South Sudan Currency Crisis Sees Shops Close as Prices Surge

(Bloomberg) -- South Sudan will push dollars into the economy after a plunge in the local currency led to a surge in prices and shops to close across major towns.

“The government is planning to inject into the market through the central bank and other commercial banks a lump sum that will enable us to control the economy,” Information Minister Michael Makuei Lueth told reporters in the capital, Juba.

The South Sudanese pound fell to as low as 870 per dollar on the parallel market on Wednesday compared with the official central bank rate of 167 as residents hoarded the U.S. currency fearing a further decline.

The government agreed last week to change the East African nation’s currency to deal with an economy shattered by conflict since it seceded from Sudan in 2011 and, more recently, the coronavirus pandemic. Ahead of the decision, the currency was trading at 510 to the dollar on the parallel market.

“Everybody wants to buy a lot of dollars to keep in their houses,” said Denis Amoko, an informal-market trader. “They fear if the currency is changed, it will affect their money.”

The recommendation was put forward to stop citizens hoarding cash and encourage them to enter the banking system, similar to the move in neighboring Ethiopia.

“The issue of the change has come up in the cabinet meeting and there is a committee formed to study and come up with a report to the council of ministers,” Deputy Finance Minister Agok Makur said by phone on Friday. “Yes the issue of change is there, but it is still not a decision taken.”

The depreciation has led to a rise in the price of goods in the landlocked nation. Oil is the country’s biggest source of income and lower prices have battered its reserves and revenue, fueling inflation that reached 37.2% in April, according to the last data released by the central bank.

Sugar prices have doubled to 800 South Sudanese pounds a kilogram and a liter of cooking oil has risen from 700 South Sudanese pounds to 1,500 pounds.

Shops Shut

“I have doubled my prices but consumers are not willing to pay for a doubled price in retail so my option is to close shop,” Mangwi Daniel, a trader in Nimule, a small town near the southern border, said by phone.

The government has appealed to traders to reopen their shops.

“After a thorough deliberation, the cabinet decided to appeal to those business people and those traders who have closed their shops to open them for the public,” Lueth said.

©2020 Bloomberg L.P.