South Sudanese Economy has collapsed

By: Dominic Ukelo (a South Sudanese economist), JUL/24/2016, SSN;

Since the returning of the SPLA-IO members and prior to the Juba Street fighting, which led to the South Sudanese economy to completely collapse, there has been high tension all over the country, especially in the capital Juba. Some elements in the government were unhappy with the returning of the SPLA-IO members.

Meanwhile, the SPLA-IOs were feeling bitter and disappointed with the government forces’ perpetual harassment and intimidation whenever they met in the capital city. Tension remained high as government security forces began killing SPLA-IO members, including Lt. Colonel George Gismala and Sgt. Domach Koat Pinyien on July 2, 2016, the incidents which fueled the already existing tension.

As a result of the tension, the SPLA and the SPLA-IO forces fought for five days inside Juba, starting from the event at Lou Clinic on Gudele road on Thursday July 7, 2016, followed by the deadly clashes outside the Presidential Palace (J1) on Friday July 8, 2016, leading to the several attacks on the IO position in Jebel Kujur, by the government forces.

Subsequently, the security situation deteriorated, especially, in the capital, Juba.

South Sudanese government has continued to fail to provide its citizens with basic public services, such as security, which any government in the world should have provided to its people in order for them to build their country and thrive economically.

For more than five (5) consecutive years, the regime in South Sudan adopted a ruling style like those of Zaire, Afghanistan and many other failed states, that are characterized by ill decisions, widespread corruption and predatory ruling.

Moreover, the regime relies entirely on crafting ill-advised policies by tribal elites that became dangerous and unsustainable, which have been for long time the reasons for the country to be destabilized and the economy growth to be sluggish.

High officials of Salva Kiir’s regime continued plundering the country’s resources which are only destined to increase their national stock of wealth, and yet the worst were the higher officials, including the president and his ministers, who decided to deposit the stolen money in foreign bank accounts offshore, which contributed mostly to the collapse of the economy.

What has been happening in the South Sudan is an unprecedented phenomenon. The economy was in critical condition even before the Juba Street fighting occurred. Before the Juba Street fighting, the government had failed to pay public servants in the country for almost four months.

Further, Salva Kiir Mayardit’s regime not only has shelved most important and urgent projects that would have contributed positively into the development of the economy if implemented.

Unfortunately, the regime has further abandoned its duties to financially support important institutions in the country, leaving for example hospitals without reliable electricity supply and the courts without ability to even go forward with there simplest duties, including failing to transport culprits from police stations to the courts.

After five days of Street fighting in the South Sudan capital, Juba, the fighting has finally dragged the already
deteriorated and abnormal economy to its knees.

As in the Venezuela, which has an inflation rate of 481.52 percent, the highest in the world, now the inflation rate in South Sudan is predicted to have reached an all-time highest of around one thousand (1000) percent, instead of 309.60 percent in June of 2016 and the average of 35.75 percent in 2008.

Moreover, foreign currency rates have climbed higher, leading to, for instance, one hundred dollars to be equivalent to eight thousand South Sudanese Pounds SSPs, instead of five hundred SSP just in June 2016 before the fighting.

As a result, the high rocketing of the hard currency rates have pushed the prices of the goods in the local markets to increase as well.

As of 16 July, 2016, one kilogram (kg) of sugar costs one hundred South Sudanese Pounds SSPs instead of thirteen SSP before the fighting, one piece of Onion has increased from five (5) SSP to thirty (30) SSP, one plastic bag of bread has reached to forty (40) SSP instead of four (4) SSP, a kg of meat costs eighty (80) SSP, one kg Maize flour eighty (80) SSP, a bag of charcoal costs hundred and twenty (120) SSP, and only four (4) pieces of tomatoes go for one hundred (100) SSP after the fighting in the capital, Juba.

In light of the hyper-inflation in the country, there has been a critical question raised by ordinary South Sudanese people, the question which needs an answer from their government.

If the average monthly salary in the country is seven hundred (700) SSP, considering that the public servants have not been paid their salaries for the last four consecutive months, how can population survive without or even with the salary of seven hundred (700) SSP?

The most devastating reasons that led to the South Sudanese economy to deteriorate so rapidly before being flunked by the recent clashes in Juba, are, for instance, the prevailing volatile political environment and constant civil wars in the country, both trends that could clog up the machine that powers any economy in the world, such as seen in Lebanon in the eighties (80th), as one example.

The International Monitory Fund IMF and the World Bank WB remain important factors that could help resuscitate the collapsed economy.

However, most contributors warn that major powers and the two financial organizations must be convinced first by the government of South Sudan in order to help support the failed economy. Mostly on the condition that parties are willing to put their differences aside, work together and are ready to put the country back together.

This condition, especially after the Juba Street fight, observers couldn’t foresee in the near future.

Therefore, as the economy has collapsed, the worst scenario for South Sudan if the international community do not intervene, would fortunately be either like another Rwanda or Somalia case in the continent.

By: Dominic Ukelo (a South Sudanese economist)

5 Comments

  1. Eastern says:

    Thanks Dominc Ukelo!,

    Kiir and cohorts are living in dreamland. The examples and reasons for many countries that have failed in the world are available for Kiir and his supporters to study and avoid the same pitfalls. It doesn’t require the expert advise of Mr Museveni at all!

    That said, following the outbreak of crisis in the country from the infamous December 2013 incidence in Juba, when the economy was not doing really badly, Kiir and cohorts would not have bought into the idea of choosing to fight the war to its logical end – Dr Garang’s SPLA wasn’t even going to remove Omar el Bashir nor was SPLA of Dr Garang was going to be vanquished by the former! When this conflict started, I was always reminding the two parties of pyrrhic victories, an observations for which I was called names.

    South Sudan depends on oil revenue to support its economy. Now with global oil prices having plumated to record lows and with much of the oil (still not extracted) having been mortgaged, the economy will continue to tumble. This was something avoidable in the first place. In the emotion of wanting to fight Dr Machar and apprehend him within 3 months, arms and equipment were acquired without regard for the country’s economy. A protracted peace negotiation in Ethiopia led to the signing of the ARCISS with the party in Juba hellbent on renegotiating it due to pressures from Kiir’s supporters. To reward them, Kiir had to split South Sudan into 28 states largely along tribal lines.

    As result in the delay in implementing the ARCISS as signed and with the split of the country into 28 states multiple battle fronts began to emerge in hitherto relatively peaceful parts of the country. This led to all resources at the country’s treasury being redirected towards fighting the war at these multiple battlefronts neglecting other sectors especially in the civil service leading to months of unpaid salaries. Kiir’s government attempted to stabilise the economy by printing new banknotes to salvage the situation but it only got worse: the South Sudanese Pound continued to nosedive and market prices sky rocketed. Some of us critised Kiir and his men at the finance and central bank for their inabilities to contain the situation. South Sudan is heading the Zimbabwe way thanks to the “leadership” at J1. I remain at pain when I see people in the streets of Juba demonstrating in support of Kiir – people who barely have enough to take them to the next day!

  2. Lagu says:

    The sudden collapse of the economy that started when the peace was being signed was just a clear sign that the peace was not wanted at all and a quick preparations for a war was immediately started using the little existing money. Millions of dollars were shifted for gunships, Jets and all the deadly weapons that were displayed on trial on the citizens in Juba from the 7th to the 11th of July 2016. It is just like taking your own money and burning it out, starve your own people and turn around bombing them,killing them and destroying their properties. This is the simple interpretations of the events in the country we do not need an economist. Nobody is thinking positively for the country and its citizens. This is a country whose people celebrate when they have killed enough of their own brothers and sisters. At a time when we had expected a declaration of days of mourning and lowering of our flag for the hundreds of innocent killed the negative face was shown to us. Who will care about the economy when even human beings are not valued?

  3. Atom says:

    Dear editor,

    In a heavy weight boxing championship, one of the fighter must be save by the bell. South Sudan as a fledgling nation has inexperience leaders, ambitious, corrupts, and tribal. Since independence everything in the country has been sinking slowly as if we are being swallowed by a sinkhole. Our leaders has no idea how to fix the economy, leave alone other things. The Dinka government in Juba is adamant to any solution that can bring peace and prosperity in the country. The Dinka government in Juba thinks that war is the solution to everything, and if they can take the whole south Sudan for themselves is the better. In Bwona Malual words “South Sudan belong to the Dinka.” Even so, why don’t they then make it a better place for themselves to live? Thousands of south Sudanese refugees who Uganda are mostly Dinka. Why are they running anyway if the land belongs to them? The reasonable solution is for the United Nations to take over the country at least for some years. It is not a better solution, but is better than hunting ourselves to death. The game of cat and mouse (Dinka Vs Nuer & other tribes) is a dangerous business. Without such a help from international communities, I think it will only be God that can save South Sudan from the notorious Dinka. South Sudan is already a failed state, and from here I don’t know what will be next for the fledgling nation.

  4. abai okwahu says:

    the junta will keep printing paper money to pay for militias (protection money), and the little derived from the share of oil ends up syphoned by kiir and friends into overseas accounts. the only solution is to switch to dollarization to arrest inflation and corruption as this has succeeded in places like ecuador. however, dollarization can only work in a stable government, not under the junta in juba.

  5. August 17, the deadline set by African and US negotiators for a peace agreement to be reached between the warring parties, has been and gone with no settlement. On the day itself, Juba was eerily quiet. One woman told me that she feared for the safety of her young daughter, so they both stayed at home. Empty water bottles and other rubbish are strewn around the city. Clean drinking water is difficult to find – leading to the current cholera outbreak – and hope is in short supply.

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