11/02/2024
The depreciation of the South Sudanese Pound (SSP) against the US Dollar from 3.5 SSP to 1,310 SSP in the black market over a decade (2013 - 2024) reflects significant economic challenges within South Sudan. Some contributing factors include:
Decline in exports: South Sudan's economy relies heavily on crude oil exports. Any decline in crude oil production, prices, or disruptions to oil infrastructures reduces export earnings, leading to a shortage of foreign exchange reserves and putting pressure on the currency.
A decline in exports leads to a deterioration in the negative Balance of Payment (BoP), indicating that the country is experiencing greater outflows of foreign currency than inflows.
Promoting diversification away from oil dependency by investing in other sectors such as agriculture, manufacturing, and services can reduce the economy's vulnerability to fluctuations in crude oil prices and improve the BoP.
Political Instability: The power struggle in South Sudan has escalated into civil war resulting in widespread violence, displacement of civilians, and economic disruption. Ongoing conflict and insecurity deter foreign investment, disrupt economic activities, and weaken the country's economic prospects, including the value of its currency.
Efforts to achieve lasting peace and political stability are crucial. A stable political environment can restore investors' confidence, encourage foreign investment, and support economic growth, including appreciation of the SSP.
Monetary Policy Approach: Strengthening institutions responsible for economic management, including central banks and regulatory bodies can enhance the ability to maintain monetary stability and implement effective policies. South Sudan's central bank can implement monetary tightening measures, such as reducing the money supply or increasing reserve requirements for commercial banks. By reducing the availability of SSP in the economy, monetary tightening measures can help support the currency's value. Nevertheless, effective coordination between fiscal and monetary authorities can enhance credibility and support the currency’s stability. http://erepository.uonbi.ac.ke/bitstream/handle/11295/163347/Dhieu_Crude%20Oil%E2%80%99s%20Effect%20on%20South%20Sudan%E2%80%99s%20Economy%20%281990-2020%29.pdf?sequence=1&isAllowed=y
