IMF Staff and Republic of South Sudan Hold Discussions on Second Review of Staff Monitored Program and Article IV Consultation
The Staff Monitored Program (SMP) has underpinned key monetary and exchange rate reforms
The economy of South Sudan has been hit hard by the global pandemic and three consecutive years of extensive floods
South Sudan faces unprecedented challenges owing to the pandemic, rising international fuel and food prices from the war in Ukraine, and three consecutive years of extensive floods; The Staff Monitored Program (SMP) has underpinned key monetary and exchange rate reforms and seeks to support macroeconomic stability and reinforce fiscal discipline and budget transparency; With buoyant oil revenues and rising prices of key imported staples, it will be important to use the increased fiscal space to clear salary arrears as a matter of priority and focus budget resources in a timely manner on priority spending, especially in health and education.
An International Monetary Fund (IMF) staff team, led by Mr. Niko Hobdari, visited South Sudan from March 14 to March 25, 2022. The mission held discussions with the authorities on the Staff-Monitored Program (SMP) and the 2022 Article IV Consultation. At the end of the visit, Mr. Hobdari issued the following statement; “The economy of South Sudan has been hit hard by the global pandemic and three consecutive years of extensive floods. This year’s flooding has caused large output losses in the oil and agricultural sectors and exacerbated the country’s difficult humanitarian situation. As a result, a record share of the population is expected to experience acute food insecurity during the coming lean season. While the recent rise in global commodity prices from the war in Ukraine will increase South Sudan’s revenues from oil exports, most of the population will experience the impact in the form of higher prices of everyday goods – especially food and fuel.
“Despite these challenges, the authorities are building on last year’s successful monetary and exchange rate reform that eliminated the gap between parallel and official rates and stabilized the value of the South Sudanese pound (SSP). The removal of restrictions in the foreign-exchange market has made it possible for individuals and firms to buy and sell foreign currency at predictable and competitive rates. This, together with prudent control of the money supply by the Bank of South Sudan (BoSS), resulted in an appreciation of the SSP which has mitigated some of the rises in global prices. To consolidate these gains, the authorities reiterated their commitment to refrain from monetary financing of the deficit and keep money growth under control, continue conducting regular foreign exchange auctions to maintain a market determined exchange rate, and expand the instruments available for foreign exchange and liquidity management.
“The recent approval of the 2021/22 budget by the Transitional National Legislative Assembly (TNLA) presents an opportunity to improve budget management for the remainder of the current fiscal year. Higher than anticipated oil prices and the good performance of non-oil revenue, in addition to the fulfillment of commitments under the Transitional Financial Agreement with Sudan, have increased fiscal space. Given the absence of social safety nets, the mission welcomed the authorities’ commitment to progressively reduce salary arrears and eliminate them by the end of the fiscal year, which will reduce the adverse impact of rising food and fuel prices due to the war in Ukraine. Going forward, budget releases should be made in a timely fashion, and in line with approved allocations, based on regular consideration by the recently established cash management committee. The mission encouraged the authorities to increase the transparency of government revenue and spending, including by publishing quarterly budget execution reports to reassure stakeholders that budget priorities are being delivered. This should also include comprehensive information on oil production and associated government revenues.”
“For the 2022/23 budget, discussions focused on setting a realistic resource envelope and ensuring that the budget calendar allows presentation to the TNLA in time for its approval before the start of the fiscal year. In addition, indicative quarterly cash planning should ensure that no further arrears are accumulated and priority spending, especially in health and education, is protected. At the same time, should oil revenues prove to be more buoyant than forecast, the mission recommends that the authorities build additional international reserves to insure against future shocks.”
“Performance under the SMP has been broadly in line with expectations. All but one of the quantitative targets have been met, with the clearance of arrears being the only exception, and progress has been made on a number of structural benchmarks. The mission encourages the authorities to complete and publish the audit of spending financed by disbursements under the Rapid Credit Facility and implement the recommendations of the Auditor General, publish external debt data and ensure its integrity going forward, and also ensure that any future external borrowing is screened by the Loan Committee and approved by the TNLA. Discussions with the authorities on the completion of the SMP review are expected to continue in the context of the forthcoming Spring Meetings.”
The team met with His Excellency, President Salva Kiir Mayardit, His Excellency First Vice President Riek Machar, First Deputy Speaker of TNLA Honorable Oyet Nathaniel Perieno, Minister of Finance and Planning Mr. Agak Achuil Lual, Minister of Roads and Bridges Mr. Simon Mijok Mijak, Minister of Petroleum, Mr. Puot Kang Chol, Minister of Education, Ms. Awut Deng Acuil, Minister of Agriculture and Forestry, Ms. Josephine Lagu Joseph, Governor of the Bank of South Sudan, Mr Moses Makur Deng, Auditor General Mr. Steven Wondu, other high-level government officials and members of TNLA, and representatives of the diplomatic community, private sector and civil society. The IMF team thanks the authorities for their hospitality and the productive discussions.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).