South Sudan's central bank expects the local pound to rise further in 2012 after doubling supplies of dollars, and plans to build up food reserves to fight shortages in Africa's newest nation, the deputy head of the bank said on Friday.

South Sudan, which became independent in July under a 2005 peace agreement that ended decades of civil war with the North, has been struggling to end rebel violence, build up institutions and fight poverty.

The central bank has managed to stop a slide in the South Sudanese pound against the dollar and, now pumping $200 million a month into the banking system, expects the local currency to gain.

On Friday, a dollar bought 3.55 pounds on the black market, the main benchmark. This is an improvement compared to a rate of 4.3 pounds a few months ago but is still below the official rate of around 3.2.

"We expect a rate of 3.3 in March. We can merge the two rates (black market and official) then," Majok said. "We have increased supplies of dollars. The economy has improved in the past two months," he said.

"We will keep this (supply of $200 million) stable in 2012," Majok said, noting that increasing dollar supplies would deplete foreign reserves. He declined to specify reserves levels.

Dollar funding from the central bank has increased from $100 million a month in October.

One of the world's least developed countries, South Sudan has been ravaged by civil war with Khartoum and neglect going back to the British colonial era. Few roads exist outside the dusty capital Juba and many regions cannot be reached by road during the rain season.

The economy and government depend on oil.

South Sudan took two-thirds of Sudan's 500,000 barrels of day of oil production when it became independent, and this accounts for 98 per cent of state revenues.

It has contracted oil sales worth $3 billion since July. Oil is flowing through north Sudan for which the South will have to pay, an issue the two sides have yet to reach agreement on

FOOD SHORTAGES

A priority for the government will be to build up food production to avoid shortages, Majok said.

The United Nations says around 2.7 million South Sudanese will need food assistance from next year following crop failures and outbreaks of violence.

With the help of commercial banks, the country plans to build up strategic reserves for basic food items such as the staple food of sorghum, maize and rice, Majok said.

"We import almost everything. We want to focus on production," he said.

Commercial banks will raise money for a loan to buy food from local farmers or importers from January under a deal with the central bank signed on Friday, he said, without giving details.

He said he hoped South Sudan could avoid a budget deficit for 2012 and cut expenditures as the country wants to lower the import bill.

"I hope there will be no deficit," he said, ruling out borrowing.

Majok also said more foreign banks bank were planning to set up shop in South Sudan, among them National Bank of Abu Dhabi and banks from neighbouring Uganda and Kenya. Qatar National Bank (QNB) recently set up an office in Juba.