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Inflation drives up interest rates, cost of business in S. Sudan

Xinhua, June 24, 2016 Adjust font size:

South Sudan's high inflation, nearing 300 percent, and the drop in global oil prices that is affecting its oil exports, have driven up interest rates as some banks have halt lending to the private sector, local traders said on Thursday.

The interest rate from commercial banks have increased to 15 percent in May from less than 10 percent in the previous months.

According to the Secretary General of the South Sudan Chamber of commerce, Industry and Agriculture, Simon Akuei Deng, the devaluation of the local currency in 2015 has led to the closure of many businesses due to shortage of hard currency to import goods. And also the economy has lost credibility due to more than two years of civil conflict.

South Sudan depends on oil exports to finance 98 percent of its fiscal budget.

"Inflation is very high, weakening the currency that has led to losses by businesses. Traders have been left with no choice but to hike prices of their goods to save their stock," Deng told Xinhua in an interview in Juba.

The International Monetary Fund (IMF) said early this month that South Sudan's widening 2016/17 budget deficit toped 1.1 billion U.S. dollars and could worsen inflation if officials borrowed or print more money from the central bank.

"The confidence in this economy is also affected. It's difficult to keep your money in this economy when you are not sure of the exchange rate stability the next day," Deng said.

"We need reforms but financial assistance from the international community should not be based on conditions because the hunger is itself a security threat that can return the country conflict if not ironed out," said the secretary general.

Deng, however, said South Sudan was attracting investors in the areas of agriculture, infrastructure, energy and construction.

"The prospects are still high for South Sudan, but there is need to construct key roads like the Juba-Torit-Nadapal road linking up to Kenya and the Juba-Malakal road linking to Sudan for trade to help boost non-oil revenue," he said. Endit