Finance minister crafts policies to tame inflation
South Sudan has is expected to lower its inflation rate to 16.3 per cent thanks to the microeconomic policies highlighted in the budget for the current fiscal year.
The Minister for Finance and Planning, Agak Achuil Lual, was upbeat during the presentation of the overdue 2021–2022 fiscal budget, which underwent its first reading on Wednesday. The budget is worth SSP 287 billion.
“Right Honourable Madam Speaker, while noting these achievements, the monetary policy for the fiscal year 2021/2022 will continue to focus on supporting microeconomic stability through the following: reducing inflation from 22.8 in the fiscal year 2020/2021 to 16.3 in the fiscal year 2021/2022,” he said.
The draft budget is being submitted just about four months before the end of the 2021–2022 financial year, which is due on June 30. However, the budget did not specify whether the government has begun its implementation or whether it will overlap to the next fiscal year, 2022/23, which commences in July of every year.
Agak pointed out that the budget would consolidate the ‘‘current exchange rate reforms through the commitment of the Central Bank to occasionally intervene whenever there is undesirable volatility in the foreign exchange market.’’
Measures in place
Other measures to achieve the goal were through ‘‘building the international reserves to the equivalent of three months of import cover to enable the country to meet its external payment requirements,’’ preserving the value of the SSP, and mitigating against the enforcement shocks.
Early this month, the Central Bank Governor, Moses Makur Deng, announced new monetary and banking policies to revamp South Sudan’s economy days after taking over office in which he said one of the goals was to reduce the inflation rate to a single-digit of 8 per cent with a margin of +/- 1 per cent as well as the 1 per cent growth of real gross domestic product (GDP) in 2022.
He also stated that the policies will encourage commercial banks to lend to the private sector at a rate of 40 per cent of their total deposits and to accumulate international reserves equal to about four months of import cover.
“The Bank of South Sudan would like to assure the public that it is prepared to intervene at any moment should there be an apparent market volatility, to stabilise the market and thus curb inflation,” said Makur in early January.
In his presentation to the members of Parliament, Agak said that: “The Bank of South Sudan will establish Deposit Insurance Funds and promote the development of microfinance sectors as a mechanism for fostering the financial services in the country and to contribute to poverty reduction.”
South Sudan has been facing one of the most devastating economic crises in the past years of civil unrest, resulting in high inflation, high market prices, and civil servants’ spending months before getting their salary while the security sector received the lion’s share of the allocations.
However, President Salva Kiir promised a better economy in his New Year remarks and directed the financial line institutions to improve the economy through reforming the sectors as provided for by the Revitalised Agreement on the Resolution of Conflict in South Sudan.
