Academic and lecturer at the University of Juba, Prof. Abraham Kuol Nyuon, weighs in on the impact of the resumption of oil on the economy, value of local currency and inflation

By Chuol Chanyong

University of Juba lecturer, Prof Abraham Kuol Nyuon, has now expressed cautious optimism with the resumption of oil in South Sudan, saying the outcome may not cushion the economy as desired if the proceeds of oil are not properly used.

“The resumption of oil brings hope. But it may be a somewhat negative hope, if the proceeds are not used in tangible, impactful sectors,” adding: 

“Inflation is controlled through monetary and fiscal policies, which means that the resumption of oil will not cause immediate impact, but raise somewhat hope that inflation will not continue.”

According to the professor, to promptly address the country’s economic situation, the Ministry of Finance should jump into the opportunity and use the projected oil revenue to obtain credits from international bodies or creditors, obtain more currency and strengthen the economy.

“This is what is required so that we can restore the value of the pound and adhere to the country’s monetary policy.”

Prof. Nyuon said inflation comes as a result of shortage of hard currency reserves at the Central Bank.

He also stressed that the value of the pound cannot be restored, except by using all possible methods, including exploiting all our means of production to support the incoming flow of currency.

This may happen through consistent export of oil, which will attract hard currency and thereby strengthen the local currency, and ultimately, the economy.

For Atem Simon, a renowned journalist and political commentator, recovering the value of the local currency calls for reviewing the country’s economic and financial policies, and treating the temporary halt in oil production (from 2014 to date) as a lesson to embark on forward-thinking, disruptive and impactful economic decisions.

According to the journalist, decline in the economy was not largely to blame on cessation of oil exports, but on the financial policies, planning and service delivery. South Sudan, he says, has immense resources. And there was need to unlock the potential of these resources through high-impact projects, clear development policies and proper management of public funds.

“If the government commits to paying salary arrears, some kind of stability will occur in the market. This needs to be followed up with a clear financial policy to limit speculation in the markets. To achieve this, we need a complete government-driven, regulatory mechanism,” he says.

Regarding the guarantees for the continuity of the flow of oil, that the process would not be affected by the ongoing conflict in Sudan, as happened before, Atem said Sudan did not provide clear guarantees regarding the continuity of pumping oil. And the high rapidly rising conflict in areas such as Al-Jazira and Khartoum affected oil transportation lines, as the pipelines pass through these areas witnessing armed conflict.

“This conflict is not limited to ground military operations, but also includes air strikes and marches, and oil pipelines may be targeted with the aim of inciting the state of South Sudan to join the conflict,” he said.