Garang Abraham, Juba
In a dramatic fiscal u-turn, the new governor of the Bank of South Sudan has announced an increase in the interest rates to 15%.
The newly appointed governor, Dier Tong, presented five resolutions designed by the bank’s Monetary Policy Committee in an extraordinary meeting yesterday. These resolutions are specifically designed to tackle currency devaluation.
Among the policies introduced is the increase of bank interest rates to 15%.
The bank’s reserve requirement rate for commercial banks and cash reserve ratio has been increased to 20%.
The bank also said it will being introducing bills to manage liquidity.
To many observers, this policy came as a surprise. Three months ago the Bank of South Sudan decreased interest rates from 13% to 10%.
Following the meeting, Dier Tong was hopeful these new policies would tackle hyperinflation.
“The meeting was held on the backdrop of the rapid depreciation of the SSP and high inflation,” Dier Tong stated.
“It suggested ways to calm the market, using available monetary tools.”
“The Monetary Policy Committee noted that the economy is severely battered by shocks brought about by the Covid-19 pandemic, low oil prices, which has led to considerable fiscal imbalances and constrained financial performance, particularly the banking sector,” the Central Bank governor added.
In recent weeks, the South Sudanese Pound has been drastically depreciated with drops in oil revenues and irregularities with national income in other sectors.
As of this morning, $100USD buys approximately £57,000SSP on the black market. This is a stark contrast to the rates offered by the Central Bank, which equate to $100USD at £17,100SSP.
Tong’s announcement comes as consumers complain about unsustainable rises in the prices of basic goods, meanwhile traders are struggling to access hard currency for imports.
Building on the currency overhaul announced earlier this month, experts have repeatedly called for structural reforms to address South Sudan’s frequent economic issues.
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