The architecture of volatility: Assessing institutional constraints and macroeconomic headwinds facing the Bank of South Sudan

Abstract

This study investigates the institutional and macroeconomic challenges hindering the Bank of South Sudan’s (BSS) ability to stabilize exchange rate movements between 2014 and 2019. Employing a cross-sectional survey design within a mixed research paradigm, the study drew a sample of 132 respondents from a population of 200, including retail business owners, Business Union staff, academic faculty, and Ministry of Trade officers in Juba. Data were collected through structured questionnaires and interview guides, achieving a high response rate of 97%. Empirical findings reveal a systemic "Policy Trap," where exchange rate movements are overwhelmingly market-driven (91% agreement) rather than policy-led, characterized by a near-perfect negative correlation (r = -0.91) between market fluctuations and BSS control. Regression analysis indicates that 84% of the variance in exchange rate instability (R² = 0.84) is explained by depleted foreign currency inflows and institutional policy deficits. Specifically, 88% of stakeholders identified limited foreign inflows as a primary constraint, with correlation data (r = -0.85) confirming that the exhaustion of oil-backed reserves has stripped the BSS of its intervention capacity. Furthermore, this study identifies a "multi-layered institutional failure," with 58% of respondents endorsing a combination of FDI scarcity, policy implementation gaps, and a critical lack of government commitment (p = 0.034). Additional barriers include short-term credit risks (26%) and a fundamental vacuum in monetary-fiscal coordination (17%). This study concludes that conventional monetary tools are insufficient under conditions of fiscal dominance and structural oil dependence. It recommends a transition toward a rule-based monetary targeting framework, strategic economic diversification, and the legal strengthening of BSS autonomy to rebuild institutional credibility and anchor market expectations.