We need long-term solution to save the SSP and consumers
Over the past year, the South Sudanese pound has lost more than half of its value against the US dollar. The exchange rate of the pound against a dollar increased from 400 in January 2022 to 680 in December 2022, despite the central bank’s attempts to control the situation.
The depreciation of the national currency leads directly to a rise in inflation rates, which is a disaster for citizens due to the high prices of commodities in the country.
One of the most important monetary policy tools that the central bank uses to preserve the value of the country’s monetary currency from declining is the money supply control tool, whose increase leads to a decrease in the price of the local currency, and its decrease leads to the opposite. If we look at our reality in South Sudan, we find that this issue faces great difficulties to implement it. The first of these difficulties is that citizens do not deposit their money in banks, as the majority of the monetary mass exists outside the banking system; which makes the central bank almost incapable of controlling the amount of the monetary mass. displayed.
In February of last year, the governor of South Sudan’s Central Bank announced a 50% reduction in the number of dollars sold at auction to commercial banks and foreign exchange offices.
The governor said that the decision was based on the successful implementation of the monetary policy tool in the deposit facility auction. Less than a month after this decision, the exchange rate rose from 600 to 630, 650, 670, and 680, respectively. This means that the attempt to reduce the amount of money sold at auction was a failure.
This also demonstrates that the issue of fixing the exchange rate and protecting the national currency from depreciation should not be viewed solely from an economic standpoint. There are political factors related to the general political stability of the country, legislation and laws, and the effectiveness of the system of governance and administration. We described it above, as an example of the weak interest of citizens in depositing their money in banks, and other actions that create problems in the economic system. Also, it is necessary to consider the possibilities and capabilities of the banks themselves, in order to perform their tasks with high efficiency to support commercial movement, investment, and other activities.
In conclusion, we need a comprehensive policy that takes into account all aspects to improve the value of our national currency and the stability of the exchange rate. This will reduce inflation, and positively affect the rest of the economic variables, in order to ensure the stability of the growing movement in the country.