By Julius N. Uma
November 26, 2012 (JUBA) - The local South Sudanese Pounds (SSP) has maintained stability against the US dollar, despite the delays in resumption of South Sudan’s oil production, shut down early this year.
- Kornelio Koriom, South Sudan Central Bank Governor addresses the media in Juba, September 11, 2012 (ST)
The local currency, according to a survey carried out by Sudan Tribune, is currently trading at 4.5 to the dollar compared to 5.5 two months ago.
In September, the local currency steadily gained value, after South Sudan Central Bank introduced certain strict measures as an intervention to a seemingly failed economy.
The strict measures, the Central Bank Governor told Sudan Tribune, involved inflation targeting as well as putting the dollar under tight control.
“We permitted the SSP to flexibly trade with local currencies of neighboring countries, created a credit line with corresponding banks and introduced a consortium of local and foreign banks to buy produce at reasonable prices,” said Kornelio Koriom.
“The Central Bank also had to place the foreign currency [Dollar] under strict control,” he added.
The steady gain in SSP, analysts say, followed the landmark agreement reach between Sudan and South Sudan on 27 September in Addis Ababa, Ethiopia. Several agreements were reached on key outstanding issues, including oil.
“The economic situation was worst before the 27 September deal Inflation was at highest, fuel was scarce and in short supply and the dollar was hard to obtain. But since then, the situation has been stable,” said John Madut, who owns a forex bureau in Juba, the South Sudan capital.
Oil previously accounted for 98 percent of South Sudan’s annual budget. Following its shutdown in January this year, however, the new nation had to turn to non-oil revenues to raise money for its economy, which heavily relies on imported food from its neighbors.
Hopes for resumption of oil flow hit a deadlock last week, after South Sudan announced it was postponing the plan, until it reached a meaningful agreement with Khartoum over security issues.
South Sudan President, Salva Kiir, said at Monday’s opening of the governors’ forum that negotiations are underway between the two countries to find ways of resolving the current deadlock on oil production.
“We are now negotiating with our neighbor. Last week, we sent a letter to Khartoum communication our readiness to discuss the Joint Political and Security Mechanism to resolve all these issue,” Kiir told the forum.
Kiir, however, said resources from oil would be directed towards service delivery, with specific focus on food security, through increased agricultural productivity.
In South Sudan, only 4% of the country’s arable land is effectively utilized for agricultural activities, yet the sector accounts for nearly 80 percent of economies of rural households.
DECLINE IN INFLATION
Meanwhile, South Sudan Consumer Price Index (CPI) decreased by 6.8% from September 2012 to October 2012, with decrease mainly driven by a decline in food prices, the national statistics bureau said.
Last month, annual inflation in Juba, according to the National Bureau of Statistics, was 27.9%, 35.5% in Malakal (Upper Nile) and 0.2% Wau (Western Bahr el Ghazal), compared to 21.5% for South Sudan.