Will fixing exchange rate solve economic hurdles?
South Sudanese have suffered from inflation and high exchange rates that have rendered some families incapable of fending for themselves.
There are others who pay school fees for their children in Kenya and Uganda but, due to the high cost of living in the country, cannot now cater for the family’s needs and pay school fees for their children.
The ministry of finance and the Bank of South Sudan have tried and exhausted almost all monetary policies since the time the currency exchange rate was fixed. The dollar reserves were drained and wasted, leaving the economy naked.
One of the risky decisions was changing from a stable fixed exchange rate in a small and volatile economy to a floating one.
When South Sudan attained independence, it had all the privileges it deserved from the world. It was later, after several reports of misuse of funds, that love turned into hate between lovebirds.
One of the biggest problems that boomerang on us is ignoring touching issues and, after we learn from them, trying to fix them when it is too late.
Yesterday and today were not supposed to be the right days for borrowing money to save the economy. We missed the point at the time when the government had no more dollar reserves. This was the exact time the government would have borrowed millions or billions of dollars to stabilise the fixed exchange rate rather than floating the rate.
What do I mean? A floating exchange rate cannot really work in a country that solely depends on imports. We import even goods that grow on their own in our country, thinking what comes from a neighbouring country is better for us. As such, traders have to factor in their buying price, the taxes at the border, and transportation costs. Whatever we buy will automatically be expensive.
A good example of local goods are mangoes. Mangoes are plentiful because they grow naturally, but we still buy mangoes imported from Kenya or Uganda. We also import milk, yet our country produces enough milk as we lead in the number of livestock in East Africa.
We are gifted with a natural oil called “lulu oil,” but we still import oil from neighbouring countries. Rice grows naturally at the Sudd, let alone fish that is sometimes brought to us in the comfort of our houses by floods.
To make matters worse, a few South Sudanese traders who decide to sell mangoes, milk, lulu oil, fish, et’ cetera, still set prices high, wanting to earn more from what they locally produce.
A solution to the issues facing our economy will not come in the night to find us waking up in the morning and finding everything fine. We must do it ourselves. We cannot blame the war in Ukraine, COVID-19, or any other excuse for having tempered our economy.
First of all, the war in Sudan and Ukraine does not stagnate our mangoes, prevent our police or army from protecting civilians, or rather prevent the government from starting plantation farming.
Secondly, COVID-19 had not infected our trackers, cultivation tools, or rains. But if you talk of floods, I shall still say that there was no flood in Juba and other areas alike. The water we have does not mean anything to us.
The wild animals, birds, and aquatic life our country is endowed with do not add to our tangible revenue. The taxes collected from businesses do not even surface anywhere so that the money can be used to stabilise the economy.
So, where is the problem coming from? Someone must be playing with people’s psychologies for self-benefit, and the entire country cannot possibly suffer because of only one person.
However much a minister or a governor of the Central Bank comes and goes, I still believe that those leaders are not the problem. There must be individuals sucking our oil money somewhere in their hiding places.
In my understanding, the problem of South Sudan’s economy cannot be solved by any economic policy. Economic policies will be exhausted, and the currency exchange rate and inflation will continue to rise. Even if you bring Jesus today to handle finances and apply the economics of heaven, he might fail, but he might know the person behind all this because He is divine.
The sad truth is that all the commercial banks and forex bureaux do not grant individual dollars, whether you have a bank account with them or not. Sometimes, they have an interest in the quantity. Again, they sometimes have a person attached to them in the black market who does the currency exchange for them.
Last year, I went to one of the commercial banks in Juba town and asked whether they gave dollars to individuals. I was directed to get dollars from a market dealer who sat outside the bank, and he charged me highly.
Recently, I visited a number of commercial banks, asking whether it was possible to get dollars from them, but the excuse was that I must have a bank account with them first. Others directed me to go to the black market, saying, “You cannot get it here; go to the black market.”
Many market dealers have said in several articles published by newspapers in Juba that some black-market dealers are attached to commercial banks and forex bureaux.
I wondered why the ministry of finance and the Bank of South Sudan do not regulate the exchange rate effectively or rather set commodity prices.
It might be true that the dollars that are auctioned to commercial banks and forex bureaux cannot be accessed by citizens of those banks. Instead, the dollars find their way to the black market. However much the Central Bank tries to use this mechanism of auctions to stabilise the economy, that is a dream that will not come true.
The dollar will continue to be in the hands of individuals, and our economy will continue to go down on its knees beyond recovery.
According to Investopedia, “The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.”
The GitHub page also states, “Exchange rates are determined just like other prices: by the interaction of supply and demand. At the equilibrium exchange rate, supply and demand for a currency are equal. Shifts in the supply or demand for a currency lead to changes in the exchange rate.”
We might be thinking that we are applying the law of demand and supply to fix the economy. I don’t have a problem with someone trying to defend his papers, but let us see an improvement in the currency exchange market and market prices dropping. This is when we will start admiring your papers and ideas. A drowning man will only see a straw to clutch to save him. Likewise, a starving man will only believe in tangible economic solutions.
However much the law of demand and supply works in any economy, this law might not work out in South Sudan because we are silent snatchers at the comforts of our houses. We aspire to get rich the wrong way.
What is the solution?
The only solution that is left currently is for the president to issue a decree fixing the exchange rate at a specific amount, for example, 2.75 SSP per dollar. Then anyone who tampers with the presidential order will be dealt with by the law and its implementing institutions.