South Sudan's Central Bank slashes benchmark rate to 13% in response to COVID-19

South Sudan's Central Bank has taken significant steps to mitigate the economic impact of the COVID-19 pandemic by slashing its benchmark interest rate by 200 basis points to 13 per cent. The move comes in response to the declining flow of credit to the private sector during the outbreak, with the aim of stimulating lending and accelerating economic growth. Parek Maduot, Director of Economic Development & Regional Integration at the International Conference on the Great Lakes Region, weighed in on the central bank's decision and provided insights into the broader economic landscape in South Sudan. Maduot highlighted the regional and global trend of central banks reducing interest rates to counter the economic slowdown caused by the pandemic. He noted that South Sudan, like its neighbors, faced challenges due to the preventive measures taken to protect the population, leading to adverse effects on the economy. In addition to lowering the interest rates, the Central Bank also reduced reserve requirements for lenders to inject liquidity into the market, similar to measures taken by countries like Kenya and Rwanda. One key point emphasized by Maduot was the importance of maintaining liquidity in a country heavily dependent on imports for essential goods. The interest rate cut, along with other monetary measures, is expected to increase liquidity and support the importation of crucial goods needed for the economy. While there were concerns about potential excessive growth from the rate cut, Maduot expressed optimism that it would help sustain the flow of goods and investments in the market. Another significant aspect discussed was the impact of declining oil prices on South Sudan's economy, which heavily relies on oil sales for public revenues. Maduot highlighted the need for austerity measures in light of limited oil revenues and budget constraints. The country's efforts to stabilize the economy amidst falling oil prices and financing obligations, such as a recently signed peace agreement, require strategic financial management and external support. Regarding the allocation of funds for COVID-19 response, Maduot mentioned that the government had dedicated resources to testing kits, awareness campaigns, and supporting healthcare workers. He emphasized the importance of effective resource utilization in combating the pandemic while cautiously easing lockdown measures to balance public health and economic concerns. In terms of the private sector's role, Maduot commended efforts to maintain employment and contribute to awareness campaigns despite challenges in sectors like hospitality. Government appeals to retain the workforce and private sector donations towards COVID-19 initiatives have demonstrated a collaborative approach to addressing the crisis. However, sustained support from both the public and private sectors, as well as development partners, remains crucial in navigating the current challenges and steering South Sudan towards a more resilient future.