By Deng Machol
Juba – South Sudan’s central bank has injected 5 million U.S. dollars into the local market in attempt to stabilize the local pound (SSP) and the country’s economy.
The money will be released every week to normalize the foreign exchange rate in the East Africa’s youngest nation.
In a press conference on Tuesday, Dier Tong Ngor, Governor of the Bank of South Sudan (BOSS), said they have allocated 3 million dollars to commercial banks and 2 million dollars to forex bureaus in order to stabilize the foreign exchange rate.
“This is the new way we will start to supply the market. We will be supplying an amount of $5 million every week – $ 2 million to forex bureau and $3 million to commercial banks,” Tong told journalists in Juba.
The money were auctioned to 22 commercial banks.
According to the bank’s governor, the move will prevent further depreciation of the South Sudanese pound against the US dollar. It would also have a positive effect on the prices of food and other basic commodities.
“So all in all, we will be supplying an amount of 5 million dollars every week,” said Tong. The allocations are aimed at cushioning the weak pound against the dollar,” said Tong.
“We want to control the excess liquidity in the hands of the public because that is the main thing that affects us and it affects inflation. We feel that the pressure on the pounds is because of excess liquidity in pounds and therefore when we are doing auctions, we are trying to mop up that excess liquidity,” said Tong.
The Governor further said that they will continue with the auctioning of hard currency until the foreign exchange market is developed.
“We will be in this for a long haul, we will do this auction until we develop the foreign exchange market so that the Bank of South Sudan can withdraw from the market-making role and we leave it to banks,” said Tong.
Since December 2020, the Bank of South Sudan says it has auctioned over $30 million to the market.
The bank’s governor insists this move has resulted in the stability of the pounds against the dollar.
1 U.S dollar sells at 195 South Sudanese Pounds as indicated on the Central Bank’s website but in the parallel market, 1 dollar sells at 620 pounds.
Governor Tong believes auctioning of hard currency will counter the black market by strengthening the pound.
“I think it has made an impact because it has at least stabilized the parallel market rated for a number of months now,” said governor.
However, an economist and observers advised the government to stop floating the rate of the currency arguing that it gives room for more speculations in the country. South Sudan’s economy is struggling amid hyperinflation caused by the more than six years of the county’s conflict since December 2013.
The conflict-affected oil production in the northern oil fields causing a reduction in oil revenue earnings. In addition, COVID-19 and the floods has also impacted the economy affecting both oil and non-oil revenue.