The cost of food for the local people who earn and purchase in SSP is becoming prohibitive. Many people are hungry. A recent report of the United Nations Office for Coordination of Humanitarian Affairs (OCHA stated that South Sudan made significant progress in improving food insecurity, prior to the start of the conflict in late 2013 but now asserts: “By late 2014, about 38 per cent of the population was considered food insecure.” It would be a greater percentage now.
The official exchange rate continues to be USD 1 = SSP 3.16. But it is only a privileged few who can access money at this rate. The ‘street rate’ for the SSP at the beginning of 2015 was around SSP4 per USD 1. By March, the street rate had risen to around SSP 7.
One media report on May 3rdasserted:
‘A small number of “privileged people close to the ruling circles” in South Sudan are benefiting from the country’s collapsing currency and shortage of dollars, according to a recently published independent report. These individuals access dollars from the Central Bank at a rate of about 3:1 and then sell them for pounds at a rate of about 9:1. Because these politically influential individuals are profiting from the difference between the official rate and the street rate, the government is reluctant to alter the official rate, which would ease the dollar shortage and in turn drive down consumer prices.’
By mid May, the unofficial rate shot up to SSP 15 with further loss of buying power. Most food and consumer goods are imported and traders cannot get dollars from the banks. Hence, they depend on street trading or go out of business. Some shops have already closed their doors. The Executive Board of the International Monetary Fund (IMF) has recommended that South Sudan’s central bank change the official exchange rate to a ‘realistic level.’ The IMF report, however, also warned that ‘strong vested interests and lack of political resolve could prevent reform” of the foreign exchange system.’
The budget for the office of the President is bigger than that of some of the states. In one recent article, it was estimated that 70% of government spending is being consumed by the military, as this senseless internal conflict continues. Although the major part of South Sudan has remained free of fighting, the economic impact is now being felt everywhere. How long can this go on?
Diesel and gas are already in short supply. If traders go out of business, a scarcity of many more goods will follow. At present, South Sudan is floundering in an economic eddy. It could soon become a whirlpool. The sensible precaution is to be well stocked with all the essentials. As always, it is the innocent and powerless poor, with the least resources, who would suffer the most. Let us hope the IMF and other influential groups can help the Government to stabilize the economy.
– Br Bill