South Sudan's economy is facing significant challenges, as highlighted in the latest edition of the South Sudan Economic Monitor (SSEM) released by the World Bank. The report, titled "A Pathway to Overcome the Crisis," projects a 30 percent contraction in the country's economy for fiscal year 2024/25. However, it also forecasts a potential rebound in fiscal year 2025/26 if oil exports resume.
The decline is attributed primarily to disruptions in oil production, leading to an estimated loss of $7 million per day in export revenues. This has strained public finances and contributed to salary arrears and reduced spending on essential services such as health and education. Additionally, hyperinflation and food insecurity affect nearly 80 percent of the population, with poverty levels rising to 92 percent.
Charles Undeland, World Bank Group Country Manager for South Sudan, emphasized the need for reforms: “The situation is very challenging, but the government has committed to undertaking reforms to tackle macroeconomic and fiscal challenges and enhance governance." He added that maintaining macroeconomic stability and improving governance could pave the way for recovery.
The SSEM suggests several policy measures for tackling inflation and fiscal challenges. These include strengthening the macroeconomic framework, increasing exchange rate flexibility, curtailing monetary financing of deficits, improving oil revenue management transparency, boosting non-oil revenues, supporting economic diversification, prioritizing social spending, clearing salary arrears of government employees, addressing poverty drivers like agriculture production, and implementing structural reforms.
Kamer Karakurum Ozdemir from the World Bank noted: “A fundamental shift in South Sudan’s policy and institutional framework is needed to reduce poverty and enhance economic growth.” She stressed investing in human capital and creating conditions for a dynamic private sector as key strategies.
The SSEM serves as an annual assessment tool aimed at informing policymakers and stakeholders about economic developments in South Sudan. It addresses macroeconomic prospects and policies crucial for structural reform priorities within the country.