Economist Ahmed Morjan speaks to Eye Radio. January 13, 2023. (Photo: Moses Awan).

A renowned economist has pronounced an alarming verdict of why the South Sudanese pound will continue to depreciate against the United States dollar if the government does not adopt long term economic measures.

Ahmed Morgan, a senior lecturer at the University of Juba said South Sudan’s economy has never been healthy at all since the country’s independence.

“If you look at the rate of inflation, it has been on a continuous escalation right from the date of independence or even before independence and with it also prices of general merchandise commodities also continue to rise,” he said on Eye Radio’s Sundown Program early this week.

The Bank of South Sudan plans to pour millions of dollars into the local market in a short-term bid to stabilize the skyrocketing exchange rate.

In a press statement on the weekend, the Central Bank announced a 10 million U.S. dollars auction to forex bureaus and commercial banks to be held on Wednesday, May 31st 2023.

This comes as the pound plunges to its weakest level since independence – with one U.S. dollar trading at over 1,000 pounds.

Traders have hiked commodity prices making it harder for most families to survive.

“As of today, the U.S. dollar against the pound has reached actually a very alarming level, and as you remember i was here in the studio the other time and I said it will continue to rise,” Morgan continued.

He differs with those putting the burden of blame for the dwindling economy on external factors and believes the inflation is caused by almost entirely internal factors.

“Most analysts just believe that there is a war in Sudan; it started from the war in Ukraine and so on. But, as much as external factors are contributing to it, the major factors that we have been and should be concerned about are our own internal factors.”

‘Importing economy’

Morgan says South Sudan’s economic downturn is due to the country’s reliance on imports from neighboring countries.

“You know very well South Sudan is almost a 100 percent importing economy. We are not producing anything to export and hence our hard currency that comes from the oil sector always gets its way out of the  country through imports of the variety of goods and service,” he said.

Morgan’s statement follows a similar remark by the Central Bank on May 19, decrying that the sharp depreciation of the local currency against the U.S. dollar is partly, due to dependence on imports from the region.

“These developments (worsening exchange rate) are exacerbated, partly by widening balance of payment gap due to import dependence syndrome….,” a BOSS statement reads.

South Sudan currently imports nearly all of its needs, including 40 per cent of its cereals from neighboring countries, particularly Kenya, Uganda and Ethiopia, according to African Development Bank.

‘Foreign-run market’

Another factor to blame for the rising hard currency demand in South Sudan is the control of local market by foreign businesses, says Morgan.

“You have an economy which is almost 90 percent run by foreign sectors or businesses. Again as their profit increases in pound, they will rush to get hard currency in order to repatriate the profit.”

He further said the millions of South Sudanese living outside the country and being supported with hard currency sent from South Sudan are also some of the internal factors resulting in scarcity of dollars in the country.

“All these together plus other issues may put a very huge pressure on the demand for hard currency while the channel which brings hard currency to the country is the only single one and that is oil export.”

“Locally, we don’t have import substitution goods. You see! So these factors contribute to high demand of hard currency and each time, the demand for hard currency rises and exchange rate rises,” Morgan said.

The African Development Bank says the backbone of South Sudan’s economy, which depends 95 percent on oil revenues – is agriculture.

The value addition for South Sudan’s non-oil revenue GDP in agriculture, forestry and fishery used to account for 36% in 2010, according to the financial institution. This made the country a net exporter of agricultural product to regional markets.

But due to war-related destruction, poor infrastructure and lack of investment in the agriculture sector, AFDB says South Sudan is now a net importer of food.

It is estimated that South Sudan’s food imports is in the range of $200-300 million a year.