EDITORIAL: Auctioning of the dollar doesn’t benefit the market
On Monday, the government earmarked one cargo of crude to pay the salaries of civil servants. Every month the cargo will be sold in form of dollars and proceeds will come to the ministry of finance and planning.
The ministry, through the Bank of South Sudan, will pay the salaries and arrears by buying the South Sudanese pounds from the Bank of South Sudan – BOSS.
According to the statement, BOSS will use the dollar to stabilise and maintain the dollar rate in the market as a short-term solution.
However, this may only be a short-term solution to the economic crisis in the country. More ideal solution would be how to manage the flow of hard currency. The government should instead focus on how the auctioning dollars could best be utilised to stabilise the market.
According to the data published on BOSS official website, the Central Bank auctioned nearly $50 million to forex bureaus and commercial banks in July as a measure to tame the skyrocketing exchange rate.
It said the daily and weekly auctions in the last 28 days amounted to $47 million.
However, this has not had a significant impact on the skyrocketing market prices good as the US dollar continue to gain against SSP. One USD now retails at SSP650 and buys at SSP 631 as of Tuesday.
But in the black market, the rate is close to SSP 700.
This brings to the question how the forex bureaus and commercial banks often use the dollars they get from the Bank of South Sudan. The government needs to investigate whether the business community has been benefiting from the retail hard currency.
Otherwise, it is becoming a waste of time to keep on auctioning dollars to the forex bureaus and commercial banks when the business community doesn’t have access.
These institutions, after receiving the dollars from the Central Bank, often deal with a few individuals with whom they have contracted
Then, any other person who needs a dollar, including the traders, can only access it through the black market. The black dealers have now become the main suppliers of dollars because they have a direct connection to the commercial banks and forex bureaus, unlike the traders.
Thus, this makes it impossible, however much hard currency the central bank injects into the market, to have any significant impact.
Unless the government finds out how the business communities are benefiting from the retail dollars, the market prices will always remain higher.