35 PERCENT DEVALUATION OF CURRENCY HITS MARKETS HARD
(Posted 14th November 2013)
Following the devaluation of the currency in Khartoum Sudan the day before yesterday has the Central Bank of South Sudan equally dropped the value of the South Sudan Pound by 35 percent, delivering an inflation boost and economic shock to the economy of this emerging nation. Like in the north where the devaluation was about 23 percent, in the south too has the black market of US Dollar versus the Pound immediately escalated further down, with a source in Juba quoting that the rate now stood at between 5 and 6 Pounds to the greenback, due to stabilize after the initial volatility following the devaluation has worn off.
Several members of parliament were also quoted to have demanded that the Central Bank in Juba reverse this decision as the cost of all imports will now correspondingly rise by 35 percent too, which is likely to affect the trade with Uganda and Kenya in the short run considerably, as it will affect travel as ticket prices too will – at least in local currency – rise by more than a third.
Were any significant numbers of tourists coming to South Sudan, which they are not, they could in part at least benefit from the devaluation as they now get 4.5 South Sudan Pound for one of their Dollars as compared to 3.15 Sudanese Pounds prior to the announcement.
South Sudan has undergone an austerity period following the decision last year to stop exporting oil through the north Sudan controlled pipeline to Port Sudan, as allegations flew high and low over the unashamed wholesome theft of oil by the Khartoum regime and outrageous oil transit fees. When eventually oil production and sale of crude resumed the regime in the north threatened to halt all exports over their contention that the government in Juba was extending support to rebels in key border states like Blue Nile and South Kordofan, to compel Juba into submission and to renounce any such support, something the government in the South continues to deny.
The devaluation is therefore just the latest blow to the struggling economy of South Sudan and will lend critics of a fast tracked ascension of South Sudan to the East African Community more ammunition, as a free currency regime is a mandatory requirement of harmonization before any country can join the trade bloc made up of Uganda, Kenya, Tanzania, Rwanda and Burundi. Watch this space as more information from South Sudan becomes available.
This action was reversed the following day after the parliament of South Sudan issued a directive to the Central Bank of South Sudan to rescind their decision and restore the previous official exchange rates, however the black market rate has remained at a level reflecting the downsized value of the South Sudan Pound.