Bundle of South Sudanese 1,000-pound notes – Courtesy

A financial economist said the significant gain of the South Sudan pound against the US dollar is not sustainable because the government has not implemented measures that would enable liquidity in the market.

Daniel Athior said there is no economic theory that explains the drastic appreciation of the South Sudanese pound, adding that it is more worrisome.

“The foreign currency traders are not in the market, so what does that tell? It says that people are holding back their dollar against the pound. So, if I just temporal, not sustainable,” he said in an interview with Eye Radio.

He noted that such a dramatic exchange rate stability would have been more understandable if the government had injected money into the market or generated sufficient oil revenue.

He added that any of these actions would have facilitated liquidity in the market.

Mr. Athior pointed out that none of the above measures has been taken, and warns that this improvement is likely a short-term situation rather than a sustainable, long-term solution.

“If you look at the level to which the South Sudanese pound is gaining against the dollar, it is too much. And there is no economic theory or concept that supports such a decline in the exchange rate.

“And when you look at what could eventually drive the decline of the dollar against the South Sudanese pound, we are all wondering where this is factor coming from. But at the moment, there is no liquidity in the market.”

According to Thursday’s exchange rate from the Bank of South Sudan, one dollar is selling for 2,995 SSP, while the black-market rate is between around 3,000 SSP per dollar. This is a significant drop from last week when one dollar was trading at 5,200 SSP.

“So, we are all wondering what is this for? Where is it coming from? When you look at the prices also, the prices remain the same. The dollar has dropped from 5.20 to 3.70.”

The economist further said there is a need for the Ministry of Trade to collaborate effectively with the Ministry of Finance to establish a market strategy on how to regulate the economy.

“It is important to consider whether the Ministry of Finance and the Central Bank have the necessary tools to stabilize and adjust the exchange rate to reflect market prices and ensure its sustainability.”

“If the authorities have effective monetary policy tools and intervention mechanisms, they may be able to reduce the negative effects and restore confidence in the currency,” he added.