Why the Proposed Change of Currency will Exacerbate Economic Crisis in South Sudan
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By Simon El Hag Kulusika, Lusaka, Zambia
Sunday, October 11, 2020 (PW) — It was reported on 10th October, 2020 that the government of South Sudan would soon introduce ‘a New Currency’. There was no further elaboration by the information minister. The reaction from an economist Prof. Akim Ajieth Buny was that such a move would not solve the problem South Sudan economy is facing.
For him the solution lies in the engagement of specialists who can propose strategies to tackle the current crisis. Prof Ajieth comments are sensible and should be taken seriously by South Sudan government. As one can speculate, the phrase ‘a New Currency’ may have three implications:
1. Change of name of currency, accompanied by new exchange rate against foreign currencies: USA Dollar, EURO, Yuen, British Pound, Yen, Rouble, Rand,etc. This change will not resolve the problem, unless supported by improved exports to breath new relief to the economy.
2. It may mean introducing new banknotes with higher or lower denominations to sap the money being hoarded. Such a move will force hoarders of money to bring their hidden money for exchange, but no real recovery to the economy, because the new currency can be hoarded.
3. The third option is to introduce a new currency with different features and values, such as removing one zero or two zeroes from the current one and retaining the name pound. This may be accompanies by restricting pricing of goods in foreign currencies as well as prohibiting transfer of money and abroad in Dollars, Rand, Yuen, etc.
This will force hoarders to come out in the open. It will keep hard currencies inside the country, allow commercial banks and Bureau de Change to sell and buy foreign currencies, but without outlawing free circulation of foreign currencies.
Currency change is not new. In Sudan it was done by the regime in Khartoum in the face of mounting economic troubles. In Zimbabwe it was done on several occasions to rescue the country from economic collapse, but without success.
Because of qurosteque economic and political decisions. The situation there is still grim. Zambia also had its currency changed following the fall of one party system, but the name remains the same.
Another change was effected by the government of President Sata, where three zeroes were removed from the currency and new features made. Again the name has been retained.
The Sata’s move killed the parallel market and limited transfers through the banks abroad to a certain amount, but the transaction is to be done in Zambian Kwacha.
All the preceding measures were intended to prevent currency depreciation and rise in inflation.
The new currency in South Sudan to be pegged against the USA Dollar, followed by drastic reform in economic policies. This may work if supported by experts inputs.
The task is problematic. One hopes the government will act on expertise advices. Let us act harmoniously. Together we will overcome the crises.
The author, Simon El Hag Kulusika, Prof, ZAOU, can be reached via his email address: pa352128@gmail.com or Lusaka phone + 260973711250
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