You may have noticed that the South Sudanese Pound sharply gained value against US dollars days after the Central Bank of South Sudan initiated a weekly auctioning of the foreign currency to both commercial banks and forex bureaus.

On April 13, BOSS allocated US$3 million to 22 commercial banks and US$2 million to forex bureaus in a move governor Dier Tong Ngor described as a step to stabilise the ‘foreign exchange rate’ and save the local currency.

“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,” the governor said, as he added that the auctioning would be on weekly basis.

The fiscal policy move worked. By the time of penning this report, a dollar traded at SSP450 or less in the black market, contrary to a week before which was SSP630 per USD.

A forex dealer who spoke to City Review is confident that the appreciation of pound’s value will be expected to improve further if the Central Bank continues to inject more dollars into the market.

“They sell $100 for SSP45,000 now. This evening it will even drop to SSP40,000 I’m sure,” James Kiir told The City Review on phone on Tuesday.

But commodity prices in the market remained at the peak despite the South Sudanese Pounds (SSP) gaining strength against the United States Dollars (USD).

This implies that the purchasing power of citizens remained stripped with prices of basic commodities still shooting through the roof. Consumers still have to spend the exact equivalent of their savings on goods like the weeks prior.

Prices remain high, but why?

In an instance, if a consumer used to pay SSP6, 300, an equivalent 10 US dollars a week ago, the same per son would spend the same amount although it now equals about 7 USD.

Last month for example, a food basket containing a kilogram of meat, sugar, onion, beans and a half kilogram of irish potatoes, a half litre of cooking oil, and potion of greens could cost SSP 6,300-an equivalent of US$ 10 US. But the same items still cost the same amount in SSP, albeit the amount translates to US$ 7.

According to an economist, the US dollars’ auctioning will only benefit the speculators whom he said control the market and the move won’t have any impact on market prices.

“The prices of goods will never come down. Still this money will go in to the hands of speculators who control the market and this will not have an impact on the prices on the market,” said Dr. Abraham Matoc Dhal who is also the Vice Chancellor at Dr. John Garang University.

According to the South Sudan National Bureau of Statistic, though the inflation in the country has dropped to 46.8 per cent in January 2021, from 58 per cent in 2020; there was a surge in Consumer Price Index which rose from 15977.66 in January to 16747.46 in February 2021.

But Dr. Matoc added, “When the prices go up, they will not come down because the market has been controlled by speculators and these speculators buy the dollars and they hold it, it doesn’t circulate. It is a matter of making the dollar as a commodity rather than a medium of exchange as it is expected to be. In economic term, money is useful when it is invested or when it is circulated.”

He said the policy of South Sudan’s economy should be revisited to ensure markets are regulated to protect both government and common people against the vice of black market dealers who treat US dollar as commodity other than a medium of exchange.

“In developing countries like ours, government must intervene to regulate the exchange through the central bank, to regulate the prices and even to fix the exchange rate so that it is uniform. But if it is free, since we are a free market economy, things can go out of hand,” Matoc explained.

“Some other people do it to fight the government, to weaken the government and to weaken the economy. So the government must have a hand on how to control the economy,” Dr. Matoc said.