, NAIROBI, Kenya, Dec 16- South Sudan has surrendered its currency, the South Sudanese Pound, to trade freely in the market against the US dollar and other foreign currencies.
According to the Sudan Tribune, an official exchange rate of 2.96 South Sudanese Pound per USD was set by the Central Bank with the unofficial market based on supply and demand at around 18.
The move will be followed by an increase in the salary of low income category employees by the government.
The government will also take more fiscal measures to manage collection of non-oil revenues.
South Sudan’s exchange rate in the country will hence be managed by market forces of demand and supply.
The government shall however occasionally supply the market at the same rate.
Banks in the country have responded to the change. KCB Juba for instance has quoted the exchange rate at 20 South Sudanese Pound to 1 United States dollar reflecting depreciation of almost 85 percent.
The move has been informed by certain factors which include the drastic reduction in oil output due to the war that started in 2013.
“Crude oil prices that plunged below USD40 a barrel, resulted in dollar shortages that have weighed negatively on the local currency,” writes the Sudan Tribune.
The Tribune further explains that the previous system of managed floating exchange rate had failed because certain people would buy the currency at the official rate and then sell it in the black market.
Kenya’s Standard Investment Bank predicts that while the impact of these measures could be adverse to certain actors, it will encourage international humanitarian and development organizations as well as foreign investors to inject more hard currency into the fledgling economy.
“This is likely to spur overall economic activity,” Standard Investment Bank says.