19 March 2016

South Sudan: Nation in Major Economic Meltdown

Photo: Samer Muscati/Human Rights Watch
A food vendor in the UNMISS camp near Bentiu (file photo).

South Sudan has been experiencing a severe economic meltdown since it devalued its currency last December, in an effort to stabilise the prices of food commodities.

Joice Yiki, who sells beans at Juba's Konyo Konyo main market, is seriously considering closing down her business due to the high dollar exchange rates. She said that mobilising hard currency for imports from Uganda remains a major challenge.

"If I exhaust my current stock, I will go home and rest; I have no choice since I purchase the beans from Kampala," she said.

Most of the goods sold in the South Sudan capital are imported from neighbouring Uganda, Kenya and Sudan. A 12kg-bag of beans currently costs SSP450 compared with SSP70 before the local currency took a beating. A 50kg bag of flour now goes for SSP800 compared with SSP75 previously.

The official exchange rate then stood at $100 for SSP295, at the Central Bank and $100 for SSP360 at commercial banks. The blackmarket sold $100 for SSP400. After the devaluation things changed drastically.

"Imagine! You know what the rate of the dollar against the pound is today? It is hurtful to buy $100 for SSP3,200 at the Central Bank and SSP3,600-SSP4,000 on the blackmarket," she said.

Catholic Bishop Santo Laku Pio said the problem is "the cost of living caused by this erratic exchange rate."

"Everything is going up daily. If the dollar goes up today, you are forced to raise your prices and the cost of food goes up," he said.

According to a 2014 United Nations Development Programme report, the socio-political and economic situation in South Sudan took a severe knock with the eruption of violence in December 2013.

The report said the turn of events had reversed the significant gains realised in peace and security since the Independence in 2011. The economy deteriorated with spiralling inflation, commodity price swings, exchange rate volatility and increasing domestic debt.

Foreign exchange reserves were depleted and the budget ran large deficits owing to heavy spending on the security sector.

According to the report, the conflict in South Sudan had caused significant declines in oil revenues, limiting the budget allocation to human development initiatives.

Last week, the Community Empowerment for Progress Organisation (CEPO) executive director, Edmund Yakani, said the decision to devalue the South Sudanese pound was necessary but the timing was all wrong.

"This idea has been tried in other parts of the world, but with limited success. The manner in which we executed our devaluation was not well thought out," he said. Last month, the South Sudan Central Bank auctioned more than $60 million to commercial banks in a bid to stabilise the pound.

However, prices of commodities have continued to skyrocket, putting pressure on the National Assembly's Economy and Finance Committee to conduct investigations into how the money was used.

The Central Bank announced it would question commercial banks on how they used the dollars they had purchased in the recent auctions.

President Salva Kiir recently stated that massive investment in agriculture offered a solution, since it would diversify the economy and minimise dependence on oil. The President directed the 28 newly appointed state governors to cultivate at least 100,000 acres of land each.

However, the persistent violence and political crisis, remained a significant challenge for the country since December 2013.

Thousands of people have fled their homes and farms, including from Western Equatoria, which in 2010 was the biggest supplier of food to the other states of South Sudan. -Africa Review

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