By No. 1 Citizen
Executive Board of the International Monetary Fund (IMF) has completed its Third and Final Review of South Sudan’s Staff-Monitored Program with Board Involvement (PMB), which was approved by IMF Management on November 1, 2024.
The review comes at a critical time as South Sudan deals with economic and humanitarian challenges exacerbated by the ongoing conflict in neighboring Sudan.
The war in Sudan has severely impacted South Sudan’s economy, leading to a substantial decline in oil exports due to damage to key pipelines.
As a result, the country is experiencing a sharp increase in inflation, a steep depreciation of the currency in the parallel market, and significant drops in fiscal revenue.
With over 800,000 refugees fleeing the conflict as of mid-October 2024, the humanitarian situation has deteriorated, leaving approximately 7.1 million people facing acute food insecurity.
The PMB, initially approved in February 2023, aims to support South Sudan’s reform agenda, focusing on macroeconomic stability, debt sustainability, and improved governance.
However, performance under the latest review was mixed, with only two out of five quantitative targets met by the end of June 2024. Key targets related to salary payments and social spending were missed, largely due to the oil production shock.
The IMF discussions highlighted the urgent need for the South Sudanese authorities to accelerate reforms, strengthen non-oil revenue collection, and redirect funding towards essential social spending, including salary payments.
Additionally, officials emphasized the importance of prudent borrowing practices and effective exchange rate management to stabilize the economy.
Despite the deteriorating conditions, the IMF Executive Directors noted the commitment of the South Sudanese authorities to implement corrective measures, including the resumption of salary payments and efforts to enhance public financial management.
They urged the government to focus on political stability and address governance challenges to boost donor confidence and attract external financing.
With protracted balance of payments needs and a decline in international aid, South Sudan has requested an arrangement under the Extended Credit Facility (ECF) to anchor its macroeconomic policy and facilitate external financing.
The IMF Directors acknowledged the need for sustained engagement and capacity development to support these efforts.
The IMF’s assessment underscores the need for coordinated monetary and fiscal policies, enhanced transparency, and ongoing reforms to ensure economic recovery and stability in the country.