By Omuno Mogga Otto
Few days ago, the Head of State decided to remove the Governor of the Central Bank of South Sudan (BSS) Dr. Othom Rago Ajak and replaced him with his Deputy, Dier Tong Ngor. The move came after the fluctuating exchange rate of one United States (US) dollar against the local South Sudanese Pounds (SSP) has reached a figure of 330 SSP a few weeks ago.
The economic crisis in this country started right from the time the former Governor of the Central Bank Kornelio Koryom in collaboration with the Ministry of Finance and National Economy lifted the fixed exchange rate in December 2015 and replaced it with a floating one.
Another reason that has led to the drop of economic activities in the country is the ongoing war in the country and the decrease in both the production of the crude oil and its price of sales per barrel in the international market.
If the policy of devaluing the local currency against the hard currency is extended up to the end of the year, the economic crisis will definitely continue to be alarming and the suffering of the common citizens in the country will worsen. The more the floating exchange rate remains in the economic system the more the majority will continue to suffer due to lack of food, medicine and other essential commodities needed for daily domestic consumption.
In the coming months, the economy of the country will face more challenges if the political situation in the country remains without a hope for true peace. The performance of agricultural sector has declined because of war. The rate of investment in the country has dropped. Many big investment companies that were previously operating very well have either reduced their activities or closed down simply because the war and insecurity has been the main obstacle blocking the opportunities for development of the country’s economy which is characterized by ethnic divisions in the country.
The new administrative changes may not help if the floating exchange rate in the Central BSS remains the same, without a bold and quick solution. The government should urgently remove the idea of keeping the floating exchange rate and create a means through borrowing to announce a fixed exchange rate sooner than later. The public is not benefiting from the floating exchange rate. Instead it is forcing the majority to survive below 3 dollars per a day.
The policy of depreciating the local currency is the main factor continuously contributing to what is called high inflation in the market coupled with the ongoing war in the country.
The danger is that such policies may lead to a total economic collapse especially if the political temperature in the country does not change positively and does not become friendly to all the sons and daughters of South Sudan who are aiming for peace and stability.