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S. Sudan awaits presidential response to devalue currency

October 5, 2014 (JUBA) – A senior South Sudanese central bank official said on Sunday that the institution awaits a response from President Salva Kiir to devalue the country’s currency so as to regulate and manage differences between official exchange rates and those on the black market.

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Kornelio Koriom, South Sudan’s Central Bank Governor addresses journalists in Juba, 11 September 2012 (ST)

“What happened is that the governor after he was summoned by the parliament, decided in consultation with the minister of finance to seek the way out, which is ameliorate the effect the differences between the official rate and the black markets had cost the economy and people of the country", he told Sudan Tribune.

The official, who preferred anonymity, attributed hard currency scarcity to plans by government to meet costs of its excessive borrowing from different institutions.

"The current conflict is causing the country very much in many aspects. When the government borrows money from lenders, it gets these loans with normally unbearable conditions and exorbitant charges. Some of these lenders demand repayment in dollars even in the cases of local loans,” revealed the senior bank official.

He cited, as an example, the South Sudanese government which largely depends on oil exports as its only source of hard currencies.

“When it is sold and bought and the hard currency is acquired, the lenders demand payment in foreign money,” he stressed.

According to the US-trained official, the central bank devalued its currency due to inadequacy of the local currency in its treasury.

“Because of the difference in the official exchange rate and the black markets compounded by the need to meet the deficiency in the budget allocated to the ministry of defence and the security, the government decided to sell every dollar to the central bank at the rate of 4.50, so that it covers this difference”, he explained.

He further alleges that the ministry of defence has in the first quarter of financial year, used more than 40% of its budget, suggesting that the overall annual budget will eventually be exhausted in less than four months of the fiscal year since the budget was passed by the national legislative assembly less than three months ago.

On 19 September, the central bank governor, Kornelio Koriom wrote to the president requesting permission to devalue the local currency against the US dollar, to meet the country’s economic difficulties.

Koriom was on 18 September summoned by MPs to explain the discrepancies in exchange rate in the country. Also summoned along with the governor was finance minister, Aggrey Tisa Sabuni.

In his response, Koriom attributed the difference to issues beyond his control and pleaded with lawmakers to help him get parliamentary approval to raise the official exchange rate from 2.96 South Sudanese Pounds per US dollar to 4.50 so as to encounter the mushrooming black market rates, currently at between SSP46-48.

The Bank governor, in his parliamentary address, told legislators that the negative effects of maintaining official rate besides the black market “were immense” and that the bank was “very concerned about the developing economic and monetary situation”.

“There are challenges before us in this country. I tell you sincerely that there are enormous challenges facing us as leaders to make decisions and take actions. There are now challenges to make decision to unify these efforts, including plans to unify rates. There should be increased salaries for employees and the austerity measures should be implemented first. This is not the work of central Bank,” Koriom told MPs.

“Money given to foreign exchange bureaus by Bank of South Sudan often finds its way to the black market”, he said upon being pressed.

As a measure, the governor said, more than 60 security agents have been deployed to commercial banks and other financial establishment obtaining money from the central bank allegedly to control movement of hard currency.

“In our own efforts and desire to control this situation with other relevant institutions, we deployed over 60 security personnel to these institutions. We gave them strict instructions to monitor and control the flow of the hard currency into the markets. We clearly explained to them the category of people who should get the hard currency,” he remarked.

He however said the bank only addresses matters related to those seeking medical treatment abroad or cases where someone demand money for school fees payment.