Matik Kueth
Africa-Press – South-Sudan. The Governor of the Bank of South Sudan (BoSS), Dr James Garang, cautioned the country that the recent public sector salary increment could fuel inflationary tendencies in the market.
While addressing the media on Friday, Garang said the recent wage hikes could probably cause prospective danger in the general price level in South Sudan.
“As we approach the last quarter of 2023, coupled with the recent public sector pay rise, the Bank of South Sudan has observed a modest strengthening of the US dollars against the South Sudanese pound over the last one week,” Garang said.
“The upward review of the pay rise may pose a potential risk in the growth rate of a broad money, which could lead to potentially lead to adverse ramification on the general price level,” he added.
He said the Bank will work hand in hand with the ministry of finance and planning to make certain economic sustainability.
“To mitigate the adverse effects of this phenomenon, the Bank will work closely with the ministry of finance and planning to ensure macroeconomic stability,” he said.
He noted that the Bank has set up procedures to curb the negative impact of salary raise by improving its capacity to intercede the foreign exchange.
“Broadly, the Bank has put in place mechanisms to control this effect, by boosting its capacity to intervene in the foreign exchange market through purchase of US dollars from government to pay the salaries of the public employees,” he stated.
“And by utilizing provisions of the Treachery Single Account (TSA) agreement that allows the bank to automatically exchange foreign component of domestic revenue into SSP to build reserves,” he said.
He revealed that the bank will intensify the “uptake of the Term Deposit Facility (TDF) sell-off by rescaling and restoring the short-lived tenors that are alluring to the bank.”
“The combination of both direct and indirect monetary policy instruments at our disposal will strengthen our capacity in sterilizing excessive liquidity from the system, and there by control the adverse effect of the exercise money supply,” he stated.
According him, the bank will shoulder four policy measures which include continuing with tightening of the monetary policy stance by maintaining the 10 percent target for 2023 growth, maintaining the central bank interest rate (CBR) at 15 percent in [M2] “which includes serving deposits in banks.”
The bank will also increase the volume of the weekly foreign exchange auctions and strengthen policy coordination with the fiscal authorities.
However, he said the banks reassure the public that they will continue to keep an eye on the evolution of the foreign exchange market.
“The Bank of South Sudan assures that it will keep monitoring developments in the foreign exchange market keenly. It will intervene, when necessary, through an increase in the amount of money auctioned to forex bureaus and commercial banks to support the balance of payment obligations and combat inflationary pressures,” Garang said.
He further stressed that the bank has sufficient reserves that will increase the amount that it will auction, reiterating that in the coming two weeks, the dollar rate will likely decrease.
“For the sake of augment, the amount we put out yesterday was double what it used to be in the last month. The figure we used to have is two to three million, and yesterday we put out four million, which is even twice what we used to have,” he expressed.
“At the moment we have enough reserves to even increase this figure going forward, I will not say how much, but we are confident that we have enough reserves to increase the amount that we will auction. So, for the next two weeks, we are confident that the rate will stabilise,” he stated.
Source: The City Review South Sudan
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