The recently formed independent state of Southern Sudan has secured a US$100 million deal from Qatar National Bank (QNB) to be used to issue letters of credit (L/Cs) for imports of essential goods.

Now a government minister has suggested a similar deal worth US$200 million is on the table with an unnamed bank.

Essential items

The L/Cs will be used to import essential items such as food, clothes, fuel, building materials and medicine.

Significantly, they should also help stabilise the price of imported goods and strengthen the South Sudanese economy.

Currency stability

The L/Cs allow importers to buy US dollars at the bank rate of 3.16 South Sudanese Pounds (SS£3.16) to the US dollar.

This is a far better deal than the SS£4.2 obtainable on the black market, according to commerce minister, Garang Diing Akuong.

New deal

The minister has also hinted to local media that a new deal similar to the one with QNB is in the advanced stages of negotiation with an as yet unnamed bank.

As well as QNB, regional banks that have already established a presence in South Sudan include Kenya Commercial Bank, Equity Bank, a subsidiary of Kenya's Equity Bank Group, and Dubai Islamic bank subsidiary, Bank of Khartoum.

Currency losses

The deals aim to stem South Sudan's substantial hard currency losses.

Informal trading with Kenya and Uganda causes a substantial proportion of the country's estimated US$1 billion a year hard currency loss.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.