South Sudan’s central bank on Monday said that foreign inflows from oil sales have reduced due to ongoing insecurity along the Red Sea caused by attacks on ships by Yemeni based Houthi militias.
“Yes, today we have seen the crisis in Yemen, in the Red Sea that has caused lifters to take precautionary measures which involves some cost and which also slows down the speed at which cargoes leave Port Sudan for the international market. So yes, the sale of the oil has been badly or slightly impacted by the crisis that you are seeing in Yemen,” James Alic Garang, the Governor of the Bank of South Sudan said in an interview with Juba Echo in Juba.
The exchange rate of the South Sudanese Pounds has continued to depreciate against the U.S dollar, exchanging at around 1200 SSP for 1 dollar on the black market while at the Bank of South Sudan, it is exchanging at 1082 SSP.
South Sudan depends heavily on oil revenue to finance nearly 95 percent of it’s annual fiscal budget.
The country currently produces about 150,000 barrels of oil a day compared to the previous 350,000 barrels before outbreak of conflict in December 2013.
“When the oil is not sold quickly enough or if it takes a long time to go to the market then it also means we will have less at any point and having less foreign exchange in the country will mean that the supply and demand are not aligned and that is one reason why you see the currency depreciating,” Garang said.
Garang said that they are working to register all informal foreign currency traders with the aim of establishing a transparent and efficient foreign exchange system aligned with international best practices.
“We will give them about a month or 45 days, by saying from this time, the small informal traders will have to register with our banking supervisors and obtain documentation so that they are able to sell foreign exchange in their shops,” Garang said.
“We are moving very slowly because we are also trying to inform them, to tell them why it’s very important for the foreign exchange market to get organized. Today if you go on the streets, sometimes if you are unlucky, you get fake dollars, sometimes you get an amount that is less than what you expect to get and you are cheated and sometimes someone can just come and buy and when they are leaving, they are attacked on the way by people who saw them making exchange. So this is something dangerous to the members of the public,” he disclosed.
Garang said that informal traders will form groups or associations to fast track their registration and will only operate in designated areas to be supervised by the central bank.
He said that they will confiscate property of currency traders who fail to get registered with the central bank.
“Without a license, your property will be confiscated and you reap the consequences, but we are not yet there. Right now we are not yet there but we have made significant progress by eliminating those boys (currency traders) that were standing on the streets,” Garang said.
