Press Release No. 24/354

IMF Staff Completes Mission to South Sudan for the Third Review of a Staff-Monitored Program with Board Involvement

October 2, 2024

• South Sudan faces several macroeconomic challenges, partly resulting from the spillovers of the war in neighboring Sudan and recurrent flooding that have deteriorated economic and social outcomes. The pipeline that carries about 70 percent of South Sudan’s oil exports has been inoperable since February 2024.
• The decline in oil revenues has resulted in a slowdown of economic activities, depreciation of the South Sudanese Pound, rise in inflation, and challenging budget execution in 2023/24.
• South Sudan’s policy and reform agenda aims to recalibrate near-term macroeconomic policies to cope with the oil production shock while maintaining economic stability and debt sustainability; and further improve governance and transparency. Discussions on performance and policies to underpin the completion of the third review of the Staff-Monitored Program with Board Involvement will continue in the coming weeks.

Washington, DC: An International Monetary Fund (IMF) staff team, led by Ms. Mame Astou Diouf, Mission chief for South Sudan, visited Juba from September 25−October 2, 2024. The team held discussions with the South Sudanese authorities on the third review under the Staff-Monitored Program with Board Involvement (PMB), which was approved on February 17, 2023 and accompanied by a disbursement through the Food Shock Window approved on March 1, 2023 (See PR 23/55).

At the end of the visit, Ms. Diouf issued the following statement:

“The mission focused mainly on performance and policies underpinning the third review of the PMB. Discussions covered recent macroeconomic and policy developments, program performance, and near-term prospects and policy plans.

"South Sudan continues to face several difficult macroeconomic challenges, partly resulting from the spillovers of the war in Sudan and recurrent flooding that have negatively impacted economic and social outcomes. The pipeline that carries about 70 percent of South Sudan’s oil exports has been inoperable since February 2024, with repairs proving difficult because the pipeline runs though Sudan. In addition, disruptions to freight traffic in the Red Sea have increased insurance costs for the oil cargoes supplied through South Sudan’s other pipeline. The war also resulted in a large influx of refugees to South Sudan.

"Against this backdrop, South Sudan is estimated to have experienced an economic slowdown during the fiscal year 2023/24 (July 2023−June 2024), with a real GDP growth close to -6 percent, driven by the oil exports drop during the first half of 2024. The slowdown is projected to continue during the fiscal year 2024/25 as the oil production shock persists. Economic prospects are expected to improve in the medium term as the effects of the shocks recede.

“The parallel FX market premium remains large (51 percent on September 26, 2024), despite a recent gradual depreciation of the official exchange rate. The combination of reduced FX inflows and resumed monetary financing to cope with the shock resulted in a large depreciation of the parallel market exchange rate (222 percent during January−September 2024). This, in turn, has fueled inflation (107.3 percent y/y at end-July 2024).

“Budget execution in the fiscal year 2023/24 proved challenging. While oil revenue collection was strong at end-December 2023 (16 percent of GDP), the pipeline damage has constrained the full year outturn. Non-oil revenue increased thanks to revenue administration measures and an increase in the exchange rate used for customs valuation. However, this only partially compensated for the drop in oil revenue. The pipeline damage also resulted in further salary payment arrears and increased monetary financing while investment in the oil-for infrastructure continued. Information technology challenges have undermined timely and comprehensive fiscal reporting.

“The draft budget for the fiscal year 2024/25 was submitted to Parliament and tabled on September 25, 2024. The draft budget includes provisions for the repayment of accumulated salary arrears. Two months of salary were paid during July and August 2024, except for foreign mission civil servants whose salary payments are constrained by FX availability. Investment is planned to focus on building roads in support of the redistribution of agricultural products across the country.

“Monetary policy has struggled to contain inflationary dynamics, mainly due to rapid reserve money growth and limited FX auctions. This is despite the usage of the term-deposit facility created in October 2022 to improve liquidity management.

“The South Sudanese authorities’ policy and reform agenda encompasses a broad-based macroeconomic policy recalibration aimed at tackling key challenges, including (i) near-term concomitant adjustments of fiscal, monetary, and exchange rate policies to cope with the oil production shock; (ii) prudent macroeconomic policies to maintain economic stability and debt sustainability; and (iii) reforms to further improve governance and transparency. Given the humanitarian situation, the authorities will also work with development partners to continue supporting the vulnerable population and reduce food insecurity.

"The mission discussed performance towards the PMB quantitative targets at end-June 2024 and progress in implementing the structural benchmarks. Discussions to underpin the completion of the third review of the Staff-Monitored Program with Board Involvement will continue in the coming weeks.

“The IMF mission met with Hon. Mariel Dongrin Ater, Minister of Finance and Planning; Hon. James Alic Garang, Governor of the Bank of South Sudan; Mr. Africano, Commissioner General of the South Sudan Revenue Authority, and other government officials. The mission also met with representatives of the diplomatic community and private sector. The mission takes the opportunity to thank the authorities for their hospitality and for productive discussions.”