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

IMF News, October 2, 2024

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

Mission dates: September 25−October 2, 2024.
Mission chief: Ms. Mame Astou Diouf.
Press Release No.: 24/354.
Purpose: Discussions with South Sudanese authorities on the third review under the Staff-Monitored Program with Board Involvement (PMB), approved on February 17, 2023 and accompanied by a disbursement through the Food Shock Window approved on March 1, 2023.
Note: End-of-Mission press releases convey preliminary findings after a visit. The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Major shocks:
- The pipeline that carries about 70 percent of South Sudan’s oil exports has been inoperable since February 2024.
- Spillovers from the war in neighboring Sudan and recurrent flooding have deteriorated economic and social outcomes and led to a large influx of refugees to South Sudan.
- Disruptions to freight traffic in the Red Sea have increased insurance costs for oil cargoes supplied through South Sudan’s other pipeline.
Growth and outlook:
- 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.

Oil and non-oil revenues:
- Oil revenue collection was strong at end-December 2023 (16 percent of GDP) but pipeline damage constrained the full year outturn.
- Non-oil revenue increased due to revenue administration measures and an increase in the exchange rate used for customs valuation, partially compensating for the drop in oil revenue.
Budget execution and fiscal adjustments:
- Budget execution in fiscal year 2023/24 proved challenging.
- The pipeline damage resulted in further salary payment arrears and increased monetary financing during the first half of 2024 to cope with the shock.
- Investment in oil-for-infrastructure continued, albeit at a slower pace to allow redirecting funds towards other urgent government priorities, including salary payments.
- Information technology challenges have undermined timely and comprehensive fiscal reporting.
Budget plans:
- 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.
- Investment is planned to focus on building roads in support of the redistribution of agricultural products across the country.

Exchange rate dynamics:
- The parallel FX market premium remains large, despite a recent gradual depreciation of the official exchange rate.
- The parallel market exchange rate depreciation was 222 percent during January−September 2024.
- The parallel market premium has been on a declining trend since July.
Inflation and liquidity:
- Inflation: 107.3 percent y/y at end-July 2024, mainly due to rapid reserve money growth and limited FX auctions.
- Monetary policy has struggled to contain inflationary dynamics despite the usage of the term-deposit facility created in October 2022 to improve liquidity management.
- Sporadic monetary financing to fund emergency needs contributed to reduced FX inflows and large depreciation in the parallel market.

Authorities’ objectives:
- Recalibrate near-term macroeconomic policies to cope with the oil production shock through concomitant adjustments of fiscal, monetary, and exchange rate policies.
- Maintain economic stability and debt sustainability through prudent macroeconomic policies.
- Further improve governance and transparency via reforms.
- Continue working with development partners to support the vulnerable population and reduce food insecurity given the humanitarian situation.
Program-related actions:
- 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.

Government counterparts met:
- Hon. Marial Dongrin Ater, Minister of Finance and Planning.
- Hon. James Alic Garang, Governor of the Bank of South Sudan.
- Mr. Africano Mande, Commissioner General of the South Sudan Revenue Authority.
- Other government officials.
Other engagements:
- Representatives of the diplomatic community and private sector.
Mission closing remark:
- The mission thanked the authorities for their hospitality and for productive discussions.

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