South Sudan's English Daily Newspaper
"We Dare where others fear"
By Denis Ejulu
The central bank chiefs from the East African Community (EAC) on Friday said they are concerned and devising ways to replenish dwindling foreign exchange reserves caused by regional and global shocks such as conflicts, climate change.
James Alic Garang, the governor of the Bank of South Sudan, said that regional economies are facing existential challenges like climate change and conflicts which are impacting greatly their ability to strengthen foreign exchange reserves.
“At home the stakes are a bit higher as the country prepares to conduct it’s first democratic general election by December this year, externally geo political tensions including fore stance the conflict in Sudan has affected our oil pipeline to Port Sudan,” Alic said during the closing of the week-long meeting of regional central bank governors in Juba, the capital of South Sudan.
He also disclosed that the ongoing conflict between Palestinian militant group Hamas and Israel has also disrupted the major trading route in the Gulf of Aden, where the shipment of South Sudan’s crude oil takes place, thus posing a challenge to South Sudan’s economic outlook.
“As a result of the above challenges including the conflict in the neighboring countries, our reserves are at a historical low level, and this has huge implications for the balance of payments with negative consequence for our currency depreciation and the volatility manifested in the price of goods and services,” Alic said.
Alic noted that the macro-economic outlook appears promising with GDP projected to grow by 4 percent in 2024, adding that inflation has been modestly subdued though it remains volatile.
He said that prior to the recent disruption on oil exports; inflation had declined from 50.8 percent in 2020 to 5 percent in 2023.
“We have also engaged as a country key international financial institutions to support our homegrown reform agenda, through our bilateral engagement with the IMF under the Rapid Credit Facility (RCF) , South Sudan has implemented a series of macro-economic reforms that have yielded positive results on the exchange rate and inflation,” Alic disclosed.
Adam Mugume, Executive Director Research and Economic Analysis, Bank of Uganda, said that Uganda is currently struggling like other EAC member states to replenish foreign exchange reserves to meet the macro-economic convergence criteria for EAC, which calls for member states to have at least importe cover lasting for 4.5 months.
“Uganda’s economic performance has been good over the years, however, of recent we have been seeing challenges, one of the challenges of now we are seeing is that we have a challenge with building foreign exchange reserves,” Mugume said.
“We know we have to meet macro-economic convergence criteria for East Africa Community of 4.5 months of import cover, and so getting dollars from the market and traditional sources which was budget support is really becoming very difficult, and I think also some sister countries in the region are also facing similar challenges in terms building reserves,” he added.
Mugume noted that the economic uncertainty ahead seems to be very volatile, adding that EAC member states should learn from some of the countries that are doing well on this front.
Kamau Thugge, Governor of the Central Bank of Kenya, said that the Kenyan economy has rebounded after the local Shilling had increasingly depreciated against the U.S dollar since last year, owing to increase in remittances and tight monetary policy.
“I think part of what is driving the narrowing of the current account deficit, is the performance particularly of remittances, our remittances are quite robust they are very dependable source of foreign exchange, last year they increased by about 4 percent which was actually on the low side. This year in compiling and estimating our balance of payment for this year, we have assumed a growth of about 5 percent for remittances,” Thugge said.
He disclosed that Kenya raked in 4.2 billion dollars in terms of remittances, adding that in the first three months of the year, remittances increased by 18 percent.
Thugge said that Kenya is hoping to emulate Tanzania and Uganda to increase it’s share of foreign direct investments.
“Sometimes I look at my friends in Tanzania and also Uganda and what I admire, is really on the area of foreign direct investments (FDI), we really tried to increase the level of our foreign direct investments. This year we are projecting foreign direct investment in the region of just slightly below 500 million dollars which in terms of GDP is very small,” he disclosed.
Thugge noted that in the last few years, the region has been faced with several shocks that have affected the economic performance and also the policy choices.
He noted that as the EAC grows larger, stronger and more deeply integrated, it should continue to build it’s resilience to multiple shocks arising from global challenges and geopolitical developments.
Emmanuel M. Tutuba, Governor of the Bank of Tanzania, said global shocks have adversely impacted the macro-economic convergence milestones that have been achieved by the EAC member states.
“We have observed deterioration of fiscal space, elevated debt vulnerabilities, increased inflation levels and also increased pressures on our local currencies,” Tutuba said.
He said that structural challenges emanating from devastating impact of climate change such as prolonged dry spells as well as floods, thunderstorms and a number of resistant diseases have also gained prominence in the region.
“This meeting should therefore, be part of our joint efforts in building resilience through strengthening policy coordination and further deepening integration while cementing existing symbiotic relations among the partner states, we should enhance collaborative efforts in monetary banking ,financial markets and payment spheres to enable the region to sail through these challenges smoothly,” Tutuba said.
