The exchange rate has become an increasingly important economic issue in South Sudan in recent years, but particularly so during the current year. For many people, the South Sudanese Pound (SSP) has been increasingly weak and volatile, manifested in a sharply depreciating parallel exchange rate. This has been accompanied by an increasingly severe shortage of dollars, even in the parallel market.
Exchange rate developments result from a combination of underlying economic developments and the choices that are made regarding the formulation and implementation of exchange rate policy. The choices that are made by policymakers are important, and have a significant impact on both the path of the exchange rate and macroeconomic balance more generally.
This paper considers the role of the exchange rate in the economy and its importance as a macroeconomic instrument, and outlines the policy choices that are available to governments in general, and the government of South Sudan in particular. We discuss the drivers of exchange rate developments in South Sudan, before reviewing the available options and making some suggestions as to how to deal with the current problems relating to the exchange rate.