IMF Management Approves the Completion of the First Review of the Staff-Monitored Program with the Republic of South Sudan

IMF News, November 15, 2021

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IMF Management approved on October 18, 2021 the completion of the first review under the Staff-Monitored Program (SMP) for South Sudan.
The SMP was approved on March 30, 2021 and supports reforms to strengthen governance, restore fiscal discipline, implement a rules-based monetary policy framework, and eliminate distortions in the foreign exchange market.

Real GDP growth for FY2021/22 is projected at 1 percent, boosted by higher oil prices.
A national vaccination campaign has made some progress distributing COVID-19 vaccines, supported by the World Bank and COVAX.
Only a small share of the population has been vaccinated; increasing the share vaccinated is critical to mitigating risks of new pandemic variants and waves that could have devastating implications for lives and livelihoods.

An FX reform introduced at the beginning of the SMP sought to liberalize FX markets and eliminate the large distortion from a significant premium of the exchange rate in the parallel market relative to the official rate.
The faster-than-expected elimination of this premium is described as a notable success with tangible benefits.
Supported by two disbursements under the Rapid Credit Facility (in November 2020 and March 2021) and higher global oil prices, macroeconomic stabilization and FX market reforms have contributed to:
- an appreciation of the market exchange rate, and
- a significant decline in inflation, with domestic prices (including those for food) falling slightly in recent months.

Economic governance remains weak following years of civil conflict.
Weaknesses cited include large oil advances and other non-concessional loans and guarantees outside the budgetary process, indicative of weaknesses in central control over debt contracting and management.
PFM reforms have been initiated, including:
- improving cash management,
- strengthening spending controls,
- starting the implementation of the Treasury Single Account,
- discontinuing the use of nontransparent oil advances for budget financing,
- starting the publication of budget implementation updates, and
- initiating reforms to strengthen the Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) framework.
Authorities and IMF staff agreed to establish a robust debt management framework and tackle a legacy of non-concessional external debt.
The authorities expressed commitment that:
- no new debts should be incurred without the approval of the newly established Loan Committee, the Cabinet of Ministers, and the National Assembly, and
- no new oil advances would be contracted.

The recent publication of the audit by the Auditor General on the use of the first RCF funds disbursed in November 2020 marks an important step towards greater fiscal transparency and accountability in the use of public resources.
An effective follow-up by the appropriate institutions on the findings of the audit will be essential.

IMF Press Release No. 21/334, November 15, 2021