South Sudan economy descending to collapse

By Gatkuoth Majiok Chol


The Official S. Sudanese Currency launched in 2011(Photo: file/Nyamilepedia)
The Official S. Sudanese Currency launched in 2011(Photo: file/Nyamilepedia)

Oct 9, 2014(Nyamilepedia) — As the devastation and destruction of war continue in the country without any sign of ending, the hope of reviving the South Sudan economy is growing dim. The country’s economy is underway descending to collapse or unless the government takes quick action of imparting the economic development and financial stability in the country. This analyst based on current situation in South Sudan with fact that there is no secrecy in the economy. Since the outbreak of war on December 15, 2013, the economy started deteriorating, the security in the country became precarious and the interventions of the foreign troops (Uganda) in domestic conflicts had increased the costs of defense in country. As a result, the government had borrowed heavily, making the current account deficits.

In the economic perspective, the falls of oil output in the country which provides almost about 98% of government total revenues and contributed to more than 60% of country’s GDP, has put the economy in a perilous state. Notwithstanding that the Governor of Central Bank of South Sudan asked for devaluation of the country’s currency. This policy of devaluation of country’s currency comes with mixture of positives and negatives, but I think the negative will override the positive. In order to diagnose this content in detail, first let us take a glimpse for what motivated central bank to ask for devalues the country’s currency. First, the devaluation of currency will discourage the black market. Second, will allow the country to use less foreign currency to recover more of its own currency. Third, will make export cheaper (weakening local currency) which mean that more money will be inflowing in the county for cheap export. Fourth, the employment level will rise and able to bring the economy back on track. Fifth, imports will be more expensive and reduce demand for foreign goods.

However, this policy of devaluation currency is inefficient for the new nation like South Sudan that engulfed with insecurity and doesn’t have manufacturing production to boost its export demand. Furthermore, I am very optimistic that this policy will create economy catastrophe, because devaluation of currency associated with many risks. First, devaluation of currency would, have resulted in more costly imports than the exports, as result the price level of imports goods will rise with the less quantity of imports, and put the domestic jobs at risk, while creating inflation inside the country. Second, it will create psychological problem for investors and will make them jittery, because the investors will view the devaluation as a sign of economic weakness and this action will influent the investors to get their money out of the country with fear of economy collapse. Third, it is quite clear that the main sources of export for the country is oil, but the present of rebel at northern Upper Nile in Renk has disrupted the oil production in Paloch, while the oil hub in Bentiu remain sealed. Therefore, the hope to boost the country’s exports remains at minimum level. Fourth, if the rebels manage to capture Renk if not Paloch, this will definitely hospitalize the country’s economy and the oil output will be running down to less than 100 barrel per a day if not close. Base on the above analyst, South Sudan economy is not in better position at all, but descending to collapse.

Despite, the consequence or deteriorating of the economy, the government still have sole opportunity to resurrect the country’s economy and restore harmony. Government need to take lead for peace deal with rebel to end a violent conflict in the country. This peace agreement will cure the tranquillity of country’s economy that poisoned by war, and will enable the country to generate sustainable economic growth through help of ceasing the insecurity in the country. In other hand, the peace deal will build positive momentum for security stability in the country and boost both oil and agricultural productions such as reopening the oil hub in Bentinu and increasing oil output in Paloch. Significantly, this will be enough for government to get the economy out from intensive care. But, if the government does not reach a peace deal with rebel, than they need to pray earnestly that the rebel would not capture Renk or Paloch to prevent more financial crisis and economy collapse in the country.
you can reach me at email.gatkuothchol@yahoo.com.au

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