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. Hundreds of thousands of people have been killed, more than 4.2 million people have been displaced both internally and to neighboring countries, and about 5.3 million (nearly half the population) face severe food insecurity. Without conflict resolution and a framework for peace and security, the country’s longer-term development and prosperity are threatened.
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 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 in FY17 (July 2017/June 2018), with output contracting, and inflation and parallel exchange market premium soaring.
The economy is estimated to have contracted by about 6.9% in FY17 due to the ongoing conflict, oil production disruptions and below-average agriculture production. Declining oil production have put additional pressure on an economy already weakened by the 2012 oil export shutdown (linked to a dispute with Sudan about transit fees) and the civil war.
The monetization of the fiscal deficit, accelerated inflation from 187% in June 2016 to 550% September 2016 before declining to 362%in June 2017. As the pace of money printing slowed in recent months, inflation decelerated to 118% during December 2016–December 2017. Driven by foreign exchange shortages, the South Sudanese Pound (SSP) continued its depreciation on both the official and the parallel market. Since the move from a fixed exchange rate arrangement to a managed float in 2016, the SSP has depreciated by 90% (by end-December 2017) with ongoing pressure as evidenced by the continued spread between the official and parallel market exchange rates.
The fiscal deficit is estimated at about 4.6%of GDP in FY17 due to falling government revenues and rising security-related spending. Expenditures are 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 expected to make up around 6%of total government spending.
The first challenge is restoring peace and security through cessation of hostilities and implementation of governance and security arrangements that serve the interests of the nation's people.
The is an urgent need for the government to implement comprehensive macroeconomic reforms to unify the official and parallel exchange markets and reduce inflation, as well as longer-term action to boost employment, build infrastructure, and diversify the economy, with special emphasis on agriculture development. Without the government’s real commitment and proactive action to end the conflict and stabilize the economy, it is premature to envisage a post-conflict path for the economy.
Last Updated: May 03, 2018
