Nairobi/Juba, December 13, 2016 (SSNA) — The International Monetary Fund (IMF) has conducted and concluded its 2016 Article IV Mission on South Sudan and warned of financial crisis and massive economic challenges in the war-wracked South Sudan.
The warning came days after an IMF team held a meeting with South Sudanese government officials in the Kenyan capital, Nairobi. The meeting which began on December 5 and ended December 9, was purely on South Sudan 2016 Article IV relate issues.
In a statement extended to the South Sudan News Agency (SSNA), an IMF mission head Jan Mikkelsen said the young nation faces “massive economic challenges” due to the three-year civil war and other conflict-related issues and that reasonable economic measures should be implement by the country’s leaders to avert a looming financial crisis.
“South Sudan faces massive economic challenges in the wake of prolonged internal conflict and subdued oil prices. A relapse of violence in July following the formation of the Transitional Government of National Unity three months earlier compounded the crisis which started in December 2013 and challenged the peace process,” Mikkelsen, who led the team said.
“Real income, adjusted for terms of trade losses, has declined by about 50 percent since 2013 and the number of people in need of humanitarian assistance has risen to unprecedented levels. Inflation has soared to about 500 percent (12 months through October), the exchange rate has depreciated steeply, and foreign exchange reserves are close to exhaustion,” he added.
Mikkelsen states that the IMF believes conclusive economic actions and a credible pathway towards lasting peace are essential to rebuild confidence in the deteriorating economy.
“Decisive economic measures and a credible pathway towards lasting peace are necessary to rebuild confidence in the economy. Restoring of macroeconomic stability will require immediate reduction of the large fiscal imbalance that in the last couple of years has led to a rapid expansion in government borrowing from the central bank and the accumulation of significant arrears. For this to be effective, it will require simultaneous efforts to promote reconciliation and address the security challenges and humanitarian emergency,” Mikkelsen explained.
The IMF also calls on the Bank of South Sudan to apply “available monetary policy instruments and implement prudential requirements to safeguard the integrity of the banking system” and encourages the bank to introduce right regulation for repos rate, rebuild foreign exchange reserves, and complete regular audits of the central bank in 2017.
Mikkelsen says after the meeting that his team has “constructive discussions” with the government of South Sudan.
Among South Sudanese government officials who participated in the discussions were Bank of South Sudan Governor Kornelio Koryiom Mayik, Minister of Finance and Economic Planning Stephen Dhieu Dau, and other officials from the ministry of Petroleum, and the National Bureau of Statistics.
South Sudan depends heavily on oil revenues and the price of crude oil has fallen, forcing many investors to withdraw their financial backings for fear of an economic collapse amid raging civil war.
In May 2014, South Sudan’s government borrow $200 million from an unnamed Chinese oil company. In the same month, South Sudan began a process of repayments delay on nearly all domestic loans, raising many questions and put the young nation’s economy ability into question.
An official with the Ministry of Petroleum and Mining told the South Sudan News Agency (SSNA) in February last year that crude oil export has declined and that Juba is concerned about the decline in oil production and current market price. The official further disclosed that March 2015 delivery was 4.6 million barrels of Dar Blend crude oil, down two hundred thousand barrels (just over 4%), compared to February 2015 delivery of 4.8 million barrels.