The International Monetary Fund (IMF) has supported a move by the South Sudanese government to restrict using the US dollar in local transactions and contracts as part of the efforts by President Salva Kiir’s administration to contain the high cost of living that has hit households and businesses.
“The IMF supports the South Sudan authorities’ efforts to ensure that the existing legal framework regarding legal tender for domestic transactions is respected,” IMF Resident Representative for South Sudan Guy Jenkinson said.
The Bank of South Sudan (BoSS) has restricted the use of the dollar in local transactions in favour of the highly volatile South Sudanese Pound (SSP).
The banking regulator has also ordered government institutions to sign dollar-based global contracts under the oversight of the ministry of Finance and Planning, effective January 27.
South Sudan is pushing for the de-dollarisation (use of domestic currency as legal tender) of the economy to tame dollar speculation, improve the value of its currency and lower the cost of living.
However, the decision has elicited mixed reactions from the investing fraternity fearing that commercial activity will be adversely impacted, including operations of government, financial institutions, NGOs, civil society organisations, hospitality industry, travel agencies, commercial agencies, service industry, entertainment industries and private businesses that have heavily relied on the dollar for transactions.
BoSS through a circular dated January 27 said the ‘‘unacceptable’’ practice of using the dollar has fundamentally undermined and threatened to erode public confidence in the SSP as a legal tender and must be entirely ‘‘discouraged’’.
“It’s prohibited for any institution, official or private within the legal jurisdiction of the republic of South Sudan to dominate its commercial transactions in any currency other than SSP. These include rent fees, travel industry, hotels, entertainment services, restaurants, commercial outlets, private services contracts and monetary dealings,” Johanny Ohisa Damian, the BoSS Governor stated.