By Deng Machol
Juba – The Governor of Central Bank of South Sudan Jamal Abdalla Wani has denied reports that the bank has run out of foreign exchange reserves.
Earlier this week, the second deputy governor of the Central Bank was quoted by the press for admitting that the bank had depleted its hard currency reserve.
This comes after the South Sudanese Pound depreciated further against the US dollar.
Second Deputy Governor Daniel Keck Pouch said that the fluctuation is being worsened by the various exchange rates and the lack of hard currency making it unable to tackle the depreciation of the local currency.
As a result, this has contributed to a hike in commodity prices. Kech says this has made it difficult to stop the fluctuation.
“It is difficult for us at the moment to stop this rapidly increasing exchange rate, because we do not have resources, we do not have reserves,” Kech told a news conference in Juba capital.
Kech added that this is due to the presence of the parallel exchange market. Currently, there are different exchange rates in the market including the official rate and the black-market rate.
South Sudan has three exchange rates – one from the central bank, from commercial banks, and from the unofficial market.
The rate for the pound from the central bank is 16,500 pounds per 100 US dollar, from commercial banks around 190,000 pounds and from the parallel market (back market) is 40,000 pounds.
In another press briefing held in Juba, on Friday, August 21st, the Governor of the Central Bank of South Sudan, said the bank accounts have not been depleted, adding although the bank has not been getting enough foreign currency, it still has little in the reserve.
“It’s not true that we are really down on [our] knees,” Governor Abdalla told a press on Friday in Juba.
Governor further admitted that the bank does not have enough foreign reserve as it used to.
“It is true that some of you know we haven’t been getting what we have been getting before -in terms of revenues coming from outside,” said Abdalla.
Governor Abdalla attributed their inability to inject money into the cash-strapped economy to “coronavirus (COVID 19) pandemic that brought the world to half-knees” in regarding to a socio – economic.
Yet, second deputy governor Kech stated that the situation may not improve unless South Sudan’s oil production is increased, or the price of crude oil goes up.
South Sudan gets almost all of its hard currency from oil sales, but current output, at around 180,000 barrels per day, has plummeted from a peak of 250,000 bpd before the outbreak of conflict in 2013, according to official figures.
“The only thing that can redeem this situation is for us to add this oil production, either to increase or the prices to go up,” said Kech.
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.
The analysts attributed the devaluation to the uncontrollable floating of the currency by the Central Bank.
A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.
This week, an economist at Dr. John Garang Memorial University, Professor Abraham Matoc warned that floating also makes currencies potentially more volatile or unstable in value when the market and other conditions change unpredictably.
However, South Sudan’s economy has been devastated by several factors since independence in 2011, including a country’s five year civil war, a drop in global oil prices and the COVID-19 pandemic.
The world youngest nation has also been battered by years of corruption, not only just lower oil production, is also driving the crisis in the landlocked country.