Why do Countries Change their National Currencies?
By Yach Atiop Yach, Juba, South Sudan
Monday, October 12, 2020 (PW) — This has been a trending topic that South Sudanese citizens of many professions whether inside the country or abroad have dog-tired their vims since the government spokesperson Michael Makueth announced the outcome of the regular Council of Ministers last Friday that the cabinet has agreed to change the currency.
To those who are knowledgeable of the practice, they will say the least but watching what the authorities will present as to why South Sudan want to change her national currency.
To those who have been brought up and educated by social media, they are jumping around saying almost not true statements and will be confusing the public who need to know the context of change of currencies.
In my own thoughts, before I gives you the reason as to why countries change their currencies. Our national currency call South Sudanese Pounds (SSP) and not South Sudan Police as they represent the same acronym.
This currency came into existence in July 2011 together with other symbols of national unity such as National Anthem, National Flag amongst others.
Immediately after independence, the country witnessed major setbacks that always affect the function of any national currency. The 2012 border war of Heglig was the genesis of downfall of South Sudan Pounds, flowed by the civil eruptions in 2013. The other factors came because of these two major problems.
Any national currency survive strongly when the country’s economic key sectors are not jeopardize by political instability, money laundering and mismanagement of public resources among others.
Now you have a hint as to why our national currency started crumbling over the years, find the reason as to why countries change their currencies, “is that the government has inflated its money so much that no one wants to hold or accept it. It would either switch to using another country’s money (look up dollarization) or issue a new currency with a promise to be good this time around”.
The key words here are:
1. No one wants to hold it or accept it. This is the reality of truth. South Sudanese Pounds since inception is not beingaccepted nor trade by our neighboring countries in their stock market, therefore, no one want to accept it. One has to ask why is our currency not accepted by our neighbors, yet their citizens are working in South Sudan since adoption of SSP?
The answer is so simple; our neighbors have no trust and confidence in our leaders who are task with money, hence it will be a burden to their financial sectors in their home countries if they do mistake to allow South Sudan Central Bank engages other Central banks in the region. The other countries have system of money laundering monitoring while South Sudan encourages laundering money out of their national coffers.
2. It would either switch to using another country’s money (look up dollarization). This is not a bit the norm that we have dollarized our economy, but this practice is in place as we speak. We are purchasing stuff in Juba in dollars simply because, most of the enterprises are owned by foreigners whose aimed is to make money and repatriate back to their home countries in form of dollars channeled by foreign banks. The dollarization is theory practice in silence. Only few knows the game but majority of ordinary citizens knew nothing.
3. Issue a new currency with a promise to be good this time around. This third point is the last resort of our government, having known the problems facing her currency. The other is in the title “Promise to do good this time” it is true that we have not managed our economy in term of diversifying it key sectors as the government was blindly relying on oil. Now the oil prices have plummeted with no quick remedy and solutions. It is a hope, the government have learned a lessons and it is my hope theypromised to;
i. Manage customs and borders revenues transparently
ii. Visa fees and aviation incomes that accrues from landing fees of big international airlines and domestic air companies.
iii. Channel PIT from International NGOs and itsaffiliates to the right useiv. Mange Tax from business communities in South Sudan either foreign or national
Is it true that people are keeping money in their houses?
This is a yes or no answer depending on how one interpreted the opinion. It is true that people are keeping money in their house because, the commercial banks have run out of cash hence, citizens fear, they may lose their cash. The other factor is the frequency of withdrawal and high level of crime have made people to keep money in their houses.
It is also a no answer on the other hand, that South Sudanese have no money. The people who have the real money are the foreigners and I have said earlier that, they do repatriate the money to their home countries in form of dollars.
Therefore, when you hear the exchange rate have reached 500 SSP per 1USD, it is possible that these foreigners have exchanged the available dollars in the market, leaving no pounds in the hands of those who had them.
You also hear the government is negotiating loans from foreign banks, simply because, there is no reserve to carter for domestic supply of hard currencies.
Is it good to change currency?
This is still a question we need answers from the authorities. We have seen when new denomination of 500 SSP was introduced,it was good because, it has reduced the volume of cash carriedby everyone but it has not reduced the prices of commodities.
It was bad because, it has encouraged stealing somehow as one can pocket a million SSP without notice, but it was not easy to pocket 1 Million SSP if 100 SSP was the highest denomination.
The answer I am referring to is whether the new currency will still be South Sudanese Pounds or they will come up with new name of currency? We hope, they will do more than the way of managing the new currency.
If the authority will maintain SSP, will there be a change in the denomination of piasters, 1, 5, 20, 25, 50? The news was that, the currency will be change but no more information has been availed.
Therefore, I am urging everyone to stay watch as the committee formed will report in a week time to tell us what they change will brings. Maintained SSP or give us new name of currency to be.
If the SSP will be maintained, then what will they do with denomination of 1 SSP as every money starts with 1 or less than one in any form? What will other denominations purchase when the purchasing power of our currency now starts at 100 SSP? It is our hope; they will do more if they change the currency.
It is true; you can use two notes of 50 SSP to make 100S SP or combination of other denominations, but had it solve the current problems of the existing denominations?
The best way is to keep watching of the impeding changes of our currency and what measures will they put in place to make us believe the changes will not be on paper but not in practice. It is our hope; they will do well this time than the old way.
Yach Atiop Yach is a humanitarian Aid worker base in South Sudan. He can be reached at atiopy@gmail.com
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