Hyperinflation ails South Sudanese economy

15 Oct 20

The South Sudanese government is preparing to take out a loan to inject money “into the market”, hoping to fight rampant inflation plaguing the economy.

 

Inflation sat at 37.2% in April, the latest official figures from the country’s central bank show, after gradually declining from its peak of 550% in September 2016 – but politicians have continued to publicly decry “hyperinflation” in recent weeks and months.

The problem has historically been caused by the government printing money to cover spending during the civil war, which began in 2013, until a ceasefire agreement was made in 2018.

Oil exports have helped the world’s youngest country begin to recover from the war - most government revenue, 86% in 2017-18, according to the IMF, comes from the sale of crude oil – but demand has collapsed this year.

As a result, the central bank ran out of foreign exchange reserves in August, and can no longer stop the country’s currency, the South Sudanese Pound, depreciating in value, the bank’s deputy governor said.

And last week information minister Michael Makuei Leuth announced the government planned to change the currency in order to fight inflation, saying “most citizens” has been holding South Sudanese Pounds in their houses because they feared taking money to the bank would result in it being confiscated.

However, the government had to backtrack from the announcement five days later, saying it had caused “hyperinflation”.

In a statement, the government said a new currency “was a suggestion, a proposed idea to be studied by economists”.

“The government is in the final stages of the process of acquiring a loan that will be injected in the market to stabilise the currency rates,” the statement continued.

“In addition, the Council of Ministers meeting also agreed to divert and inject oil money into the market to help in the stabilisation.”

South Sudan is in talks with the IMF and World Bank, and applied for a $250m loan from the African Export-Import Bank in August.

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