cash working group meeting · 2020. 11. 12. · aob –lead by ali mansoor (cash working group) cva...

Cash Working Group Meeting07 October 2020

Agenda

Agenda

A. CVA in 2021 HPC - lead by Luluwa Ali (OCHA)

B. Annual Analysis on JMMI and location specific exchange rates –lead by Jonathan Buckley (REACH Initiative)

C. Impacts of the Depreciation of Local Currency on Households -lead by Achalew Felek (VAM/WFP)

D. Exchange Rate issues - macroeconomic perspective – lead by Malcolm Smart (UK Embassy)

E. AoB – lead by Ali Mansoor (Cash Working Group)

CVA in 2021 HPC

CWG meeting, 7 October 2020

Considering CVA in the HNO & HRP

HNO

Part 1: Crisis Impact and Humanitarian Consequences

Impact on functioning of and access to critical markets of goods and services;

Information on delivery mechanisms and how these have been affected; Impact on

National Social Protection mechanisms

Part 2: Risk Analysis and monitoring of situation and needs

Consider impact on market access and performance of critical goods and services,

availability, accessibility and quality of services and the response by national

institutions

Part 3: Sectoral Analysis

Include critical market information on the sector relevant goods and services to be

provided. Including cost, prices and trends, access to markets by different crisis affected

groups


HRP

Part 1: Strategic Response Priorities

• Review feasibility of different response modalities (cash, vouchers, in-kind or mixed)

• Provide information on operational capacities of partners and financial service

providers, access to and functioning of markets, acceptance by government and

preferences of beneficiaries, potential risks to beneficiaries (by gender, age,

disability, socio-economic group. etc.) and response implementers, etc.

• Support identification of appropriate, ‘SMART’ outcome-based monitoring indicators.

• Interrogate to what extent is MPC going to be used and the barriers to the same, if

not

Part 2 - Response Monitoring

• Include beneficiary preferences towards different response modalities as part of

community-based perception indicators,


HRP

Part 3 - Sectoral Objectives and Response

• Clarify which response modalities will be used to deliver planned programmes.

• Include information on evidence used to determine response modalities and state the

percentage of the response delivered by the respective modalities.

• Include outcome-based, non-modality specific indicators for the monitoring of sector-

level objectives.

Part 4 – Refugee Response Plan

• Include any response using CVA, including MPC and brief cash feasibility information,

budget, PiN targeted and objective of MPC

• Part 5 – Annexes 5.1- Response Analysis

• Include detailed cash feasibility information under this annex

Considering CVA in the HNO & HRPHRP

Formulating Projects/Activities and Estimate the Cost of the response plan

Thank you

Joint Market Monitoring Initiative (JMMI)


Cash Working Group (CWG)

October 7th, 2020


Partners – 30 partner organisations


September MSSMEB MapCost of MSSMEB

46,451 SSP117.6 USD*

▲6186 SSP +15%


MSSMEB Yearly Trend

Figure 1: Normalised Graph of MSSEB Prices from August 2019 to September 2020*

* The prices were normalized by setting August 2019 as the baseline and dividing each month’s price by the price in August 2019

• MSSMEB prices across all regions have

increased since August 2019

• A spike in prices was seen in March due to

COVID 19 and uncertainty over supply lines and

border closures

• Prices stabilized at a higher price, and have

increased again since August 2020 due to poor

wet season road conditions and the depreciation

of the SSP


Parallel Market Exchange Rate Changes since March

Figure 2: National Median SSP Parallel Exchange Rate from March 2020 to mid-September 2020• National median prices have been increasing

since March 2020 – and at a faster rate since

August.

• Parallel market rates are not the same across the

country and vary at a market level


SSP Parallel Market Rate By Location


Contacts

Khemis Moses

REACH South Sudan

[email protected]

Jonathan Buckley

REACH South Sudan

[email protected]

mailto:[email protected]:[email protected]

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vamfood security analysis

South Sudan

Impacts of the Depreciation of Local Currency on Households

Cash Working Group (CWG)

October, 2020

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Depreciation vs devaluation


South Sudan

Devaluation: linked to the type of exchange rate regime, whether the currency ispegged or floats. When a government lowers a (pegged) currency's value, the currency

devaluates.

• Measures to strategically lower the purchasing power of a nation's own currency to combat trade imbalance

Depreciation: is a fall in the value of a currency in a floating exchange rate system -when market forces determine a (floating) currency‘s value loss, the currencydepreciates.

Why local currency depreciates• Interest rate• Inflation• Negative trade balance• Monetary and fiscal policies• Political instability

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Exchange rate changes


South Sudan

Exchange rates are typically quoted in LCU/USD - “Direct Quotation” where the USD is the base currency equal to one and the LCU is the quote currency.

Perspectives of exchange rates:

• How many Local Currency Units (LCU) are needed to buy a USD – SSP/USD

• What share of a USD you can buy with one LCU – USD/LCU

A change from 2 LCU/USD to 4 LCU/USD

• 100 percent (positive) change in LCU/USD; or

• 50 percent (negative) change in USD/LCU (from 0.5 USD/LCU to 0.25 USD/LCU).

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Exchange rate monitoring


South Sudan

The depreciation or appreciation of the LCU is typically reported within two different methods

Example: SSP/US $ 215 (Sep 2018)520 (Sep 2020)

By how much the SSP depreciated?

= (520-215)/215 142%

= (520-215)/520 59%

How do you interpret the above two percent changes?

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Trends of SSP/USD exchange rate


South Sudan

Exchange rate plummeted from SSP 311 in Sep2019 to SSP 520 in mid-Sep 2020, 67%

depreciation

From 1st to 3rd week of September, exchangerate dropped by 30% (from SSP 400 SSP to 520).

Gap between the parallel and official rate widen, as the latter rate revolved around 166 SSP/US dollar.

Exchange rate fluctuations can impact food prices and, consequently, access to food

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Exchange rate monitoring


South Sudan

Exchange rate fluctuations can impact food prices and, consequently, access to food.

If the local currency depreciates relative to the USD,

Food imports get more expensive. This leads to a rise in domestic food prices for importeditems and, through substitution of these items with less expensive ones and shiftingconsumption, to increasing domestic food prices in general.

Food exports become more competitive -ensuing higher export demand can also drive up domestic food prices.

If a currency rapidly loses value, holding on assets/hard currency/ food commodity stockscan be perceived as a more reliable form of saving than keeping local currency

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Impacts of SSP depreciation


South Sudan

Being markets as main source of food coupledwith high share HHs food expenditure, thedepreciation of SSP has negative impact on pricesof food commodities.

Increases HH food expenditure share,compromise HHs purchasing power for non-foodneeds

If the depreciation of SSP continues at the currentpace and no measures introduced, the situationwill be the worst to many

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South Sudan

Rise in cost of living: Increase in prices of foodcommodities, leading to high cost of basket,specifically in urban areas.

• In Juba the cost of basket increased by about 42%between August to mid - September 2020.

Given the income of many households affected by thesustained economic crisis, an increase in cost ofbasket limits households access to basic food andnon-food items

Increases in HH vulnerability to become foodinsecure- increases in caseload looking forhumanitarian assistance

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South Sudan

Increase in transport costs – (Fuel prices increased by 13% - SSP 230 to 260/L)

Drop in Terms of trade for livestock owners and labor dependent HHs.

The value of debt expressed in local currency increases as soon as the currency depreciates

Overall reduction in trade volumes - overall reduction in amount of cash in the hands of traders (US dollars denominated), and hence drop in volumes of imports.

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South Sudan

THANKS

Source: Bank of South Sudan

12 Aug: Talk of people cashing out at banks to buy US$ over

rumors of disagreement between Akol Kur and Nhial Deng

24 Aug: BSS Deputy Governor announces that central bank

has “run out of reserves”From June: BSS increased printing of SSP to finance budget deficit

16 Sept: Finance Minister Garang replaced

12 May: easing C19 restrictions ↑demand US$ as trade resumed

18 Feb: mix optimism at

formation of R-TGoNU and/or US$

payoffs to those who lost GRSS positions

24 Mar: intro of COVID-19

restrictions saw ↓demand US$ as trade restricted

↑ ↑ demand for US$ as people desperately try to

convert their SSP to $

31 Aug: rate appreciates on reports GRSS had secured a

$250m loan from Afrexim Bank

Evolution of the market exchange rate over 2020

The exchange rate should just balance the S&D of SSP with the S&D of US$

Supply of SSP in circulation• BSS / GRSS domestic

spending• Commercial bank lending?

Demand for SSP• For transactions (private and

businesses)• CT progs• By BSS (eg when auctions

US$)• ‘Saving’ outside of banks?

Supply of US$ in circulation• Oil revenues (MoFP payments,

BSS sales & auctions) • International community

(programmes, staff payments)• Remittances (WB estimate

>US$1bn pa)• Other?? Other exporters

Demand for US$• Traders• Foreign businesses remitting

profits• For business transactions?• Remittances to families o/s• Speculators?

=> Problems when the relative S&D get out of balance

Evolution of the exchange rates since ‘unification’ in Dec 2015

The growing gap between the official and market rates has huge VfMimplications for CT programmes.

What should CTs cost to deliver – how many cents in every USD spent should reach beneficiaries? 60, 70, 80?

A ‘commercial’ market-based US$ buying rate would lie somewhere between the indicative and market rates, but closer to the market than the current official rate.

Possible that recently the market rate has overshot relative S&D for SSP and US$.

Central Bank policy would be ideally to smooth the commercial rate to eliminate spikes from speculation and shocks to the S&D for each currency.

The Bank of South Sudan (BSS) Circular on Special Accounts

Some highlights fromCircular No: DCB/2/2017

Circular of Bank of South Sudan for use of SSP instead of any other hard currency

Experience sharing and suggestions

Experiences in decision on USD to SSP with FSPs?

How you are coping with current exchange rate issues?

What should be the solution to the challenges?

Some Links

Humanitarian cash and exchange rate fluctuation (not all are specific to South Sudan).

https://www.calpnetwork.org/wp-content/uploads/2020/09/use_of_foreign_currency_for_designing_of_assistance_packages_in_yemen_final_11082020.pdf Yemen

https://tec.alnap.org/system/files/content/resource/files/main/1540822102.CaLP%20Yemen%20CTP%20Case%20Study.pdf.

https://www.rescue.org/sites/default/files/document/4100/costefficiencybestpracticeguidance.pdf (pag 14 for exchange fluctuation best practices)

https://resourcecentre.savethechildren.net/node/14268/pdf/save_the_children_yemen_economy_brief_final.pdf Yemen

https://assets.publishing.service.gov.uk/media/5c6ec44940f0b647a8f662df/467_South_Sudan_Cash_Transfers.pdf It has some references to the impact of exchange rates

http://documents1.worldbank.org/curated/en/806291508505062484/pdf/120563-WP-SSEUUpdatefinal-PUBLIC.pdf

FOREX and exchange rate fluctuations in South Sudan:

https://reliefweb.int/report/south-sudan/south-sudan-special-working-paper-devaluation-south-sudan-pound-short-term-food

https://reliefweb.int/report/south-sudan/covid19-outbreak-likely-impact-markets-and-food-security-south-sudan-25-march

https://tec.alnap.org/system/files/content/resource/files/main/1540822102.CaLP Yemen CTP Case Study.pdfhttps://tec.alnap.org/system/files/content/resource/files/main/1540822102.CaLP Yemen CTP Case Study.pdfhttps://www.rescue.org/sites/default/files/document/4100/costefficiencybestpracticeguidance.pdfhttps://resourcecentre.savethechildren.net/node/14268/pdf/save_the_children_yemen_economy_brief_final.pdfhttps://assets.publishing.service.gov.uk/media/5c6ec44940f0b647a8f662df/467_South_Sudan_Cash_Transfers.pdfhttp://documents1.worldbank.org/curated/en/806291508505062484/pdf/120563-WP-SSEUUpdatefinal-PUBLIC.pdfhttps://reliefweb.int/report/south-sudan/south-sudan-special-working-paper-devaluation-south-sudan-pound-short-term-foodhttps://reliefweb.int/report/south-sudan/covid19-outbreak-likely-impact-markets-and-food-security-south-sudan-25-march

Bank of South SudanDocuments and Circulars

https://docs.southsudanngoforum.org/sites/default/files/2017-09/GUIDELINES%20ON%20THE%20MANAGEMENT%20OF%20SPECIAL%20ACCOUNTS.pdf

https://docs.southsudanngoforum.org/sites/default/files/2017-09/BSS%20SPECIAL%20ACCOUNTS%20OPENING%20DIRECTIVES.pdf

https://docs.southsudanngoforum.org/sites/default/files/2017-09/Bank%20of%20South%20Sudan%20Act%202011.pdf

https://docs.southsudanngoforum.org/sites/default/files/2017-09/GUIDELINES ON THE MANAGEMENT OF SPECIAL ACCOUNTS.pdfhttps://docs.southsudanngoforum.org/sites/default/files/2017-09/BSS SPECIAL ACCOUNTS OPENING DIRECTIVES.pdfhttps://docs.southsudanngoforum.org/sites/default/files/2017-09/Bank of South Sudan Act 2011.pdf

AOB

Next meeting agenda?

For more info contact : [email protected]

CWG Meeting Calendar:https://www.humanitarianresponse.info/en/operations/south-sudan/cash-working-group/events

CWG South Sudan Page on humanitarian Response Website: https://www.humanitarianresponse.info/en/operations/south-sudan/cashworkinggroup

Contact us

CWG Coordinator

Ali MANSOOR

CashCap Advisor

[email protected]

CWG Co-leads

Afsar KHAN

Operations Officer – ES/NFIs

IOM

[email protected]

Aikins MACBANSAH

CBT Team Leader

WFP South Sudan

[email protected]

mailto:[email protected]://www.humanitarianresponse.info/en/operations/south-sudan/cash-working-group/eventshttps://www.humanitarianresponse.info/en/operations/south-sudan/cashworkinggroupmailto:[email protected]:[email protected]:[email protected]

Thanks