Hyperinflation Stalks War-Torn South Sudan as Prices Spike

SSUDAN-UNREST-IDPS

Displaced people queue to register at the UNMISS Protection of Civilian (POC) site in Bentiu, South Sudan.

Photographer: Charles Lomodong/AFP/Getty Images
  • Consumer prices jumped 109.9% in December as food costs soared
  • Currency devaluation following oil slump adds to risks

Prices are spiraling out of control in South Sudan after two years of civil war and plunging oil prices forced the government to abandon its currency peg.

An 84 percent devaluation of the South Sudanese pound against the dollar last month is set to fuel hyperinflation in a country where surging food costs and a foreign-exchange shortage boosted consumer prices by 109.9 percent in December. The collapse in oil prices since 2014 has deepened the economic crisis by slashing government revenue and forcing SABMiller Plc, the nation’s main non-oil foreign investor, to shut its brewery.

“This cannot take me anywhere,” Suzie Gobi, a Ministry of Labor official, said of her monthly salary of 1,400 South Sudan pounds ($75.68). “I spend 100 pounds a day. It is really bad, very difficult and we are really suffering.” 

Fighting that erupted between factions of the ruling party in December 2013, just 18 months after independence from Sudan, slashed oil production by a third to an average of 160,000 barrels a day. Oil prices have slumped 71 percent in London since the outbreak of war, curbing revenue in a country that holds Africa’s third-largest oil reserves. Crude fell to a new 12-year low below $30 a barrel in New York on Friday.

The average government worker’s monthly wage of 1,000 South Sudan pounds can buy only three 30-kilogram (66-pound) bags of the staple corn flour that now retails at 280 pounds each, up from 190 pounds in November, according to Louis Tangun, a shopkeeper in the capital, Juba. A five-liter bottle of cooking oil sells for 200 pounds, compared with 80 pounds about two months ago.

‘Policy Options’

December’s inflation rate was driven higher by food and non-alcoholic beverage prices, which rose 130 percent from a year ago, up from 81.7 percent in November, the statistics agency said on Jan. 12. This category accounts for nearly three-quarters of the consumer-price index.

Inflation may be higher than official figures suggest because the National Bureau of Statistics only collects price data from two towns, according to Nadene Johnson, an analyst at NKC African Economics, based in Paarl, near Cape Town.

“With a weak currency, high inflation rates and fiscal difficulties, South Sudan authorities are running out of policy options,” Johnson said in an e-mailed note to clients. “On the brink of hyperinflation, South Sudan may face even higher reported rates.”

Carlos Gomes, managing director of SABMiller’s South Sudan Breweries Ltd., said on Thursday the company will shut its brewing operations and cut as many as 176 jobs by the end of March as the foreign-currency shortage curtails its ability to import raw materials.

The company says it has failed to turn a profit since setting up South Sudan’s first brewery in 2009. Prices of its beer jumped more than 40 percent following the devaluation.

“We have for many months not had access to any significant amount of forex,” Gomes said in an e-mailed response to questions. “We had large South Sudanese pound deposits in the bank at the time the devaluation was announced. The end result is that we incurred a loss of ‘tens of millions’ of dollars, placing South Sudan Breweries in an even worse position than it was.”

Civil War

South Sudan suffered its first economic crisis just months after seceding from Sudan when it turned off oil production following a dispute with Sudan over export fees for oil transported in pipelines across the border to a port. The quarrel deprived the state of nearly all revenue and its main source of dollars.

The civil war has left tens of thousands of people dead in the past two years and more than 2 million displaced from their homes. The World Food Programme and other United Nations agencies said in October that 3.9 million people are experiencing severe food shortages and at least 30,000 people in the oil-rich Unity state faced starvation and death unless warring parties allowed unrestricted access.

Political stability may return to Juba after the government of President Salva Kiir and rebels led by his former deputy, Riek Machar, agreed this month on a power-sharing accord to end the conflict. The government is due to be formed by the end of January.

Ivan Abilya, a resident of Tomping, a camp for displaced people in the capital, said pleas to the government to tame inflation were a waste of time.

“We are not heard,” she said in an interview. “Our cries are now to God for survival.”

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