During the welcoming ceremony for the current Minister for Finance and Economic Planning, Dr Marial Dongrin, his predecessor Awow Daniel Chuang said, “nobody has the magic stick to solve the economic hardships of South Sudan”.
Indeed, no one has the magic stick to suddenly fix the economic woes of our beloved country. However, this is not because our problems have no solutions. The solutions are known but are avoided because they touch the pockets of the big men. In any country, politics shapes the economics and the laws. It is the politics that creates good or bad economic institutions and laws, which in turn determine the shape of an economy. If the economic institutions are created and guided by politics of individual interest, they can hardly work for the common good.
Our economy can be repaired but, definitely, not by one individual. There is no single Finance and Economic Planning Minister or the Bank of South Sudan Governor, or both together, who can solve the country’s economic crisis, without the supportive politics and laws.
Nonetheless, it is incumbent upon the leadership of the Ministry of Finance and Economic Planning and the Bank of South Sudan to collect the pieces of what is left of our economy and try to fix the problem because our people are in dire need of a solution to alleviate the heavy economic pressure mounted on them by these hard times.
To find this solution, the Ministry of Finance and Economic Planning and the Bank of South Sudan should undertake some radical measures. They require solutions outside the conventional fiscal and monetary policies normally employed by a Central Bank to control the micro and macro economic activities and especially the exchange rates. In fact, the solution lies far away from the box. This is because both the political and the economic entities surrounding our economy do not permit the effective functioning of the conventional fiscal and monetary policies. The conventional measures work best where the Central Bank is in full control of the money supply all the time. This is a thing our Central Bank lacks: it cannot tell how much money(both local and hard currency) is in circulation at a particular time. This creates a situation where we always have too many pounds chasing too few dollars, increasing the value of the latter due to high demand.
An economy best operates on trust and confidence; mostly with regard to the exchange rates and prices of goods and services. The more confident the businesses and the masses are in the stability of the exchange rates, prices and safety of investments, the smoother the flow of the economic activities. Lack of trust and confidence in the exchange rates and commodity prices, on the other hand, causes economic uncertainty. Trust and confidence are the two elements that are badly lacking in our economy now. Our people have totally lost confidence in our currency due to its instability. No one is ever sure of what its value will be tomorrow; though it has now become common knowledge that its value is always on a downward trend. There is thus, a need to urgently restore the trust and confidence so that the economy can be put on the path to prosperity. This responsibility, obviously, is incumbent upon the Ministry of Finance and Economic Planning and the Bank of South Sudan.
To restore the trust and confidence in our Pounds, the government, through the Central Bank, needs to quickly reduce the demand for the US dollars and increase the supply of the hard currency.
Below are some of the factors, which have largely contributed to the suffering of our economy, and the measures, which, I believe, will help reduce the crisis:
The biggest challenge is the lack of access to the US dollars. Within the first few months of his tenure, the Central Bank Governor, Dr James Garang Alic, banned the trading of the US dollars on the black market. However, the downside was the lack of an alternative source since there are no operational forex bureaus and commercial banks that deal in hard currency. South Sudanese exchange currencies on the black market because there are no alternatives. The Central Bank auctions the US dollar to the commercial banks and the forex bureaus with the believe that these institutions will, in turn, sell to the other traders. Unfortunately, they do not sell to those who need the dollars such as the importers of food, fuel, and medicine and those with families outside South Sudan. This leaves them with the black market as the only source. With the ban on the black market, accessing the dollar has become harder, exacerbating an already bad situation.
To solve this, the government should adopt a more direct approach by establishing state forex bureaus. This has several advantages, including helping create an easy access for those who truly need them for active market participation, and puts the Bank of South Sudan firmly in control of the forex market.
This method will also help the government, through the Central Bank, to regulate goods that take priority in importation. For instance, fuel and basic commodities should always get the first allocation before a car dealer.
The strategy will also help the Bank of South Sudan to equitably allocate the hard currencies to traders, depending on their import capacity. Some crooked traders buy more than they need for imports at a particular time. Additionally, the frequent auctioning of dollars to banks and forex bureaus is an ineffective policy. As stated earlier, the banks, which buy these dollars, do not have tellers designated for forex transactions and the forex bureaus and operate only in briefcases. They, therefore, do not sell the hard currency to the active traders, instead preferring the zol kebir. These individuals may hoard the hard currencies or send it to offshore accounts, depriving the active common traders who badly need the dollars for imports.
It should be mandatory for all commercial banks to have at least one forex-trading teller and all the briefcase forex bureaus to actively trade or risk de-registration.
Another big challenge that needs urgent solution is the domination of the economy by foreigners. Most of them have little regard for the health of our economy. They are always demanding the US dollars for importation. They also save their earnings in hard currencies in foreign accounts. This practice, coupled with that of the affluent South Sudanese, drains the country of the already deficient hard currency. In simple terms, South Sudan injects US dollars into the economy and it instantly leaks through outward remittances. South Sudan should borrow from other countries such as Ethiopia, Morocco and Qatar where it is illegal to send money outside. This helps ensure that the dollar circulates in the economy and builds confidence in the local currency. However, considering that a sizeable number of South Sudanese have families outside, it would be unwise to suddenly outlaw the outward remittances. The amounts sent out should, however, be limited and strictly controlled.
The dollarization of the South Sudan economy should also be addressed. Right now, property owners, schools, hotels and even some government institutions demand payments in dollars only. This creates an unnecessary demand for the dollar, making it even more expensive. I understand that the Bank of South Sudan issued a circular late last year but the implementation has been ineffective. Strictly enforcing this unwarranted activity is necessary to reduce the pressure on the dollar.
In the same vein, the Bank of South Sudan should fund and promote MoMo from MTN. Recently; MTN introduced a service, which allows cross-border remittances where a customer can directly exchange their South Sudan Pounds with the Kenyan or the Ugandan shillings on their mobile phones. This service allows the sending of Pounds to Kenya and Uganda without having to first convert to the US dollar. The technology can be of great help to South Sudan since we import almost 100% of our medicine, fuel and food from these two countries. If funded to allow bulk transactions, it will completely remove the need for the US dollars for the importation of goods from Uganda or Kenya. This can be done by the Central Bank in collaboration with the commercial banks.
In conclusion, it should be underscored that the long-term solution lies in giving the Ministry of Finance and Economic Planning, the Central Bank, the National Revenue Authority and other financial institutions the freedom from any political interference. If granted, the freedom can allow them to design and implement better policies. The interference may be politically expedient, but it could be economically disastrous as has already been seen. Another strategy in our system should be the security of tenure for the critical offices. The idea of appointing a minister or bank governor today and kicking them out tomorrow is not helping at all. It places those officers at the mercy of the appointing authority, which makes them work for their “stomachs”. It is therefore imperative that we do not continue to politicize the critical institutions.
Bad politics creates bad economic institutions, and vice-versa.
The author, Sebit Madit, is a Certified Public Accountant candidate (maditsebit@gmail.com)
The views expressed in ‘opinion’ articles published by Radio Tamazuj are solely those of the writer. The veracity of any claims made is the responsibility of the author, not Radio Tamazuj.