I don’t know how you’re managing your budget to meet your daily expenses because, in reality, it’s tough. Things are getting tougher and tougher every day because of inflation. Inflation is an enemy.
Now, there’re more fears that the exchange rate may hit SSP 600 to a dollar firing up prices for basic commodities. And that’s the greatest fear for most people because it means one thing – SUFFERING
In the 70s, South African businessman, Dr. Anton Rupert described inflation, as ‘an enemy number one. At that time, the world economy was experiencing unprecedented inflation causing enormous human suffering.
On August 15, 1971, U.S. President Richard Nixon, removed the dollar from the Gold Standard giving the FED powers to print more dollars. The U.S. gov’t held the $35 per ounce price at that time. However, Nixon’s executive order ended the convertibility of U.S. dollars to Gold.
Now, with Ukraine- Russia war taking a snail-like pace unabated, the world’s economies are plummeting into inflation, and this is visible and observed through the sustained increases in the general price level over some time. If you surf through the world’s largest newspapers online you will find that most news headlines are about the status of the economy, inflation, and the Russia-Ukraine war.
For close to two years now, the world has been managing two major man-made catastrophes, for example, the Covid-19 crisis and the Ukraine-Russia war.
The Covid-19 crisis disrupted the supply chain for the whole of 2020 shutting down businesses and rendering masses jobless. Now, the man-made war in Ukraine is driving economies into inflation and price hikes.
I get surprised when I hear people say, how does the war in Ukraine affect me in South Sudan or how is the Russia-Ukraine war related to South Sudan? We are very quick to ignore the basic facts of globalization, which are an interconnected world, a global village, and boundaryless. That’s why the war in Ukraine is affecting you and the entire world. Ukraine and Russia are said to be a source of wheat, and other foodstuffs, and the majority of European countries are dependent on Russian gas.
Just like the way Covid-19 started in China and engulfed the world through the movement of people from country A to country B via planes.
The fact is South Sudan’s economy is inflated; a few market indicators are visibly telling us to prepare for tougher times ahead, for instance, the Central bank commercial banks, and FX auctions are showing upward trends in exchange rates, for example, on Monday, July 4, 2022, it auctioned 5 million dollars where it sold a dollar at SSP 512 for the higher bidder.
On Tuesday, July 5, the average daily exchange rate was at SSP 504 South Sudanese pounds per one dollar. That’s an SSP 8 dropped. This tells you that the Central bank is unsuccessful in curbing inflation to restore the exchange rate to SSP 400 a dollar or to a figure lower than that. If that does happen that food prices could adjust slowly taking a download trend. As of now, the indication is on the negative trend.
At the time of this publication, the South Sudan Association of manufacturers was raising a red flag fearing upward price hikes. The fear is the continue skyrocketing prices thus putting more pressure on already struggling households making it difficult to put food on the table.
Curbing inflation is the responsibility of the Central. The Central Bank is constitutionally mandated to play that role in the economy.
Globally, Central banks have three tools for correcting anomalies in an economy, and inflation is one of those anomalies.
At the disposal of any Central bank are reserve requirements, open market operation, and discount rates. Central Banks apply these tools to stimulate the economy and keep the country’s economy in good shape.
Even though, South Sudan’s central bank is working hard in curbing inflation by increasing the money supply through an open market operation approach. Whether it is succeeding or not remains something to be seen.
At a personal level, auctioning dollars to commercial banks and Forex Bureaus appears to be bearing fewer positive results because the market has remained deviant judging by the incremental increase in the exchange rate and the sustained price hikes in the market.
So, it is obvious that the Central bank is facing challenges to curb inflation.
As a country, we are facing myriads of challenges both internal and external. For us to get back on our feet we must think strategically.
A few things must happen first
First – we must expedite the full implementation of the R-ARCSS to restore security, and freedom of movement of people and goods within the country;
Second – we should urge our government to promote investment and support local production by investing in agriculture and ensuring the safety of farmers at state levels;
Third – Central banks should wider net and bring in credible and reputable traders into currency auctioning to supply the country with needed food;
Fourth – The central bank needs to increase its weekly amount injected into the market.
Firth – we must reduce overdependence on imports that are currently putting more pressure on the local currency because of the high demand for the dollar.
Sixth – the gov’t should create enabling environment for local businesses by exempting some from paying taxes.
Any decision taken by the Central bank should be aimed at providing a long-term solution for stable economic development.
