The Depreciation of SSP: a thorn in the Tax-Payers flesh

Every month, the value of US Dollar keeps growing new shoots while that of The South Sudanese Pound withers in value every fortnight in South Sudan. Currently, $1 trades against a mid-rate [SSP 690] in the parallel market with an inflation rate of about 21.7% ( a decade low since 2011). It has subsequently led to the life being difficult for 15 Million South Sudanese as 90% of the population is confined to only one meal per a day.


The US Dollar’s appreciation against South Sudanese Pound is not only South Sudan’s problem alone but also a regional headache for other member-states in the EAC-Bloc. For instance, $1 trades against Ksh.124, pushing the prices of essential items on an upward trajectory in Kenya, months after new government took office last year.


DRIVERS OF THE SSP DEPRECIATION


  • BoSS Inability to Regulate the SSP


In 2015, a year after lifting financial distress (Austerity Measures). South Sudan decided to adopt the free market economy and floated its currency. The market was to operate on the dynamic forces of demand and supply without government intervention. Since then, the SSP has never recovered its parity with the US Dollar.



  • Zero-Export-Base as a % of GDP


Despite having both vast unused land for agriculture and readily available water from River Nile, South Sudan imports almost 90% food from either Uganda or Kenya, in order to feed its 15 million population causing a severe DEFICIT in the Current Account or Balanced of Trade.


  • Dollar Shortage


In order to import essential and non-essential goods from neighboring countries, Traders are actively looking for FX offers in order to generate US Dollar liquidity for international trade. It usually creates deficit resulting from Demand-Pull Inflation as there is an increased demand against fixed supply of US Dollars in the country. The result is always a shortage of Dollar Supply.


  • Drop in Oil Prices


South Sudan is the leading producer oil in the East Africa and sells its oil through Port of Sudan to the outside world. But oil remittances are nowhere to adjust the money supply since 2015 when the newest nation adopted the free market economy. Critiques have attributed this to the global drop in prices of crude oil which has caused limited Dollar Supply as well. Today, a barrel of oil goes for roughly $70 in the international market.



  • The Federal Reserve Hawkish Interest Rates


The rise in Dollar value is also as a result of recent aggressive policy by the central bank of the United Stated of America, which has raised Interest Rates more harshly than central banks of many economies across the world.


Quick Economic Recovery!

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