South Sudan Says Black Market Currency Trading Fuels Inflation

Written by Jared Ferrie, Published by Bloomberg Business on 21 October 2011

Oct. 21 (Bloomberg) — Central Bank workers in South Sudan may be involved in black market currency trading that is fueling inflation in the newly independent nation, the deputy finance minister said.

The employees are able to buy dollars at the official rate of between 2.9 to 3.3 pounds to the dollar and sell them on the black market, where the U.S. currency fetches as much as 4 pounds, Marial Awou Yol said yesterday in an interview in Juba, the capital. Ministry of National Security agents are probing all businesses that can trade in foreign currency, including banks, insurance companies and exchange bureaus, he said.

“We have ordered them to be positioned, or embedded, into mainly the central bank, because it looks like there is connivance between some staff of the central bank and these mobile bureau exchange owners” operating on the street, he said.

Consumer prices jumped 61.5 percent in September from last year as the cost of food surged, the National Bureau of Statistics said on Oct. 18. South Sudan gained control of about 75 percent of Sudan’s oil production, the third biggest in sub- Saharan Africa, when it seceded on July 9.

Police in Juba said last week they detained more than 20 people who were exchanging money illegally on the streets.

Yol said the government hoped that further investigations would lead authorities to the “invisible guys” who are profiting from illegal currency speculation.

Food Prices Soar

The price of food, the largest contributor to the inflation index with a 71.4 percent weighting, advanced an annual 65.3 percent in September, the Juba-based statistics bureau said in a statement on its website.

The central bank this month said it was doubling to $200 million the weekly amount of foreign currency allocated to financial institutions.

Yol said such measures would only be effective if security agencies are able to prevent illegal speculators from profiting on the black market.

“If no safety nets are out in place, it will be like pouring water into a bottomless hole, so we have to safeguard against more leakages in the currency market,” he said.

Yol said the surge in food prices coincided with the frequent closure of borders to trade between South Sudan and Sudan after fighting erupted this year between government forces and rebels in Sudan’s border states of Southern Kordofan and Blue Nile.

He also blamed illegal checkpoints demanding payments from trucks carrying imports from Uganda, South Sudan’s southern neighbor, for the price rises. The authorities have shut down roadblocks operated by members of 44 government institutions and 65 other groups, he said.

–Editors: Karl Maier, Nasreen Seria

To contact the reporter on this story: Jared Ferrie in Juba, South Sudan, at jferrie1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

Original post: http://www.businessweek.com/news/2011-10-21/south-sudan-says-black-market-currency-trading-fuels-inflation.html