South Sudan Economy on Unresolvable Leaks: Change of Currency, the Tactical Wish Hunt Decision
By Madit Them Arop, Juba, South Sudan
Thursday, October 15, 2020 (PW) — South Sudan authority has decided to change the color of its legal currency to safe the crippled economy. Reasons were many but one tangible fact is that the money don’t make it back to the central or commercial banks once it’s withdrawn. Through the committee report, the money is kept in the houses leaving circulation minimally low.
Over 80% of cash is needed to be injected into the markets to boost the economy, according to the financial sector which later covered by Juba Monitor, the English daily newspaper on its editorial page on 12th Oct 2020 Vol. 9, Issue #2084. The committee recommended that the change of currency issuitable solution to the rampant economy.
The Council of Ministers endorsed the idea, which leaves focus on when to implement this standby decision while the why part has already been addressed.
South Sudan floated its economy in 2015 with assurance that “it will do good in the long run!” With this new proposal, it seems an open economy didn’t only fail to work but it axed into the economy breathing veins. The matter wasn’t studied well or the blind was pulling the deaf!
How will changing of currency fix the failed economy?
It’s like copy and paste the same problem and expect the different results. Why did the economy fail? What caused the failure? What is being tried to solve? Why, what, and how, the fundamental questions are associated with the cause that led to failure. In this case, it was tragic idea to float the economy in the first place knowing that the country relies on the imports, this gave exploitation an upper hand over the importable goods.
Dated back, however, the benchmark interest shows the floated economy was meant to freely allow the flow of goods and services in the borderless markets where buyers and sellers interacts without limit as demand and supply forces adjusts on an automatic zone. That was the expectation. As supply slowed demand overridden the path.
That chain kept on uncontrolled and uncorrected as the country waits for the imports rather than creating means of production for exports in order to adjust the demand storm. On the current focus, there is a need to know the button needed for fixing.
What is being tried to solve?
According to the Crisis Management Committee Report, it’s hidden of money in the houses by the population, which, they believed, such money does not go back to the bank. To discourage the practice, the new currency must be introduced and demand the old notes back to the bank. By keeping bulky notes uncirculated it creates shortages in the market with less cash in circulation, the report sounded an alarm of urgency.
Imaginably, the new way will require less cash out to individuals or companies in order to have enough cashin the bank. On the other hand, the issue of less cash in circulation is seen to be unresolved, and having enough cash in the bank doesn’t guarantee the constant flow of the cash in the long run; controlling or balancing what is in the bank with the ones in the market is unbridgeable challenge to reckon with. The train will still moves in the same speed.
The concept also suggests that the money in the bank and that out into the market to circulate freely after changed of currency. This checks and balances can under no circumstances control movement of cash, and possibly, cash will definitely makes their way back into the hidden boxes in the houses. As a result, the national economy screen will reclaim its previous status.
In short, nothing will improve. This means keeping new printed currencies in the bank or putting more in circulation and expect the practice to continue is unpredictable. And as such, slipping back into the odor page is promising to happen since the same market with the same forces with the same system will continue to have similar manipulative control.
How will changing of currency fix the failed economy?
Bad beginnings may always have unpleasant results. The committee seems to have avoided the fundamental question as to why the economy failed, and instead came up with the shortcut approach to smear up the drip. To solve the leak for instance, you have to locate it and identify the cause.
The report by the CMC have enlightened the public on the leak (problem) and proposed to move the same roof that leaks to have a different foundation. The unstudied route taken in 2015 when the economy was madly kicked into an open economy carried storms which held on to this day. This similar mistake with yieldable shocks is being repeated.
When the young nation seceded in 2011 from Sudan, new currency was introduced to substantiate the new nation from the old Sudan. On an elaborated stretch, the new currency didn’t do any good due to deprived management system. Other explosive factors such as 2012 abrupt shut down of oil, 2013 power struggle war, 2015 devaluation of pounds, 2016 dogs’ fight war, and then 2019-2020 COVID diarrhea tempest, all have rocked the direction of the economy.
Per these facts, change of currency would be a waste of resources and time; deserted currency would be victim of bad assumptions. Such assumption is a scapegoat which will never set the system on healthy junction; authority to do needful within the practice rather than merely discard the currency for unbearable solution.
Changing of currency will deteriorate the performance of economy and if the steady force doesn’t change, another decision would be required to undo the previous. To normalize based on the situation, producecoins, 1, 2, 3, 4 notes to control jump in prices by coin and note differences in the speculated markets.
Conclusion
Reverse the floated economy and introduce the new system that fix trust between forces of the market and that of the system to seal the leaks which drains cash in the bank. Trust is eroded and it’s the reason the public keeps money at home so that they used it whenever needed.
This is the main leakage and it’s the missing link the government should have addressed in order to win over the lost trust in the impoverished management. Whenever cash is needed by the bankers or investors, for instance, it’s figures only with no physical cash available in the bank are seen.
The government shouldmake cash available by toping up the little cash in circulation, lift the limit given by the bank to owners due to scarcity of cash.
Also, the government should make hard currency available in the bank, regulate the markets, control the black markets, strengthen the system, and empower commercial banks with enough cash sell out in fixed rate to keep the black markets dehorned and toothless.
Whenever black market goes wild, inject more cash to have relatable measures correlated with system to help cancel out lack of hard currency which rises demand on scarce goods. The rest will adjust by itself.
But taking the CMC report as viable rescuing tool is not only going to be a tactical wish hunt decision, it will serves an unresolvable leaks associated with 2015 devaluation of pounds which did not bear any fruitful result.
Just an idea!
The author is a concerned South Sudanese citizen who is reachable via his email address: aropmadit@gmail.com
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