Economists Recommend South Sudan Adopts a Developmental State Economic System
Some economists recommend the government drop its current capitalist system and adopt a developmental state economic system to control the flow of money in and out of the country and stabilize prices.
Economics Professor Abraham Matoch, who is also Vice Chancellor at the Dr. John Garang Memorial University of Science and Technology in Bor, Jonglei state said the developmental state economic system is market friendly and also allows the government to control prices, the black-market foreign exchange rate and the flow of currency in South Sudan.
“There’s no rule in a new country wishing to reconstruct, rehabilitate, and reconstruct to move immediately into a free market economic level which is more or less a catalyst.” Matoch told The Insider.
“And therefore, I encourage having a developmental state economic system because we cannot apply a capitalist economic system in a developing country.” Added the Prof.
A developmental state economic system is a system under which the state has more independent political power and more control over the economy. It embodies strong state intervention, as well as extensive regulation and planning.
Prof. Matoch emphasized that adopting such a system would help the government intervene and stabilize exchange rates and control prices in the country, adding that capitalism creates a class of minority rich and a class of the majority poor people.
“It also creates high unemployment because foreign investors are reluctant to invest in a country with uncertain exchange rates. As a result, the industrial sector will not grow,” Prof. Matoch said.
He said South Sudan’s economy is still developing and that’s why speculators are able to manipulate the foreign exchange rates to their advantage.
“Although the Central Bank has regulations in place, those regulations are not followed. If the commercial banks or the forex [bureaus] go and abuse the exchange rate to keep bulk of the money or dollars with them for black marketing, this will affect the economy. And this is exactly what has actually happened. So, people put it politely that it’s inflation but it’s not inflation.” He said.
The activities of commercial banks are not the only factor affecting the country’s economy. Since international NGOs and UN Agencies pay their employees in dollars, Prof. Matoch said this act inflates the market and weakens the South Sudanese pound against the US dollar.
“The international bodies are a part of it. Whether they are international NGOs or UN agencies, because they don’t open accounts with the Central Bank and they keep their money abroad, either in Kenya or in Uganda, they bring it in suitcases when it’s time to pay their staff.”
Seven days ago, President Salva Kiir fired finance minister Salvatore Garang, acting commissioner of the National Revenue Authority Erjok Bullen, and head of the country’s oil company, the Nile Petroleum Corporation Chol Deng Thon Abel.
But Ahmed Morjan, an economics lecturer at the University of Juba, says the country’s economic problems are political, not economic.
“An economy that produces goods and services needs to have proper peace and security whereby people will begin to produce import substitution goods and lessen dependents on imports.” Morjan said.
He said if this is done, the country would have enough reserves from the oil money that comes in the form of foreign currency.
“but this has never happened, and people are not able to produce either for themselves or surpluses for export.” Morjan told The Insider.
He noted that one of many tasks facing new finance minister Athian Diing Athian and his administration is to reduce rampant government corruption in the country.
“Administratively, if they can work to lessen corruption, there should be some little improvement internally especially now that government sometimes is not able to pay its workers,”
“What the new minister could do is to fight (and) reduce corruption such that the non-oil revenue, part of it can be used prudently to settle internal government obligations.” Morjan said.
After the recent reshuffle in the country’s financial institutions, the government formed a committee of economists to find solutions and make economic reforms in the fiscal policy to enable the government to improve the procedures of tax collection and efficient management of tax revenues.
Salvatore Garang, is the eighth finance minister to be sacked by the president since independence but Morjan said that will not solve much’
“the country’s economic problems are political rather than economical. the government must enact procedures to minimize corruption, improve security, and maintain peace. Otherwise, the changes will not help.” Morjan added.
Recent Comments