Banking, like all the other sectors of the Southern Sudan economy, was affected during the years of the Civil War. Before the signing of the CPA, only a handful of branches of some banks, based in Northern Sudan, had branches operating in the South - mainly in the key town like Juba, Wau and Malakal.
The signing of the Comprehensive Peace Agreement (CPA) was a turning point for the banking sector in the Sudan in general and Southern Sudan in particular.
The Wealth Sharing Agreement (WSA), signed at Naivasha, Kenya on 7th January 2004 clearly defined the shape of banking and currency in the post-war Sudan.
It was agreed in WSA to have a dual banking system in Sudan during the Interim Period. An Islamic banking system in Northern Sudan and conventional banking system in Southern Sudan.
The Parties agree to restructure, the Central Bank of Sudan (CBS) to reflect the duality of the banking system in Sudan. The CBS was therefore directed to use and develop two sets of banking instruments, one Islamic and the other Conventional and to implement a single monetary policy through:
- An Islamic financing window in Northern Sudan under a Deputy Governor of CBS using Islamic financing instruments to implement the national monetary policy in Northern Sudan; and
- The Bank of Southern Sudan (BOSS), headed by a deputy governor of CBS was to be established to manage the conventional window using conventional financing instruments in implementing the same national monetary policy in Southern Sudan. The BOSS was also tasked to be responsible for chartering and supervising financial institutions in Southern Sudan.
The primary responsibility and mandate of the CBS as per the CPA is to ensure price stability, maintaining of stable exchange rate, sound banking system and issuance of currency. The monetary policy is to be carried out accordingly relying primarily on market-based instruments instead of administrative allocation of credit.
The Governor of CBS and his/her two deputies to be appointed by the Presidency. The Governor of CBS in turn to appoint, in consultation with his/her two deputies, other senior officers within the Central Bank.
The Parties agree to establish, during the Pre-Interim Period, an independent Board of Directors (BOD). It was agreed that decisions of BOD on matters that affect adversely the interest of Northern or Southern Sudan be by consensus. The BOD is responsible to the Presidency on the accountability of the CBS and consist of nine (9) members as follows:
- Governor of CBS, as Chairperson and his/her two deputies and;
- Six highly qualified Sudanese to be appointed by the Presidency taking into account the agreed formula in the Power Sharing Protocol for the institutions of the National Government.
The CBS was directed to adopt a program and to issue a new currency, which was successfully completed in the first quarter of 2007.