Press Release: IMF Staff Completes 2016 Article IV Mission to South Sudan

IMF News, June 1, 2016

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Canonical URL: Press Release: IMF Staff Completes 2016 Article IV Mission to South Sudan

An International Monetary Fund (IMF) staff team led by Jan Mikkelsen visited Juba from May 23 to June 1 to hold discussions in the context of the country’s 2016 Article IV Consultation.
The IMF Executive Board is expected to discuss the 2016 Article IV consultation in August 2016.

South Sudan has suffered political instability and external shocks over the last two and a half years.
Since the civil war started in December 2013, around two million people have been displaced.
The decline in oil production by almost half and the sharp drop in international oil prices caused large shortfalls in foreign exchange receipts and government revenue.
The country is experiencing an economic crisis with a sharp decline in national income and high inflation, which approaches 300 percent.
The value of the South Sudanese pound has dropped by close to 90 percent since the exchange rate liberalization in December 2015.
Central bank international reserves have dwindled to a few days of import coverage.

If macroeconomic policies do not change, the economic situation will deteriorate further, resulting in more humanitarian suffering and potentially threatening the still-fragile peace process.
The deficit in 2016/17 could top US$1.1 billion or 25 percent of GDP which, if again financed through borrowing from the central bank or accumulation of arrears, would continue to fuel inflation and put further downward pressure on the exchange rate.
The mission notes that further fiscal adjustment beyond the measures recommended would make it impossible for the government to meet its obligations, including expenses related to the peace agreement, indicating a need to cover the remaining gap from external sources.

Government fiscal measures:
- Raise non-oil revenue.
- Cut expenditures, particularly in the payroll, current operations, travel, and investment.
- Strengthen expenditure controls and budget preparation.
- Limit arrears accumulation.
- These measures could reduce the fiscal gap to about US$300 million.
Central bank actions:
- Refrain from lending to the government.
- Regain control over monetary policy.
- Set inflation on a decelerating path.
- Gradually start replenishing international reserves.
External support and credibility:
- Strong policy efforts by the government could lay the basis for donors to play a role in providing support to close the fiscal gap, including through budget support.
- The mission urges the government to restore credibility by preserving peace and the rule of law, implementing a stronger public financial management framework, and enhancing transparency in its financial transactions.

The peace agreement signed in August 2015 has registered significant progress with the formation of the Transitional Government of National Unity (TGoNU).
Political reconciliation must be consolidated and the TGoNU should work as a cohesive government to chart a new course toward broad-based and inclusive economic development.
Demonstrating unity and commitment in the coming months to economic stabilization and strengthening public financial management will be key steps to rebuilding policy credibility and regaining access to external financial support.

The mission met with President Salva Kiir, First Vice President Riek Machar, Vice President Wani Igga, Minister of Finance Deng Athorbei, Central Bank Governor Kornelio Mayik, several other ministers and high-level officials, parliamentarians, and representatives of the diplomatic community and of the civil society.
The team expressed gratitude to the South Sudanese authorities for constructive discussions and hospitality.

Press Release: IMF Staff Completes 2016 Article IV Mission to South Sudan — June 1, 2016