The World Bank has issued a stark warning regarding South Sudan’s economic trajectory, projecting a 30% contraction in the nation’s economy for the fiscal year 2024/25. This alarming forecast underscores the urgency for comprehensive reforms to avert further economic decline.
The report, titled “South Sudan Economic Monitor,” reveals a sharp rise in extreme deprivation, with the proportion of households unable to afford basic food increasing from 70% in 2022 to 84% in 2023, before reaching 92% in 2024 South Sudan’s economy has been on a downward spiral for five consecutive years, with the Gross Domestic Product (GDP) per capita anticipated to plummet to nearly half of its fiscal year 2020 levels.
A significant contributor to this decline is the disruption in oil production, leading to an estimated daily revenue loss of $7 million. This shortfall has severely strained public finances, resulting in unpaid salaries and diminished funding for essential services such as health and education.
The socioeconomic ramifications are profound. Hyperinflation, coupled with widespread food insecurity, has plunged nearly 80% of the population into crisis conditions. Poverty levels have escalated to an estimated 92%, exacerbated by weak governance, ineffective fiscal policies, and an underdeveloped financial sector that hampers economic diversification and access to credit.
In light of these challenges, the World Bank emphasizes the necessity for swift and sustained reforms. Charles Undeland, the World Bank Group Country Manager for South Sudan, highlighted the government’s commitment to addressing these issues:
“The situation is very challenging, but the government has committed to undertaking reforms to tackle macroeconomic and fiscal challenges and enhance governance. If carried through, these reforms will provide for greater macroeconomic stability as well as greater, fiscal sustainability that will allow the government to improve its delivery of services to the population,”
The World Bank’s South Sudan Economic Monitor highlights a series of critical policy interventions aimed at stabilizing the country’s fragile economy and fostering long-term growth. Key recommendations include strengthening the macroeconomic framework by enhancing exchange rate flexibility and limiting monetary financing of deficits to ensure stability.
“By maintaining macroeconomic stability, improving governance, and enacting strategic structural reforms, South Sudan can unleash the potential of its private sector and pave the way for recovery and prosperity. The World Bank Group is keen to support the government in these efforts,” Charles added.
The report also calls for improved transparency and efficiency in managing oil revenues, a vital step toward fiscal sustainability. To reduce reliance on oil, the World Bank advocates for economic diversification by supporting sectors such as agriculture and trade.
Addressing salary arrears is another priority, with a proposed strategy to clear outstanding payments and ensure timely wages for public sector workers. Additionally, the report emphasizes the need for poverty reduction and economic expansion through investments in human capital, job creation, private sector development, and stronger local institutions.
“A fundamental shift in South Sudan’s policy and institutional framework is needed to reduce poverty and enhance economic growth. Many of the essential actions to addressing the root causes of poverty in the country and for providing the basis for lasting peace are long-standing government policy and institutional reform commitments. said Kamer Karakurum Ozdemir, World Bank Senior Economist.
“Investing in a growth model that creates more, and better jobs will be key to poverty alleviation. The overarching priorities should be to invest in building human capital and state capacity, create the conditions for a dynamic private sector to boost growth, and support the development of local institutions and civil society,” he added
Despite the grim projections, there is a silver lining. The economy is expected to rebound in the fiscal year 2025/26, contingent upon the resumption of oil exports, particularly from the Dar Blend Oil. This potential recovery underscores the importance of implementing the recommended reforms to stabilize and revitalize the economy.
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