The Central Bank Should Channel the Incoming Loan into Interdiction of the Shadow Economy in South Sudan
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By Kuir Mayen Kuir, Nairobi, Kenya
Thursday, October 01, 2020 (PW) — There are a number of reasons that can explain the crumbling of the South Sudan economy including the persistent political disagreements between the president and the 1st vice president, lack of adequate productivity in the country as a result of the rooted insecurities that has led to massive reduction of the economic activities which could lead to the boost in our GDP growth. However, of recent the constant depreciation of SS pounds against dollar as a hard currency has been more disturbing.
It is so momentous and sudden and its impacts are so debilitating in the wake of so many efforts allegedly being exerted by the central Bank to clobber and normalize the exchange rate of pound against dollar. There is a big need to go back to the original healthy status of our economy but the existence of the unlicensed market operating within the economy has been shattering the hopes of resuming the former state hitherto. The fact that we still have the vices of corruption among our government officials in the central bank is a definite way that will always retrogress our steps. Our people have suffered the agony of bullets and now the wrath of unregulated economy with its subsequent tendons of corruption that cage their self-oriented progress. Generally, the situation is dwindling with a every blinking of time.
Our Central bank on the other hand is incapable of salvaging our economy in terms of providing an alternative for the black-market clients. In the month of August this year, ALJAZEERA published a very devastating piece of information about South Sudan entitled “Running on empty”. According to this article, the central bank’s deputy governor Daniel Kech Pouch told the news conference and I quote “It is difficult for us at the moment to stop this rapidly increasing exchange rate, because we do not have reserves”. When the deputy governor of the central bank is capable of saying this publicly, we just wonder the extend to which our corruption has eroded our values. If the dollars in the black market do not belong to them, then where are our reserves? He further confirmed that South Sudan has three exchange rates at the moment in which the black market has the highest rate.
This means that the demand for dollar currency is so high in the black market as compared to the central bank and any other commercial banks operating in the country. This is because when a client goes to the bank, he/she does not get the hard currency, therefore they are left with less options to choose from, with the closer being the black market. Though the rate is exceedingly high in this unlicensed market (400ssp per $), thereis an assurance that you would end up with the amount of dollars you want provided there are equivalent amounts of pounds.
This tendency does not only make the black-market stronger but it also increases pounds in people’s hands leading to increase aggregate demand which is itself a vehicle for skyrocketing prices of the already scarce goods and services. This is a recipe for inflation in the country. Every time prices increase suddenly; it is an indication that we are losing this fight with an equal amount and we are moving many steps away from the reality of economic normalization. To stabilize prices is the main duty of the central bank in addition to implementing monetary and fiscal policies. If this major pillar of an economic progress has been chained and handcuffed, then our economic bleeding maybe everlasting.
On a good note, the South Sudan government has expressed an intention to borrow some two hundred and fifty million dollars from AFRIEXIM. This can be a very outstanding strategy to interdict the black market. In the briefings by the minister of information, Hon Michael Makuei Lueth on why the government is borrowing the indicated amount, he mentioned that the borrowed money would be channeled into avenues for strengthening our ailing economy. So, in order to realize the intentions of the borrowing, led that money be used to help disable the black-market exchange rate. The central bank has the prerogative to use the borrowings to frustrate the black-market by lowering the dollar rates in the banks. This will attract all the regular clients of the black market leading to an urgent collapse of the said black market. Many people will prefer exchanging their money in the banks than outside the bank. This can help the central bank to control the economy in a better way. However, if this money goes into individual pockets through embezzlement again, then the quest to completely and quickly recover our economy will remain a far horizon. It will be unattainable.
It is the right time for the central bank officials such Daniel Kech Pouch and his boss to make hay when the sun will be shinning with the incoming cashflows. Before the ministry come up with a plan to use the money, led it first help in the fight against the black market. Create more out of it through short term loans to the citizens. Otherwise our people will keep agonizing experiencing both economical and political pain. It is time for our government to empower and help our people grow. In addition to the minister of information briefings, he also mentioned new regulations on the amount of dollars that should be leaving the country henceforth. The central bank should prioritize to implement these kinds of regulations because they are going to be useful in the significance reduction of the remittances abroad. Do not discriminate people based on the positions in the government. There is nobody that is so special as far as our economic recovery is concerned. All should be treated equally. Efforts should start with that slightest change which you feel like overlooking as an individual. They shall be the foundation of greater good. It is time to fix South Sudan.
You can reach the author via his email address: mayenkuir@gmail.com
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