How BoSS dollar auction could sink economy: expert

How BoSS dollar auction could sink economy: expert
The exhibit of fake dollar notes that led to the arrest of a Liberian and a South Sudanese. [Semir Bor, City Review]

An economist has warned of negative repercussions characterised by a violent upsurge in the dollar’s strength.

This is after the Bank of South Sudan (BOSS) slashed the weekly US dollar auctioned by commercial banks and forex bureaus by 50 per cent.

“The bank of South Sudan Auction Supervisory Committee (ASC) has unanimously decided to reduce the weekly foreign currency auction amounts to USD 3 million for commercial banks and USD 2 million for forex bureaus, down from USD 6 million and 4 million per week, respectively,” the statement partly read.

According to the Central Bank, the decision was based on the ‘‘successful implementation of the new monetary policy instrument known as the Term Deposit Facility (TDF) auction, which operates similarly to currency auction.”

While the Bank basked in glory, counting the gains made in fiscal policy, analysts such as Dr Abraham Maliet Mamer, the economic cluster’s advisor, believe that this step could be a mistake.

Dr. Mamer chastised the Central Bank for publicly announcing its fiscal gambit to strengthen the local currency, claiming that it could spark shrewd speculation, causing the dollar to rise.

“Do not be surprised if the dollar tomorrow [reaches] 65 (SSP65,000 per $100) or 70 (SSP70,000 per $100) as a result of that announcement,” Maliet contended.

He said the circular would have a negative impact on the market as players try to configure its economic significance.

“They should have not done that…whatever we say is what affects the market,” he complained.

 He advised the Bank of South Sudan to make such announcements internally and not share them with the public if they are really serious about protecting the local currency.

Mamer said bringing down the value of the dollar is not a walk in the park because it somewhat relies on the forces of demand and supply. Hence, if the demand is high, it will continue to be high.

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“If they clever enough to introduce the letter of credit whereas there is no cash in the hands of the people… no middlemen in the process, then it can control the rate,” he said.

“I would also advise them to use letters of credit if someone is exporting or importing, you tell the seller and buyer to do transactions through banks,” he added.   

According to the economist, the bank needs to work hard to mop out the cash in hand and champion the banking culture to save the currency.

The Central Bank increased the weekly dollar auction by $7 million, bringing the total injection to $20 million, up from $13 million in August 2022.

The approach was hailed by the former governor of the Central Bank, Moses Makur Deng, as “the most transparent way of allocating foreign currency to the market.’’

As of yesterday, a USD was bought at SSP613 and sold at SSP631, as per the data from the Central Bank.