By Deng Machol
Juba – The Bank of South Sudan on Tuesday launched and introduced 1,000 pound banknote with a larger denomination in attempt to mitigate runaway inflation and a perpetual depreciation of the currency which has eroded the face value currency in the recent past.
In aftermath of the political conflict in 2013 to date the East African’s youngest nation have been characterized by high inflation, and the perpetual depreciation of the currency has eroded the face value of the country’s banknotes.
The South Sudanese Pound was introduced on 18 July 2011, replacing the Sudanese Pound after the National Legislative Assembly approved it before the independence day.
In 2016, the Bank of South Sudan issued a 20 South Sudanese pound banknote to replace the 25 South Sudanese pound banknote.
It later introduced into the market coins in form of 10 piaster, 20 piasters & 50 piasters, 1 pound, 2 pounds. However, the coins are rarely used for transactions nation-wide.
The introduction of the SSP 1,000 came after successful introduction of the SSP 500 banknote in 2018 which the bank said it showed to us a significant increase in the demand for higher denomination of banknote.
There are seven different denominations (1, 5, 10, 20, 50, 100 and 500 pounds).
With the crunch in the economy, the 1 pound value can no longer purchase any commodity in the market.
In a press conference in Juba Tuesday, Central Bank Governor Dier Tong Ngor said a new Pound bill of 1000 will start to circulate to the market as a way to make transactions more efficient.
“I is in view of the need to make our currency more convenient to use that we are today introducing the SSP 1000 banknote into circulation to complement the existing banknotes, to ensure customer convenience, and bring about efficiency in the printing of currency to generate savings for the country,” said Tong. “This new higher value denomination will only partially restore the dollar value of SSP 10 in 2011, but high enough to significantly reduce the deadweight loss and high transaction cost in making high-value purchases in a cash-based economy like South Sudan.”
He explains that the bank carries out a review of the denomination mix from time to time to ensure that the available denomination mixes are aligned with macroeconomic conditions and demand.
However, International best practices require central banks to review their currency regimes at intervals of between five (5) and ten (10) years to ensure that demand for banknotes is well aligned with economic activity, address weaknesses and challenges associated with the management of notes and coins in circulation, assess the non-usage of a particular series to ensure efficiency in printing, and address technological innovations that impact the usage of currencies.
The central bank argues that the introduction of the new higher denomination is meant to complement the existing banknotes, to ensure customer convenience, and bring about efficiency in the printing of currency to generate savings for the country.
“The introduction of these high-value notes should not be misinterpreted to mean a shift away from the Central Banks policy of promoting the use of electronic modes of payments. While vigorously pursuing financial inclusion by accelerating the migration to e-payment platforms, we are also mindful of the relevance of cash in our day-to-day dealings. Undeniably, cash still remains ‘King’ and a preferred medium of payment by the large informal sector in the country. This is why we continue to pay attention to enhancements in the structure, security features, and management of cash within the economy,” said Tong.
He further states that the introduction of SSP 1000 banknote will ease its portability, adding that the higher denomination will reduce high transaction costs, more efficiency in high-value transactions in cash, and reduce printing and currency management costs among others.
“The introduction of SSP 1000 banknote will not cause inflation – saying it will actually make it more convenient when engaging in high transaction volumes,” Tong echoed.
However, the people and economists are skeptical about central bank decision, argued that a biggest banknote denomination cannot withstand shocks to the market and that it will automatically lead to hyperinflation.
“There will be a lot of money in circulation chasing few goods which leads to a situation of inflation – it is very dangerous for the country’s economy,” anonymous said.
Governor said the new notes will complement the small ones such as SSP 5, 10, and 20.
“Our aim is to align the structure of the banknote with the needs of the people who use it for their daily transactions. We need banknotes that are convenient, high quality, secure, and cost-effective,” said Tong. Adding printing small notes costs us a lot of small currency every year. This one will reduce it significantly. The other justification of course is the storage, [which] has been a challenge to us because we have this small denominations and we need massive space in order to store them. “
The principal features of the new 1000 bank note include feature for the partially sighted, watermark, color changing holographic security strip, disappearing value, gold colored iridescent bank, Nile of values numerals and a water mark portrait of Dr. John Garang de Mabior with a dominant color of maroon.
Last year, Central bank announced that the monetary institution was increasing its interest rate to 15 percent, the cash ratio to 20 percent, and also introduced treasury bills to manage liquidity as some of the measures taken to address runaway inflation in the country, blighted by six year conflict and violence.
The new 1000 bank note is expected to be in circulation soon.