By Sentry Team
Soon after South Sudan devalued its currency in December 2015, the central bank authorized the auction of U.S dollars to commercial banks to offset the cost of devaluation which had caused the South Sudanese pound to lose its value by 84 percent. Millions of dollars were auctioned to the commercial banks as a result of this move.
As reported in this Enough Project brief, the process of injecting dollars into the market via the auction was compromised by the fact that this money was not reaching an “open market of buyers and sellers.” Instead, a “closed market of insiders have held on to that cash.”
Now the central bank governor, Kornelio Koriom, has asked the commercial banks to account for how the dollars were utilized. According to this story from UN Radio Miraya in Juba, this request arises from the fact that the “effects of the money are not being felt in the market.”
Koriom threatened to disclose the names of non-complying banks to the media. Another round of auction is set to occur in the coming weeks.
Before the devaluation, two parallel exchange rates existed in the market: a black market rate and an official rate set by the central bank. Elite politicians with access to preferential rates at the central bank turned huge profits on the black market rate. The currency devaluation was aimed at reconciling the parallel exchange rates. For an in-depth grasp of the devaluation exercise, please refer to our brief, Addressing South Sudan’s Economic and Fiscal Crisis.