South Sudan’s Central Bank has run out of foreign cash reserves and there is nothing the bank can do to stop the South Sudanese pound from further depreciating against the U.S. dollar, according to a senior bank official.
“It’s difficult for us now at this moment to stop this rapid exchange rate because we don’t have the [foreign] reserves for us to intervene in the market,” said Daniel Kech Pouch, a bank second deputy, at a Wednesday news conference.
Pouch acknowledged South Sudan’s black market is flush with U.S. dollars, but he said those dollars never make their way into the Central Bank.
“There are other agencies that bring money to South Sudan that does not come through the Central Bank. And there are some commercial banks that bring money, which does not also come through the Central Bank. You know, the Central bank has no system that unifies the operation of the bank [with] the flow of money, whether inside or going outside,” Pouch told VOA.
International NGOs and other agencies bring money into the country, but they sell directly to the people on the street or on the black market, according to Pouch.
South Sudan’s economy has been devastated by several factors since independence in 2011, including a 5½-year civil war, a drop in global oil prices and the COVID-19 pandemic.
Nearly all of South Sudan’s revenue comes from crude oil, but current output is only about 180,000 barrels per day, down from a peak of 250,000 bpd before the war erupted in 2013, according to government figures.
The country’s economic troubles date to January 2012, when South Sudan suspended all oil production following disputes with Sudan over processing and transit fees for exporting Juba’s crude.
When South Sudan emerged from its civil war, the government should have invested in the country’s infrastructure, said professor Marial Awou, former dean of economics at the University of Juba and vice chancellor of South Sudan’s Upper Nile University.
“It will have a severe impact on the economy of South Sudan. Even people who have things to sell, there’s no one buying. When they stay in their shops, in their selling places, when they get tired, they will pack their things and go home because no one is buying from them,” Awou told VOA’s South Sudan in Focus.
The Central Bank’s failure to obtain foreign currency will translate into more suffering for businesses and citizens, said Ahmed Morjan, an economics lecturer at the University of Juba.
“It will be very difficult for businesspeople to import goods from the outside world and hence it will have a negative impact on what we consume. On the common man, it’s going to be serious because we will not get what we want, we will not be able to buy what we want, and our consumption of almost everything will go down,” Morjan told South Sudan in Focus.
Political instability, corruption and most recently the COVID-19 pandemic explain why South Sudan’s Central Bank ran out of cash reserves, according to Morjan. He said the government should immediately ask the International Monetary Fund for a bailout as a short-term solution.
“If we want a long-term solution, the country should diversify its exports and that can only be done if there’s peace. If there’s no peace then it cannot, but the immediate way to bail out the country [is] we need a bailout from some international financial institutions,” Morjan said.
The U.S. dollar exchanged for 165 South Sudanese pounds Thursday in the Central Bank. On the black market, the dollar exchanged for 400 South Sudanese pounds.