South Sudan’s central bank Tuesday injected 5 million U.S. dollars into the local market in a bid to mop up excess liquidity to stabilize the local pound (SSP).
Dier Tong Ngor, governor of the Bank of South Sudan (BOSS), said they have allocated 3 million dollars to commercial banks and 2 million dollars to forex bureaus in order to stabilize the foreign exchange rate.
“Today, the Bank of South Sudan conducted its first foreign exchange auction and in this auction 22 banks participated and we are auctioning an amount of 3 million dollars,” Tong told journalists in Juba.
Tong said they have already allocated two million dollars to forex bureaus. The central bank in early April announced that it will be auctioning hard currency to commercial banks and forex bureaus on a weekly basis.
“So all in all, we will be supplying an amount of 5 million dollars every week,” said Tong. The allocations are aimed at cushioning the weak pound against the dollar,” said Tong.
“We want to control the excess liquidity in the hands of the public because that is the main thing that affects us and it affects inflation. We feel that the pressure on the pounds is because of excess liquidity in pounds and therefore when we are doing auctions, we are trying to mop up that excess liquidity,” said Tong.
South Sudan’s economy is struggling amid hyperinflation caused by the more than six years of conflict since December 2013. The conflict-affected oil production in the northern oil fields causing a reduction in oil revenue earnings. In addition, COVID-19 has also impacted the economy affecting both oil and non-oil revenue.
Tong revealed that they will continue with the auctioning of hard currency until the foreign exchange market is developed.
“We will be in this for a long haul, we will do this auction until we develop the foreign exchange market so that the Bank of South Sudan can withdraw from the market-making role and we leave it to banks,” said Tong.