Experts raise questions after South Sudan introduces higher value banknote
South Sudan’s Central Bank said the new denomination is supposed to ease transactions in a largely cash-based economy.
What you need to know:
- This week, the government in Juba introduced a new note worth 1,000 South Sudanese pounds, making it the highest denomination to circulate in the market since 2011.
Juba,
Just how far will South Sudan’s new 1000-pound notes help the economy? Not much, according to some local analysts of the economic situation.
This week, the government in Juba introduced a new note worth 1,000 South Sudanese pounds, making it the highest denomination to circulate in the market since 2011.
The currency was introduced in July 2011 after the country officially seceded from Sudan, following a referendum earlier that year.
It circulated in seven denominations – 1, 5, 10, 20, 50, 100 and 500 pounds, the latter which was introduced in 2019.
The Bank of South Sudan had in 2016 faced out the 25-pound note and replaced it with a 20-pound note.
On Tuesday, South Sudan’s Central Bank said the new denomination is supposed to ease transactions in a largely cash-based economy.
“Our aim is to align the structure of the banknote with the needs of the people who use it for their daily transactions. We need banknotes that are convenient, high quality, secure, and cost effective,” said Governor Dier Tong in Juba.
“In July 2019, the Bank of South Sudan planned to introduce a 1,000-pound note after the successful introduction of the 500-pound note in 2018, which indicated a significant increase in the demand for higher denomination banknotes.”
South Sudan's new 1,000-pound note, which is aimed at easing transactions.
Supply chain’s stability
But the introduction could be cosmetic, according to Prof Akim Ajith who said the economy’s woes are far from transaction-related.
“I don’t think the introduction of the 1,000 note will solve the economic crisis in the country. For example, the introduction of the 500-pound note was done two years ago and it didn’t stop the ailing economy. Expect the new note not to solve this issue,” he told The EastAfrican on Wednesday.
“To stabilise, the economy needs more than trending banknotes. Bold decisions need to be made and people with skills and the technical know-how brought on board by the government,” said Prof Ajith.
He spoke generally, referring to inflation and the shortage of basic commodities, which he argued could help lower the import bill if South Sudan focuses on local production. He said that with South Sudan’s massive arable land, food production alone could shield the country from having to import.
Prof Abraham Matook, Vice Chancellor of Dr John Garang Memorial University in Juba, agreed, saying focus by the country’s authorities should be directed at stabilising the supply chain.
“There will be a lot of money circulating, chasing a few goods in the market [sic]. This is to say cash is in the hands of a few people who can’t find what to buy. This can lead to inflation, which is already happening,” he told The EastAfrican.
“What the government should have done is reduce the notes to at least 100 and below, or have coins, instead of adding huge notes. Imagine the South Sudan economy without coins. This is dangerous” said Prof Matook.
A South Sudanese man shows his country's 50-pound note on February 28, 2017.
The hoarding problem
South Sudan’s problem has been mostly political, experts argue.
Prof Matook said some politicians have hoarded cash, making it harder for ordinary folk to buy goods at lower prices.
Last year, South Sudan’s Council of Ministers opted to change the currency in an attempt to bring back hoarded cash that it claims is aiding the decline of the economy. The move, though, wasn’t implemented after consultations with various stakeholders, officials said.
In August last year, the Central Bank’s second deputy governor, Daniel Kech Pouch, said the financial institution had run out of foreign reserves, a claim that was later revoked by the then governor, Jamal Abdallah Wani.
The same month, the minister of Trade and Industry said there is nothing the government can do to stop the local currency from losing value.
South Sudan’s economy has been devastated by several factors since its independence in 2011.
Years of civil war, a drop in global oil prices and the Covid-19 pandemic have brought the young, fragile economy to its knees.
Before the conflict and Covid-19, South Sudan was drilling more than 250,000 barrels of crude oil per day, which has now dropped to 180,000 barrels per day.
Corruption
In addition, South Sudan has once again been ranked the most corrupt country in the East African region.
A 2020 report by Transparency International ranked the country the second most corrupt across the globe, followed by Somalia.
A 2013 report about corruption in South Sudan, released by The Sentry, indicated that the vice spreads across all sectors of the economy and all levels of government.
It said that since independence, President Salva Kiir’s country has taken steps to promote transparency and accountability in its fight against corruption, but that a lack of capacity, resources and political will often hampers effective implementation.
In September 2019, The Sentry published a report titled “The Taking of South Sudan", which accused regional and international companies of profiting from the conflict in the country.
It accused seven of President Kiir’s immediate family members of forging partnerships with Chinese-Malaysian oil giants, British tycoons and networks of traders from Ethiopia, Eritrea, Kenya and Uganda.
But Presidential Press Secretary, Ateny Wek Ateny dismissed the allegations as biased and not backed by evidence.
