South Sudan blames currency woes on Uganda, US 

When hackers recently seized control of the Central Bank of South Sudan website late last week, it was the justification that the hijackers gave that raised more concern than the attack itself.

The hackers, calling themselves “Anonymous South Sudan” said they wouldn’t restore the website until the government slashed the dollar exchange rate to 400 South Sudan Pounds (SS£), a cut of more than half.

By April 6, just before the website seizure, the official exchange rate was SS£ 841.5 to one US dollar (buying) and selling at SS£ 866.2. By Tuesday, however, the rate had escalated further to SS£ 844.5 (buying) and selling at SS£ 870. 

On the black market, the dollar sells at an average of SS£ 950/dollar. The SS£ has been sharply losing its strength since 2020, but the situation worsened especially due to the global high commodity prices in 2021. At the time of the launch of the South Sudanese pound in 2011, the exchange rate was just SS£ 2.75 against the US dollar. 

After the recent Monetary Policy Committee meeting, the governor Bank of South Sudan (BoSS) Johnny Ohisa Damian said the currency decline was not only limited to the SS£ but that many countries were suffering against the strength of the US dollar. He also cited the increase in prices of imports from Uganda, the main source of food supply for the high inflation in South Sudan. 

“In addition, the increase in prices of imported goods elsewhere and major trading partners like Uganda whose prices rose by more than 50 per cent in January, have a strong bearing on food prices in the markets in Juba,” he said. 

Like with the US dollar, the SS£ has been losing value against other currencies including those in the region. On Tuesday morning, the Uganda shilling was exchanging at 0.2308 to 1 SS£, compared to Shs 0.229 recorded on April 6. The Kenyan shilling opened trading at 6.564 per pound compared to SS£ 6.5370 last Thursday. 

The Monetary Policy Committee in March raised the interest rate from 13 to 15 per cent to try to halt the depreciation, but this has not borne fruit. In February, the government in Juba issued a ban on the use of US dollars for all domestic transactions, a move supported by the International Monetary Fund (IMF) with the hope of propping up the South Sudanese pound. 

Most of the transactions were being conducted in dollars and with the trend increasing, according to a report in March, 77 per cent of the deposits at commercial banks were in dollars. 

According to the bank, other factors that contributed to South Sudan’s economic hardship are the US Federal Reserve tightening its monetary policies and the banking crisis. Damian insists that South Sudan is not alone in the economic upheaval, which it said is a global phenomenon.

“The US dollars strengthened sharply against major currencies including but not limited to South African rand, Egyptian pounds, Kenyan shillings or South Sudanese pounds,” he said. 

In February, BoSS announced the sale of $5 million in two tranches to eligible forex bureaus through an auction, but this hardly had any impact on the exchange rate. Governor Damian now says they have resolved to sell $5 million weekly into the market, adding that the amount will increase if the situation makes it necessary. 

“The bank will continue to monitor and review the situation and respond with appropriate measures, as the situation warrants,” he says.

While all countries have suffered from the strengthening of the dollar and the high global commodity prices over the last two years, the world’s newest country’s bigger challenge is the undiversified economy, mainly exports.

Oil exports account for 82 per cent of the country’s export value at about $630 million. The other exports are fresh crops and sheep and goat meat. A plunge in global oil prices affects the country’s overall revenues because of overreliance on one export. 

However, according to analysts, because of the country’s financial obligations with many multinationals, the value received from the oil exports (150,000-170,000 barrels per day) is equivalent to just 50,000 barrels per day. 

Despite the exchange rate volatility, the headline inflation continues to show signs of easing, dropping to 13.4 per cent in February, from 14.4 per cent registered in January 2023.

In comparison, the Uganda shilling has fluctuated between Shs 3,690 and Shs 3,790 to the dollar and is currently exchanging at Shs 3,732 according to the Bank of Uganda’s Tuesday mid-day trading update.