COVID19 Outbreak: Impact on Markets and Food Security

All major stock indicates from the global market plummeted 5 to 11 per cent on 9 March, due to a combined impact of coronavirus panic and crashing petroleum prices, some of which depended on the export of oil, Italy and some damaged petroleum wells reopened after the peace agreement in 2018.

While access to hard currency has not yet begun by importers of banks, traders still rely on the informal market. The collapse of world oil prices as COVID19 spreads across a variety of main players in the world economy would have an impact on oil revenues. The crash of foreign energy prices would lead to significant export revenue losses, which will increase a trade deficit of over 2 billion SSP.

The decline in oil prices would also cause the weakening of the currency and the balance of payments will change. [Download Report Here: https:/bit.ly/2Unsmrx]

South Sudan is a net importer of cereal with a gap of approximately 483,000 mt in 2020, 7% lower than last year but still relevant, 22% higher than the five-year average in previous years. Cereal deficits increased in 2019, in Northern Bahr el Ghazal, Jonglei, Unity, Upper Nile and Warrap, which were persistent deficits and import-dependent countries, due to the floods which affected crop production.

Food deficit is covered by food assistance that produces more than 300,000 tons of mixed goods, with commercial imports equal to 215,000 tons of Uganda maize in 2019. As a key source for South Sudan’s food commodities, Uganda and Sudan have a negative effect on trade volumes and therefore put pressure on prices for cereal and industrial (processed) commodities both across all markets in South Sudan as a result of the outbreak of COVID19 which results in limited trade in both Uganda and South Sudan and border closure restrictive commodity movement.

Commodity rates typically trace the SSP’s parallel rate of exchange to USD. After the conflict of 2016, average exchange rates between South Sudanese pound and US dollar have tended to depreciate on the Juba parallel market. The depreciation rate decreased by approximately 13% compared to 28% in the previous six months (October 2018-March 2019).

The parallel currency depreciated in April from SSP 274 to SSP 311 per US Dollar in September 2019. Druck from reduced Uganda demand, instability in Sudan combined with a decrease in oil incomes as well as the restrictions on free trade following COVID19 resulted in sharp devaluation by the SSP following the establishment of a Government of National Unity in late February 2020, after an appreciation in value for SSP 270/USD.

The SPP in the parallel market has declined from SSP 270/USD to 310/USD from last year, with its border closures between Uganda and South Sudan during the third week of March 2020 as a result of COVID19. This depreciation of the currency and possibly reduced trading volumes across the border will continue to put pressure on the already very high average five-years and particularly the commodity prices of Eastern African counties in South Sudan.

From the global markets, as a result of the combined impact of coronavirus panic and falling oil prices, on March 9 all major stock indices fell by 5 to 11 per cent. When financial markets are spotted by risk, poor countries such as South Sudan are at risk of losing their borrowing and spending ability when it is most needed.

However, while the latest coronavirus outbreak in East Africa may have a major socioeconomic effect, with significant potential impacts for survival media, food security, the national economies, and while the Chinese are too early to predict becoming the world’s largest agricultural and food trader region, representing an important part of the country’s trade portfolio.

Southern Sudan–an import-driven nation with significant exposure to the supply chain to China, factory shutdowns in China, import bans, higher shipping and freight rates, suspension of flights, and restrictions on the movement of products and persons–may potentially disrupt trade and market chains with impacts on import prices of food.

These economic shocks are likely to worsen South Sudan’s acute food insecurity, particularly because household stocks are generally running out, the market prices are high and food and nutrition insecurity are approaching its peak of the lean season. According to the latest IPC report, which was carried out in January 2020, a total of 6.5 million people were expected to suffer extreme food insecurity in the timeframe from May to July 2020, even before the news about the spread of COVID19.

Decreased costly income and subsequent monetary depreciation translate into costly imports, including basic food, which poses a significant threat to South Sudan, a low-production country, which relies heavily on imported goods even for the most basic commodities. Higher food prices decrease the buying power of households, jeopardize household access to food and push them to trigger coping strategies ranging from moving to cheaper, less nutritious goods, decreasing the intake or going on without food for entire days.

Data Source: World Food Programme (WFP)