JUBA, May 12 (Reuters) - South Sudan’s largest bank is shutting more branches as hyperinflation and a shortage of dollars eat into the group’s profits, the managing director said, underscoring country’s worsening financial woes amid a civil war.
Harun Kibogong told Reuters that Kenya-based KCB Group Plc , East Africa’s biggest bank by assets, will temporarily close five branches, leaving ten operational.
KCB was one of the first foreign banks to move into South Sudan more than a decade ago, lured by one of sub-Saharan Africa’s lowest banking penetration rates and its petro-dollars. Its then-chief executive slept in a tent and opened the first branch in a shop just big enough to fit a partition and a grill.
But a three-year civil war has curbed oil production, sent the economy into a tail-spin and spurred runaway inflation.
“We are not saying KCB is pulling out from South Sudan,” Kibogong said in an interview this week. “What we are doing now downsizing for survival.”
KCB lost 2.8 billion South Sudanese pounds in 2016, he said. He declined to specify the amount in dollars. The South Sudanese pound traded at 16 to the dollar on the black market on Friday, compared with 13 in February.
The bank has operated in South Sudan since 2006. Its branches are older than the country itself, which only became independent from Sudan in 2011.
Violence forced the bank to shut three branches in January 2014, a month after the war broke out. But now it is a perilous shortage of dollars and hyperinflation that topped 800 percent last year that is hampering operations.
Thom Rago Ajak, the governor of the Bank of South Sudan, said the state bank was trying to tackle the country’s economic difficulties.
“South Sudan’s economy is undergoing tremendous challenges due to internal and external shocks: the current political and economic development, and low oil prices,” Ajak said.
The bank planned to improve information technology, human resources and develop a credit information system, he said.
Such reforms, however, will not alleviate South Sudan’s fundamental problems: war, the flight of foreign capital and crippled oil production. (Editing by Richard Lough)