be used as conduit toward money laundering and terrorists financing by individual who might have huge idle sum of dollars. These terrorists sympathizers will exploit the freely roaming dollars in the market to finance their terrorists activities. Don’t be surprise when South Sudan becomes a base of launching terrorists activities in the region.

However, the question in mind having seen some disadvantageswould be; how do we eradicate, eliminate or curb this proliferation of dollarization in the country? Well, for dollarization to cease or minimize there is a need for decisive steps to be taken to minimize it if we dream of stable economy. 

As we know one of the critical factors that led to semi-dollarization is the fact that majority of our citizens live abroad, no matter how much dollars could be injected in the market itmight remain the same, because all these dollars are exchanged as soon as they reach market and send out of the countrydepriving the dollar circulation within the economy.

This situation requires lasting stability or security and credible education system in order to encourage our people abroad to come back home. There is a need for permanent peace and standard education system if we were to convince them to come back home.

Having said that, our big problem in South Sudan is ignorant. The more we allow the parallel market to thrive the likelihood that the dollarization may not cease anytime soon. I am not saying there is no parallel market in other countries, they do exist, but the different between our parallel market and that of other countries is that, other countries control their black market compare to Juba where money is being paraded and piled along streets.

What happened in Juba’s money parallel market is unbelievable and can never be seen in any other street anywhere in the world. The black markets in the rest of the world operates underground, they don’t pile thousands of all kind of currencies on the streets as it happens here. The only option is to have dialogue with these parallel market vendors and convince them to form cooperative in term of forexes and register them to allow them to operate legally and in organize manner.

In circumstances where they refused to leave the streets, illegalization or restrict them become the only language if the dialogue fails.

In Juba, as I mentioned above it has become habit that all price tags are put in dollars. This is encouraging the dollarization of the market. It up to city council in collaboration with the relevance institutions to impose poundization. All the prices must be in pounds so that citizens don’t worry on how to get dollars to pay rent, buy a phone and many other essential products or commodities.

Why do I need to have dollar to rent when I have pounds. One of the sector that had been spearheading and totally dollarize and continue to fuel dollarization is the real estate sector. For you to rent an apartment in Juba you must have dollars to be permitted to rent. To stop that the concern institutions must ban all the price tags in dollars in the market and real estate business and immediately replace it with pounds.

The dialogue failure between the government concern institutions and the money black market vendors will give government upper hand to initiate the reform agenda in foreign exchange sector. These reform may include the formation of aregistered forex association to take responsibility or oversee the forex market in the country to avoid vacuum that might be left behind by the banned parallel market vendors.

This new organization will conduct awareness campaign to the citizens that they can have access to hard currency in forex which is convenience and secure. This will help the government in planning to know how much hard currency needed to be inject into the market for its stabilization.

On other hand government cannot completely exonerate itself in dollarization crisis. One of the bad habit practiced by most of our institutions is quoting all the contracts value in dollars. To minimize these, not all the contracts should be quoted in dollar term, there are some contracts that do not require to be quoted in dollars.

That means majority of contracts should be quoted in pounds, in circumstances the contractor may needs dollars, it will request for conversion or walk into any registered forex and exchange direct since these forex will have enough hard currency supply to them by central bank. The advantage of having or recognizing our forexes is that it will not only stabilize the currency market but also an opportunity for employment to many young graduates doing a lot of nothing at tea places.

In South Sudan we have culture of having free cash flows to outside world, some sent through international money transfer companies other being deliver directly to the families abroad. Sending money to your family abroad is not a problem, the problem is when someone who earn SSP 5,000 is able to send more than USD 10,000 in a month without being question where he or she get that large sum of cash is the problem. 

In many countries there is always limit to how much an individual should send abroad in months and also provide clear explanation when they received certain amount deems to be beyond the scope of how much you should send or receive. In other countries for you to receive that large amount of money you must provide evidence of what you are going to do with that money; with out clear evidence they will be confiscated.

Restricting the amount of money and individual should send is not only good for the economy but reduce the terrorists funding. In South Sudan with free flows of cash it is only God we pray to protect us not to be hit hard by terrorists. In other countries for instance, our neighboring Ethiopia when you alight from the plane you must report the mount of money you have in your possession and if they find extra on top they will confiscatethem straight away, whether you like it or not.

I remember one incident when the Ethiopian security agents confiscated USD 10,000 from South Sudanese diplomat who was transiting to one of West African countries. In South Sudan you can leave and enter with more than USD 100,000 without being question appropriately and particularly when you have title like Excellency, honorable, general and many other prominent titles in the country. This madness must come to an end, instruct all the security agents to confiscate any amount exceeding USD 5,000 with immediate effect. 

Many might be thinking of investors who invest in the country, well the investors can repatriate their many base on terms of agreement between the government and them. Their transactions usually goes through the financial system which is good for planning purposescompare to the culture of smuggling money out of the country.

As highlighted, how to restrict or decrease the dollarization in the country. Some people however, will be tempted to ask how are these steps going to be implemented; well, in South Sudan there are relevance laws that could be used to implement the de-dollarization strategy. Apart from relevance laws that exist there is chapter 4 of revitalize peace agreement that deals with economic reforms. 

If the provisions provided in that chapter put to use effectively it will help in operationalization of these de-dollarization reform steps. This chapter has it institutions that were to be constituted or had been constituted to oversee the implementation of economic reform. Some of such institutions include Public Financial Management Reform Strategy(PFMRS). Public Financial Management (PFM) has committees that are tasked with drafting relevance public financial reform policies.

These committees include: PFM secretariat, PFM technical committee and PFM oversight committee the supreme body. If this idea is raised under their discussions by concern institutions it is likely to capture their attention and solution may eventually be found. In circumstances this reform bodies reached consensus on some of the points to be implemented then it will be up to financial institutions concern like central bank and the ministry of finance and planning to come up with guidelines and implementation matrix. 

South Sudan as a country that produce nothing and rely heavily on import of essential commodities from neighboring countries,one of the big excuses that led to the rise for demand of hard currency is import of goods. To address that the government may come up with short term policy by contracting the food cooperatives companies to avail the essential food and non food items in the market and whole sell them to the small and medium enterprises to reduce the pressure on demand for dollarsto import food stuffs and non food stuffs abroad. 

If there is doubt on its effectiveness, the government can form a committee comprising of the relevant institutions to monitor both the illegal currency vendors and cooperatives contracted to import food into the country.

The committee should be comprise of the members from the following institutions that are not limited to representative from financial intelligence unit(FIU), economic intelligence both National security service, money laundering and counter terrorist financing if such a department exist in national security, representative from central bank of South Sudan, representative from city council, representative from the ministry of finance and planning, representative from the ministry of interior (Criminal Investigation Department or Directorate) and any other relevance institutions can be coop into the committee.

In circumstances where all the above measures failed, the only radical and hard way of approaching it is total dollarization which to me seems unacceptable, because it is likely to undermine our hard won sovereignty. In total dollarize economy, dollar becomes a legal tender used in all transaction. Meaning, the national currency is forsaken and not longer use as legal tender note, which I think South Sudan hasn’t reached that level yet.

To conclude, having seen all the scenarios mentioned above; ending dollarization will be great task that require both reformand patriotism. Eliminating dollarization should not be seen aswork of government alone but as patriotic citizens we have role to play. 

To some of us who had a privilege to have been to other countries, citizens from countries we have been to don’t accept payment in foreign currencies e.g. dollars, Euros or Yuan, you have to convert your hard currency first into domestic currency for them to accept you to purchase anything.

Dollar is not as precious and expensive as we think or made it to look like, it is just a currency like any other; we intentionally made it look expensive, if we follow the simple steps mentioned above in later and spirit we will see drastic changes and reduction in dollarization and eventually decrease in inflation that had imposed unnecessary and unbearable suffering for too long on our people. With that, we can curb the severe effects of dollarization proliferation on our economy.

The author, Longar Mathiec Wol, is a concerned South Sudanese citizen who can be reach through email address: longarmathiech@gmail.com

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