South Sudan limits cash withdrawals to encourage electronic transactions

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South Sudan has restricted cash withdrawals by individuals and public and private sector entities in a push to promote cashless transactions, lower the cost of printing currency.

The limits mean cash withdrawals will be capped at SSP10 million ($3,730.58) per day per person, according to the South Sudan central bank.

The banking regulator in a circular dated September 16 says cash withdrawal exceeding SSP10 million shall be either deposited through a bank account, transferred within the banking industry or through interbank transactions, including mobile money operators.

The regulator says clients should use alternative authorised channels to conduct their banking transactions thereby fostering digitalisation of financial services.“The public is encouraged to embrace electronic payment platforms including mobile money, credit and debit cards which incur low charges on transactions while offering convenience and establishing individual credit history,” the regulator says.“The Bank of South Sudan (BoSS) recognises the vital role that cash plays in the economy and would therefore ensure an inclusive approach as it implements the transition to a more cashless society.”According to BoSS, commercial banks are expected to make account opening process more seamless for all customers especially those traditionally excluded by the banking sector to facilitate the shift to the cashless economy.

The new policy underscores importance of digitalisation and deployment of related financial technology applications in the South Sudan economy.“The proposed financial instruments and the necessary steps to ensure their effective adoption, will reduce the risks associated with carrying cash."It will also ensure convenience and speed while allowing the bank to exercise greater control over the cash in circulation, thereby improving the conduct of monetary policy,” the bank says.

Juba is also struggling with a shortage of dollars as a result of declining revenues from oil production, the nation’s chief revenue earner, on depleted wells and military conflict in the neighbouring Sudan.

The International Monetary Fund (IMF) says Juba’s risk of debt distress remains high, owing in large part to the high debt service costs, and low levels of foreign exchange reserves and fiscal buffers.

In February 2023, the Bank of South Sudan (BoSS) suspended the use of the US dollar in local transactions, saying the use of foreign currency reduces the demand for domestic currency and places huge pressure on the forex demand, fuel speculations, and inflation.

The regulator also argued that the rapid expansion in dollar deposits and loans is likely to increase the riskiness of the loan portfolio of the domestic banks.

Most transactions in the country were initially carried out in the US dollar largely due to hyperinflation and the volatility of the local currency.

The South Sudanese authorities are facing multiple challenges including significant spillovers from the conflict in neighboring Sudan, protracted flooding, declining humanitarian assistance, the incorporation of newly constituted security forces into the payroll, and the need to finance elections planned for 2024.

Juba has seen more than five consecutive years of severe food insecurity, which continues going into 2024 with an estimated 7.1 million people facing acute food insecurity, according to the International Monetary Fund (IMF).