[Juba, South Sudan, TCT, Francis Mading] South Sudan has signed a partnership with Egypt on oil and energy at the ongoing oil and gas forum in Juba.The agreement will allow Egypt to invest in the oil field in the coming period in the operations of oil exploration and extraction, in addition to allowing Egyptian companies in the fields of technology and oil extraction equipment to operate in South Sudan.
[Juba, South Sudan] Twenty months war has weighty impact on lives of the people of South Sudan. Evidences of deteriorating services are widely experienced. Properties and financial sector faced shocking indicators of collapse especially with banking sector sliding into almost unescapable fall, unless some mitigation steps are urgently taken. Although the warring parties signed peace with implementation expected to start immediately, there is little hope for economic improvement.
USD accounts domiciled in South Sudan will not be allow for withdrawals in Kenya and Uganda by their counterpart associates. If withdrawals are allowed from these accounts, and if South Sudan banks from whose withdrawals were made are asked to settle their liabilities, these banks might not be able to settle their liabilities.
There is doubt on ability of the Central Bank of South Sudan (CBoSS) as provider of last resort to throw in the reserves, which might have been used up. As CBOSS seems not able to prop up the banks with their reserves, banks have decided to restrict outside transactions to avoid exposure. If accounts domiciled in South Sudan are drawn in Kenya and Uganda to a tune of a $1m for example, it is expected that the bank with its cash including reserves at CBoSS will settle these liabilities with Kenya and Uganda. Ability to settle these liabilities is what is in doubt both at bank and CBoSS level and that is why restriction has been placed as mitigation for the exposure.
Interbank transactions: Some vendors cannot deposit into their accounts checks given from a different bank. The CBoSS has no capacity to settle interbank transactions through a clearinghouse. Consequently, the banks have noted this and banks have responded by rejecting checks from other banks. There is no longer faith in clearing house. It can be said CBoSS has lost legitimacy if you like. To illustrate further, if you write a check from Kenya Commercial Bank (KCB) to an entity or individual banking with CfC Stanbic for instantce, CfC Stanbic will not accept deposit of the check, as they have no faith in clearing house. Simply put, clearing house is collapsed.
Recently, Transfers and withdrawals of dollars have been restricted to $2000 and transfers $5000 respectively as the banks don not have capacity to settle large dollars liabilities. At present, if you go to any of the commercial banks to withdraw from a USD account, you are restricted to USD 2000 and transfers out of SSD are restricted to USD 5000.
Who is directing these actions?
Most of these actions are done by individual banks as a response mechanism to emerging risks in the financial sector. These actions indicate serious loss of confidence in the Central Bank of South Sudan, and points to the beginning of banking crisis. Many South Sudanese are looking at exchange rate like an isolated economic commodity but banking sector seems to be in a stern mess. If it does not collapse, perhaps larger part of public resources may be injected into it to rejuvenate the reserves - Public and Private.
What can we do?
Peace has just been signed. It is time for economic experts and cautious leaders on both side of SPLMs to swiftly workout mitigation steps before a complete collapse of the sector. A collapse will not be treated as SPLM -IG issue, it will eventually affect the whole nation. As such, if urgent steps are not considered immediately, South Sudan will face severe, long and heavy consequential impact on the economy. Therefore, we must work as country to save our economy.
Citizens in South Sudan's capital Juba are complaining about increasing prices at the market as the pound yesterday dropped to its lowest level yet against the US dollar.