South Sudan Central Bank unveils measures to curb inflation
October 30, 2023 (JUBA) – South Sudan’s central bank has unveiled monetary measures in an effort to curb a fall in the value of its local currency against the rise in the United States dollars.
“As we approach the last quarter of 2023, coupled with the recent public sector pay rise, the Bank of South Sudan has observed a modest strengthening of United States dollars against the South Sudanese pound over the last week”, James Alic Garang, the Central Bank governor said on Friday.
He expressed that the economic situation the country was facing would improve if policy efforts were properly coordinated with strategic guidance and support from the leadership in the country.
“While it is a good idea to increase salaries and pay off government workers, you could see that on the other hand, a higher pay rise may have a negative impact than what the bank does. The bank has to go out and we had to inject dollars to mop the excess liquidity which is in the market,” explained Garang.
“The amount we put out last Thursday was double what used to be for the last month. The figure we used to auction was about USD 2 to 3 million and on Thursday we put out USD 4 million which is twice what we used to auction. At the moment we think that we have sufficient reserves to even increase this figure going forward,” he revealed.
The governor assured the population of a stabilization in the currency.
He warned that the upward review in the pay rise poses in the growth rate of broad money, expressing a fear such a development could potentially lead to adverse ramifications on the general price
A separate statement issued by Governor Garang also revealed that the bank would work closely with the Ministry of Finance and Economic Planning as part of the strategies in the short term to mitigate the adverse effects of the phenomenon and ensure macroeconomic stability.
It further revealed that the bank has put in place mechanisms to control the effects by boosting its capacity to intervene in the foreign exchange market through the purchase of US dollars from the government to pay the salaries of public employees and by utilizing the provisions of a treasury single account agreement that allows the bank to automatically exchange foreign component of domestic revenue into South Sudan pound to build reserves.
Another approach as part of the effort to address a sharp fall in the value of the local currency includes scaling uptake of the terms deposit facility auction by increasing volume and reinstating shorter terms tenors that are attractive to the bank, it noted.
“The combination of both direct and indirect monetary policy instruments at our disposal will strengthen our capacity in sterilizing excess liquidity from the system and thereby control the adverse effects of the excessive money supply”, the statement adds.
It rolled out four policy measures, including continuing with tightening monetary policy stance by maintaining the 10 percent for 2023 growth in broad money, maintaining the central bank interest rate at 15 percent until further notice, increasing the volume of weekly foreign exchange auctions, and strengthening policy coordination with fiscal authorities.
The Central Bank assured the public that it will keep monitoring the developments in the foreign exchange market and intervene when the situation requires through the increase of the amount of dollars for auction to the forex bureau and commercial banks to support the balance of payment obligations and combat inflationary pressures.
(ST)