3 Dec 2020

 

South Sudan's Empty Central Bank Is Not A Laughing Matter!

"South Sudan’s foreign currency reserves all stolen but the government is making jokes about it".

By Jok Madut Jok*

What you need to know:
The Government of South Sudan has announced that it has run out of foreign reserves.
This was meant to happen, owing to too many malpractices that were born of incompetence, malfeasance and partly due to the huge revenues from oil giving the government the impression that these were limitless, a resource curse perhaps.

For a country that depends entirely on imports, the immediate effect of this will be runaway commodity prices and extreme suffering for the poor millions.
In the meantime, the government has appointed the same people who supervised and aided the mess to help fix it.

On August 18, 2020, the Central Bank of South Sudan announced that it had run out of foreign exchange reserves. This news was greeted with lots of discussions, debates and sharing among South Sudanese in online discussion forums, on social media and at other gatherings.

“A central bank is not like the blood bank, you know. It is not like you can do a blood donation campaign when it runs out of blood… Officials at the Central Bank of South Sudan seem to have missed the distinction between the central bank and any other type of bank,” a university of Juba lecturer commented on the news.

“For a senior official at the central bank to think it is a normal thing to go on radio and announce that the country is broke is callousness with such sensitive information that should have been considered classified,” said another commentator.

The news, though unsurprising, seems to shock everyone, understandably so, given this will lead to numerous economic challenges that will most likely affect the ordinary population, as they have already been battered by the civil war that started in 2013, and by corruption, the immediate consequences of which include the absence of goods and services.

This news was not surprising because the way the bank had been run since it was established in 2005 had always left much to be desired in terms of its ability to be a trusted custodian of the peoples’ resources. There were too many malpractices that were born of incompetence, malfeasance and partly due to the huge revenues from oil giving many people the impression that these were limitless, a resource curse perhaps.

Others said they knew this was definitely bound to happen, given numerous and suspicious practices within the bank, including the fact that some bank officials owned Forex Bureaus, a clear conflict of interest, or the fact that the bank ran a currency exchange rate that is partly a floating rate and partly fixed.

It is popularly known in Juba that these varying rates allow bank officials and others to trade in currency by acquiring dollars at the official rate of SSP165 to the US dollar and selling them at a parallel market rate of about SSP400 to the dollar and pocketing the difference. This has been going on for many years and it was a surprise that it took this long for foreign reserves dry up.
Posed a risk

Many people thought the senior official who made the announcement at a press briefing may have been genuinely trying to be transparent and to explain the roots of the country’s economic woes to the public, but this blunt announcement may have posed a risk to the government in terms of public anger; created a potential national security threat and has possibly discouraged any efforts to secure a bailout from outside.

It also sent the national currency, the South Sudan Pound, into a free fall, shot the commodity prices into the sky and threw up many questions that have no readily available answers – how could this happen in a country that generates a lot of foreign currency from oil exports? What does this mean in terms of foreign assistance and what will happen to the officials implicated in this crisis?

In terms of consequences of both the announcement and the actual shortage of foreign currency will first be felt in inflation and commodity prices. South Sudan economy is nearly 100 per cent import economy and even though the importers of food and fuel will get foreign exchange, they will obviously transfer the cost to the already impoverished consumers. How long the people will continue to endure these oppressive conditions without protesting is anyone’s guess, but a growing public frustration and anger is unmistakable.

Partners in the robbery
There were always many forms of mismanagement that were visible to all, including the demands that top government officials had been making on the bank, seeking access to foreign currency to address personal needs abroad. The bank seemed unwilling to assert itself to stop these unscrupulous senior officials from bleeding it.

On the contrary, the supposed custodians of the peoples’ money themselves became partners in the robbery, and the fact that it is now declared broke was only a culmination of a long process of a country destroying itself at the behest of those who were entrusted the responsibility to safeguard it.

They have been busy moving the money out of the country. Almost every senior government official, including hundreds of army generals, ministers, undersecretaries and directors, have families in Kenya and Uganda, some having bought massive homes and others renting in some of Nairobi’s and Kampala’s high-end neighborhoods and have put their children in private schools in these neighboring countries.

Monthly transfers of foreign currency to settle these expenses have been in millions of dollars, some wired officially but majority carried in suitcases, bribing customs officials to look the other way.

Where then is the mystery about how the country exhausted its reserves? That the government of South Sudan should appear puzzled about being broke is laughable. They all know exactly what happened.

The government has since been trying to explain what happened to the money, what will be the impact of this news on the country’s economy, how it will affect the lives of citizens and what the country will do going forward.

 

 Some of the explanations that the bank and some government officials have offered so far would be comical if the situation were not so grave.

The primary factors include the civil war that started in 2013, the country’s reliance on oil revenues for most of its expenditure, which was compounded by the fall in oil prices and the economic effects of the coronavirus pandemic. President Salva Kiir said there was mismanagement of non-oil revenues, with some senior officials diverting the taxes into their private bank accounts.

The government went into a frenzy with damage control efforts, with the president creating an Economic Crisis Management Committee to look into the foreign currency reserve situation and to find ways to prevent the economy from a further downward spiral.

The problem is that this committee will be headed by one of the five vice presidents, the vice president for economic cluster, James Wani Igga, and will comprise ministers of finance, trade and industry, petroleum, mining, in addition to the governor of Central Bank itself, the police inspector general, deputy director of the national revenue authority and the director of National Security Service.

And it is the structure of this committee and its mandate which makes the whole endeavor almost laughable. This is because it is these people who have presided over the destruction that they are now tasked to investigate and make recommendation about how to fix it. The running joke throughout the country is that if you have a project you want to kill, give it to James Wani. He was head of the Crisis Management Committee in 2013 following the outbreak of the civil war, which is why this new committee is a joke. Hardly anyone will hold their breath waiting for anything meaningful to come out of a committee made up of people with the least public trust. This only adds to a litany of failures and no change is in sight.

*Dr Jok Madut Jok is Professor of Anthropology Maxwell School of Citizenship and Public Affairs, Syracuse University.
@Except for the title, this opinion piece was first published by the Nairobi-based Daily Nation.


 

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