South Sudan reverses currency devaluation/ IHS Global Insight Daily Analysis 18.11.13 Ana Melica
South Sudan reversed on 14 November 2013 the 32% currency devaluation it had implemented two days earlier, with Bloomberg data showing a return to SSP3.06:USD1 from SSP4.5:USD1 (see South Sudan: 13 November 2013: ). According to Reuters, parliament ordered the central bank to revert to the previous official exchange rate after prices rose substantially overnight, causing significant hardship in an environment of already-high prices for fuel, water, and imported food. It appears that the central bank did not fully consult with parliament prior to making the decision, with several lawmakers claiming that they only heard of the devaluation afterwards from press reports. According to Bloomberg, the black market rate rose to around SSP6.0:USD1 and many petrol stations ran out of fuel, while the few that had fuel raised the price to SSP10 per litre from SSP6 before the devaluation. Significance: The devaluation had been intended to align the currency with the black market exchange rate (which subsequently jumped even higher), as well as to curb volatility and encourage foreign investment. However, the timing and magnitude might have been better planned had there been improved communication between the central bank and parliament. Currency adjustments would certainly be helpful for South Sudan since the exchange rate is likely overvalued, as demonstrated by the black market differential and the fact that Sudan has devaluated its currency twice since South Sudan's secession, while South Sudan has kept its official rate steady. However, South Sudan may not need to significantly devalue its currency – or at least not yet – given the resumption of oil export revenues this year, which represents virtually all of the country's hard-currency earnings prior to the oil output shutdown last year. Unlike Sudan, which is unlikely to have significant new sources of export earnings in the near term, South Sudan may generate sufficient foreign-exchange earnings to support the currency, and realign the official and curb rates without further policy interventions. -- You received this message because you are subscribed to the Google Groups "South Sudan Info - The Kob" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. To view this discussion on the web visit https://groups.google.com/d/msgid/SouthSudanKob/CAJb14oqzom13xq9g8W-nXSV39Adibkd%3D%2B0ey2Ld6vbffy0%2BuWg%40mail.gmail.com. For more options, visit https://groups.google.com/groups/opt_out.
