The Republic of South Sudan became the world’s newest nation and Africa’s 55th country on July 9, 2011, following a peaceful secession from the Sudan through a referendum in January 2011. As a new nation, South Sudan has the dual challenge of dealing with the legacy of more than 50 years of conflict and continued instability, along with huge development needs. Formal institutions are being built from a very low base and the capacity of government to formulate policy and implement programs is limited, but growing. South Sudan also has significant oil wealth, which if effectively used to drive development, could provide the basis for progress in the coming years.
Unfortunately, the nearly two-year long conflict, which broke out in Juba on December 15, 2013 and later engulfed three of the 10 states of the country, deteriorated development gains achieved since independence and worsened the humanitarian situation. It is now expected that the implementation of the Compromise Agreement on the Resolution of the Conflict in the Republic of South Sudan, signed by the President and the Opposition in August 2015, will put in place the necessary framework for peace and security, and lead to longer-term development and prosperity.
Although South Sudan has vast and largely untapped natural resources, beyond a few oil enclaves, it remains relatively undeveloped, characterized by a subsistence economy. South Sudan is the most oil-dependent country in the world, with oil accounting for almost the totality of exports, and around 60% of its gross domestic product (GDP). On current reserve estimates, oil production is expected to reduce steadily in future years and to become negligible by 2035.
The country’s growth domestic product (GDP) per capita in 2014 was $1,111. Outside the oil sector, livelihoods are concentrated in low productive, unpaid agriculture and pastoralists work, accounting for around 15% of GDP. In fact, 85% of the working population is engaged in non-wage work, chiefly in agriculture (78%).
The current conflict, has had a significant financial impact on South Sudan with 2014 GDP coming in at 15% less than projected. Furthermore, military expenditure has increased, further reducing the availability of resources for service delivery and capital spending on much needed infrastructure.
South Sudan’s discounted Dar blend oil prices decreased by 40% from $29.75 per barrel in December 2015 to $18 per barrel in January 2016. Production also significantly declined over the same period, cutting gross oil revenue by more than half from $29.7 million in December to $10.8 million in January. The decline in oil revenue, has also had a negative impact on macro-budgetary indicators, requiring austere fiscal adjustments. The current account has deteriorated considerably leading to depreciation of the parallel exchange rate and fueling inflation. The low level of foreign reserves could negatively affect food imports with further knock on effects on food intakes, notably during the “lean season,” which runs between April and October. The incidence of poverty has also worsened, from 44.7% in 2011 to more than 58.5% in 2015, with a corresponding increase in the depth of poverty.
Last Updated: Apr 09, 2016