The Republic of South Sudan became the world’s newest nation and Africa’s 55th country on July 9, 2011.
The renewed conflicts in December 2013 and July 2016 have undermined the development gains achieved since independence and worsened the humanitarian situation. The conflict is estimated to have led to nearly four hundred thousand excess deaths since 2013 and more than 4.3 million people have been displaced both internally and to neighboring countries. The latest UN updates suggest that about seven million (more than half the population) were assessed to be severely food insecure between May and September 2018.
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). The country’s GDP per capita in 2014 was $1,111 dropping to less than $200 in 2017. Outside the oil sector, livelihoods are concentrated in low productive, unpaid agriculture and pastoralists work.
South Sudan’s economic collapse continues, with output contracting, and inflation and parallel exchange market premium soaring. Monetization of the fiscal deficit led to strong money growth and high inflation, although there are indications that borrowing from the Bank of South Sudan had recently been limited. The year-on-year annual Consumer Price Index (CPI) increased by 88.5% between June 2017 and June 2018. The spread between the official and the parallel market exchange rates remains wide (44% in July 2018), despite the recent exchange rate appreciation.
The fiscal deficit is projected at about 4.4% of GDP in FY2018 due to falling government revenues and rising security-related spending. Expenditures continue to be skewed toward defense at the expense of poverty reduction. Security and accountability/public administration and rule of law spending have accounted for over 70% of the total budget over the past three fiscal years. By contrast, combined expenditures on health and education are estimated to make up around 6% of total government spending.
The Revitalized Agreement on the Resolution of the Conflict in South Sudan (R-ARCISS), signed by the government, the opposition and civil society on September 12, 2018 in Addis Ababa is seen as a fresh opportunity for South Sudanese to build durable peace in the country. As a result, the government expects to resume full oil production of 350,000 barrels per day by mid-2019, as production has recently been restarted in the five oil fields that have been shut down since the conflict started in December 2013. Furthermore, South Sudan and Sudan have reached a new deal on oil transit fees whereby South Sudan will pay $4 per barrel, down from $9.1 per barrel under the terms of an agreement signed in September 2012 when international oil prices were very high.
The main challenge going forward is to ensure all parties to the conflict remain committed to implement the new peace agreement. Subsequently, the government will be expected to the tackle the underlying causes of the country’s current macroeconomic crisis, improve food production, boost employment, build infrastructure and diversify the economy, among many other priorities to address.
Last Updated: Oct 12, 2018