South Sudan devalues currency by 84%, drops fixed exchange rates

South Sudan devalued its currency by 84 percent as the government allowed the pound to trade freely, surrendering to prices charged in the black market.

The Central Bank adopted the parallel market rate of 18.50 per dollar as of Wednesday midnight  from a previous fixed rate of 2.96 per dollar.

While addressing the press, South Sudan Central Bank Governor Kornelio Koriom Mayik said that the regulator will supply the market with occasional dollar sales.

Previously, President Salva Kiir had stated that the government had planned to fire state workers to free up cash for investment in non-oil industries, while improving collection of revenue in other sectors.

Conflict in the country has left thousands of people dead and forced about two million others to flee their homes.

An August peace agreement signed by Kiir and rebel leader Riek Machar sought to establish a transitional administration that would govern the country.

Oil output in the world’s newest nation was curbed by a civil war which erupted two years ago, reducing production by about a third in a country that has sub-Saharan Africa’s third-biggest reserves.

However, the decline in crude oil revenue and fluctuating oil prices that have plunged to below 40 dollars a barrel have resulted in dollar shortages that weighed on the local currency and caused the value of the greenback to soar in the black market.

“We are being driven by the supply and demand of commodities on the market,” said Koriom.

“The money was already devalued. People were no longer receiving money at the official rate and nobody could control it.”

The Governor also noted the Central Bank appealed to the international community to help the country make the switch as it does not have the reserves to back a move to the free-floating currency.

In addition Koriom added that it made the shift since rich people would buy the currency at the official rate and then sell it to the poor at inflated levels.

Officials with access to oil revenue during the conflict have profited by manipulating the dual system, selling foreign exchange at the black market rate, the advocacy group Enough Project said in an e-mailed statement on Tuesday.

The finding is part of a wider study by Enough Project on how financial interests fueled the conflict.

On his part, the department’s Minister David Deng said that the Finance Ministry would work on a package of measures to improve fiscal prudence to better cope with economic and external shocks.

Nevertheless, the devaluation has followed similar steps by other oil-producing nations with Brent crude hovering around 36 dollars a barrel, down almost 70 percent since a June 2014 high.

Angola, Africa’s second-biggest producer also devalued its currency at least twice this year, and Kazakhstan let the Tenge float freely, while exporters from Russia to Colombia let their currencies slide.