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REPUBLIC OF SOUTH SUDAN

STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION AND SECOND REVIEW UNDER THE STAFF-MONITORED PROGRAM––DEBT SUSTAINABILITY ANALYSIS

July 19, 2022

Approved By

Catherine Pattillo and Guillaume Chabert (IMF), Marcello Estevão and Asad Alam (IDA)

^{Table 1.}

^{Table 1.}

Joint Bank-Fund Debt Sustainability Analysis
Risk of external debt distress	High
Overall risk of debt distress	High
Granularity in the risk rating	Sustainable
Application of judgment	No

View Table

^{Table 1.}

Joint Bank-Fund Debt Sustainability Analysis
Risk of external debt distress	High
Overall risk of debt distress	High
Granularity in the risk rating	Sustainable
Application of judgment	No

The baseline in this Debt Sustainability Analysis (DSA) reflects several changes with respect to the previous DSA update of October 21, 2021, including the higher outlook for oil prices, a slower recovery in oil production over the medium term, the discovery of an outstanding loan to the National Investment and Development Bank (NIDB) incurred prior to the start of the SMP, and more conservative assumptions on financing terms throughout the forecast period. South Sudan’s debt remains assessed to be sustainable with a high risk of debt distress for both external and overall public debt.¹ Two of the four key indicators of public and publicly guaranteed external debt breach the threshold in the short/medium term, with debt service to revenue remaining above the threshold through 2027/28, and debt service-to-exports through FY2024/25. The present value of overall debt-to-GDP ratio decreases below the threshold starting in FY2022/23. This suggests that risks to external debt distress will remain high, and that maintaining debt sustainability while supporting development objectives would require financing at concessional and semi-concessional terms—such financing is minimal under the baseline. South Sudan’s external and overall debt are assessed to be sustainable given the current recovery in oil prices, and contingent on a prudent path for fiscal policy, including refraining from expensive financing such as oil-advances. There are several downside risks to these assessments, which include potential volatility in oil prices, slow implementation of reforms, effect of climate-related disasters, and a breakdown in the peace process and the resumption of large-scale civil conflict.

Background

A. Public Debt Coverage

1. The DSA is limited to central government debt. Debt data collection and compilation presents serious weaknesses in South Sudan. SOEs are omitted from the DSA as information about SOE debt and government guarantees is incomplete or unavailable.² External debt is defined using the currency criterion. The analysis for the contingent liability stress test includes SOE debt, financial market shocks, and a 2 percent shock to GDP to include the potential repayment of salary arrears to embassies’ staff.

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2. Debt data access and availability remains weak. The IMF and the World Bank are providing technical assistance (TA) on statistics compilation (including on Balance of Payment statistics) and Public Financial Management (PFM) reforms. This is expected to improve the quality and availability of data. An IMF STA TA mission on International Investment Position, International Aid and External Debt Data is planned for July 2022, and a TA mission on Public Debt Management is planned for September 2022.

B. Debt Developments

3. South Sudan’s external public debt was estimated at US$2,390 million (46 percent of GDP) as of December 2021 (Text Table 1). Debt to the World Bank amounted to US$79.8 million on IDA terms, while debt to the African Development Bank (AfDB) amounted to US$19 million. Debt to the IMF includes the two disbursements under the Rapid Credit Facility (RCF) of November 2020 and April 2021, and the use of US$150 million from the SDR allocation for budget support.³ Bilateral creditors include China Exim Bank, with a remaining debt estimated at US$130 million at end-December 2021. Amongst commercial creditors the outstanding liability to the Qatar National Bank was amounting to US$586 million at the end of 2021, and the debt stock with Afrexim bank was US$438 million. The debt stock at the end of 2021 also included an outstanding debt of US$550 million owed to oil companies and an estimated outstanding debt of US$210 million to the National Investment Development Bank.⁴ Domestic debt is mostly owed to the central bank but also includes a relatively small share of debt due to local commercial banks (around 20 percent).

^{Text Table 1.}

Republic of South Sudan: Decomposition of Public Debt by Creditor FY2020/21–2022/23¹

^1/As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

^2/“Multilatera l creditorso are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears)

^3/Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it,. if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan, An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts, See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

^4/Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent li abilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements).

^{Text Table 1.}

Republic of South Sudan: Decomposition of Public Debt by Creditor FY2020/21–2022/23¹

	Debt Stock (end of period)			Debt Service
	2021			FY20/21	FY21/22	FY22/23	FY20/21	FY21/22	FY22/23
	(In US$)	(Percent total debt)	(Percent GDP)	(In US$)			(Percent of GDP)
Total	3081	100	60	328	456	431	6.4%	9.5%	5.0%
External	2390	78	46	312	446	422	6.0%	8.6%	8.2%
Multi lateral creditors’2	913	30	18	134	227	229	2.6%	4.4%	4.4%
IMF	377	12	7	0
World Bank	80	3
ADB/AfDB/IADB	19	0
Other Multilaterals	438	14	8	134	227	227
o/w: Afrexim 438	14	8	134	227	227
Bilateral Creditors	130	4	27	17	13	0.5%	0.3%	0.2%
Paris Club	0	0	0	0	0	0.0%	0.0%	0.0%
		0	0
Non-Paris Club	130	4	27	17	13	0.5%	0.3%	0.2%
o/w: China Exim	130	4
		0	0
Commercial creditors	1346	44	26	150	201	180	2.9%	3.9%	3.5%
o/w: QNB	586	19	11	66	66	66
o/w: Oil Companies	550	18	11	84	135	114
Domestic	692	22	13	17	11	9	0.3%	0.2%	0.2%
Held by residents, total	692	22	13	17	11	0.3%	0.2%	0.2%
Held by non-res idents, total	0	0	0	0.0%	0.0%	0.0%
Memo items:
Collateralized debt3	1574	51	30
o/w: Related	0	0	0
o/w: Unrelated	1574	51	30
Contingent liabilities	na
o/w: Public guarantees	na
o/w: Other explicit contingent liabilities4	na
Nominal GDP	5167

^1/As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

^2/“Multilatera l creditorso are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears)

^3/Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it,. if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan, An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts, See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

^4/Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent li abilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements).

View Table

^{Text Table 1.}

Republic of South Sudan: Decomposition of Public Debt by Creditor FY2020/21–2022/23¹

	Debt Stock (end of period)			Debt Service
	2021			FY20/21	FY21/22	FY22/23	FY20/21	FY21/22	FY22/23
	(In US$)	(Percent total debt)	(Percent GDP)	(In US$)			(Percent of GDP)
Total	3081	100	60	328	456	431	6.4%	9.5%	5.0%
External	2390	78	46	312	446	422	6.0%	8.6%	8.2%
Multi lateral creditors’2	913	30	18	134	227	229	2.6%	4.4%	4.4%
IMF	377	12	7	0
World Bank	80	3
ADB/AfDB/IADB	19	0
Other Multilaterals	438	14	8	134	227	227
o/w: Afrexim 438	14	8	134	227	227
Bilateral Creditors	130	4	27	17	13	0.5%	0.3%	0.2%
Paris Club	0	0	0	0	0	0.0%	0.0%	0.0%
		0	0
Non-Paris Club	130	4	27	17	13	0.5%	0.3%	0.2%
o/w: China Exim	130	4
		0	0
Commercial creditors	1346	44	26	150	201	180	2.9%	3.9%	3.5%
o/w: QNB	586	19	11	66	66	66
o/w: Oil Companies	550	18	11	84	135	114
Domestic	692	22	13	17	11	9	0.3%	0.2%	0.2%
Held by residents, total	692	22	13	17	11	0.3%	0.2%	0.2%
Held by non-res idents, total	0	0	0	0.0%	0.0%	0.0%
Memo items:
Collateralized debt3	1574	51	30
o/w: Related	0	0	0
o/w: Unrelated	1574	51	30
Contingent liabilities	na
o/w: Public guarantees	na
o/w: Other explicit contingent liabilities4	na
Nominal GDP	5167

^1/As reported by Country authorities according to their classification of creditors, including by official and commercial. Debt coverage is the same as the DSA.

^2/“Multilatera l creditorso are simply institutions with more than one official shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears)

^3/Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it,. if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan, An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts, See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key Considerations for Public Lenders and Borrowers” for a discussion of issues raised by collateral.

^4/Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent li abilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements).

4. The recovery in oil prices contributed positively to South Sudan’s debt-servicing capacity (Text Table 2). Oil prices are forecasted to be higher in the medium term with respect to the previous DSA update. The positive effect of higher oil prices, however, is dampened by a decrease in oil production, which was affected negatively by floods and aging oil infrastructure. Real oil GDP is projected to decrease by 2.8 percent in FY2021/22 and 0.3 percent in FY2022/23, and to start growing again in FY2023/24.

^{Text Table 2.}

Republic of South Sudan: Key Macroeconomic Assumptions Comparison with the Previous Debt Sustainability Analysis

Sources: South Sudanese authorities; and IMF staff estimations and projections.

^{Text Table 2.}

Republic of South Sudan: Key Macroeconomic Assumptions Comparison with the Previous Debt Sustainability Analysis

	2020/21	2021/22	2022/23	2023/24	2024/25	2029/30
	Projection
Real GDP growth (annual percent change)
June 2022 DSA	-5.0	-2.8	-0.3	4.6	4.8	5.9
Sep 2021 DSA	-5.4	1.0	5.2	7.4	4.9	6.1
Real oil GDP growth (annual percent change)
June 2022 DSA	-0.9	-7.4	-3.8	3.3	3.2	2.8
Sep 2021 DSA	-5.9	-2.5	5.8	9.1	2.8	5.0
Current Account Balance (percent of GDP)
June 2022 DSA	-4.2	4.5	1.2	0.1	-3.1	-0.4
Sep 2021 DSA	-5,0	2.7	3.2	2.2	-0.3	5.0
Exports of goods and services (percent of GDP)
June 2022 DSA	67.6	67.2	65.6	62.5	60.1	43.8
Sep 2021 DSA	61.8	68.4	70.0	73.5	74.9	81.8
Imports of goods and services (percent of GDP)
June 2022 DSA	87.9	66.6	71.0	72.5	75.9	56.7
Sep 2021 DSA	81.8	75.8	83.6	89.8	95.2	100.6
Primary deficit (percent of GDP)
June 2022 DSA	-3,6	1.0	0.3	1.1	0.9	-0.6
Sep 2021 DSA	-4,6	4.7	3.4	2.9	2.0	0.8
Revenue and grants (percent of GDP)
June 2022 DSA	34.6	29.6	31.1	30.0	28.9	23.2
Sep 2021 DSA	31.6	29.6	31.9	33.0	33.6	33.2
Primary expenditures (percent of GDP)
June 2022 DSA	38.1	28.6	30.7	29.0	28.0	23.7
Sep 2021 DSA	36.2	24.9	28.5	30.1	31.6	32.5
SSD Oil prices (US$/ barrel)
June 2022 DSA	53.2	84.5	95.5	84.7	77.3	71.5
Sep 2021 DSA	51.5	63.1	63.2	64.5	65.8	72.9

Sources: South Sudanese authorities; and IMF staff estimations and projections.

View Table

^{Text Table 2.}

Republic of South Sudan: Key Macroeconomic Assumptions Comparison with the Previous Debt Sustainability Analysis

	2020/21	2021/22	2022/23	2023/24	2024/25	2029/30
	Projection
Real GDP growth (annual percent change)
June 2022 DSA	-5.0	-2.8	-0.3	4.6	4.8	5.9
Sep 2021 DSA	-5.4	1.0	5.2	7.4	4.9	6.1
Real oil GDP growth (annual percent change)
June 2022 DSA	-0.9	-7.4	-3.8	3.3	3.2	2.8
Sep 2021 DSA	-5.9	-2.5	5.8	9.1	2.8	5.0
Current Account Balance (percent of GDP)
June 2022 DSA	-4.2	4.5	1.2	0.1	-3.1	-0.4
Sep 2021 DSA	-5,0	2.7	3.2	2.2	-0.3	5.0
Exports of goods and services (percent of GDP)
June 2022 DSA	67.6	67.2	65.6	62.5	60.1	43.8
Sep 2021 DSA	61.8	68.4	70.0	73.5	74.9	81.8
Imports of goods and services (percent of GDP)
June 2022 DSA	87.9	66.6	71.0	72.5	75.9	56.7
Sep 2021 DSA	81.8	75.8	83.6	89.8	95.2	100.6
Primary deficit (percent of GDP)
June 2022 DSA	-3,6	1.0	0.3	1.1	0.9	-0.6
Sep 2021 DSA	-4,6	4.7	3.4	2.9	2.0	0.8
Revenue and grants (percent of GDP)
June 2022 DSA	34.6	29.6	31.1	30.0	28.9	23.2
Sep 2021 DSA	31.6	29.6	31.9	33.0	33.6	33.2
Primary expenditures (percent of GDP)
June 2022 DSA	38.1	28.6	30.7	29.0	28.0	23.7
Sep 2021 DSA	36.2	24.9	28.5	30.1	31.6	32.5
SSD Oil prices (US$/ barrel)
June 2022 DSA	53.2	84.5	95.5	84.7	77.3	71.5
Sep 2021 DSA	51.5	63.1	63.2	64.5	65.8	72.9

Sources: South Sudanese authorities; and IMF staff estimations and projections.

5. Notwithstanding progress, salary arrears have not yet been fully cleared. Salary arrears, after accumulating during the COVID-19 crisis, had decreased as the two RCF disbursements of November 2020 and April 2021 had allowed the authorities to reduce the amount of domestic salary arrears substantially to around 1 month for central and state government workers as of end-June 2021. While salary arrears increased again during the first half of FY2021/22, the MoFP has taken steps to clear the arrears, and as of June 2022 arrears on domestic salaries stand at an estimated SSP 24 billion (about 0.8 percent of GDP), and arrears to foreign missions stand at about USD 150 million (about 2 percent of GDP). An additional 2 percent of GDP has been added to the contingency liability test to take into account the repayment of salary arrears to diplomats in foreign missions.

6. Although the payment of the Transitional Financial Arrangement (TFA) with Sudan is completed as of February 2022, South Sudan has continued to transfer the same amount of crude oil to Sudan as before but is not getting paid. The TFA with Sudan created considerable fiscal pressure over the last few years, with payments amounting to about 3.4 percent of GDP in FY2020/21. The end of payments to Sudan under this agreement should create fiscal space for the authorities. However, the timing of when funds that used to be paid to Sudan will become available for the budget is not yet known as it appears that modifying the practical arrangements of crude oil transferred to Sudan (about 28 thousand barrels per day) will not be immediate. As of end-March 2022, South Sudan had accumulated credit of about US$136 million with Sudan for the value of crude oil transferred in excess of obligations under the TFA. A further credit of about US$110 million is estimated to have accumulated during the last quarter of FY2021/22, bringing the total to about US$246 million (equivalent to about 3.3 percent of GDP). Resolving this issue is of critical importance for South Sudan to be able execute its FY2022/23 budget without the need for external borrowing.

Underlying Assumptions

7. Real GDP growth is forecasted to be lower than in the previous DSA (Text Table 2). Real GDP growth in FY2021/22 is forecasted at -2.8 percent, lower than the 1.0 percent projected in the previous DSA, and GDP growth is projected to remain substantially lower than in the previous DSA through FY2024/25. This change reflects mainly lower oil production due to flooding damage in some oil fields. Real GDP growth is expected to gradually increase over the medium term and reach the level of around 6 percent after FY2029/30. This is mainly driven by the peace dividends in the non-oil sector and base effects in the oil sector as oil production recovers from the disruption caused by floods. Text Table 2 presents the main macro-framework assumptions in the current baseline scenario, as well as those of the previous DSA update.

8. The authorities remain committed not to contract oil advances and other highly non-concessional loans. The average nominal interest rate on external debt in the current DSA is forecasted at 4.1 percent in FY2021/22 and projected to decrease to 3.6 percent in FY 2022/23 due to the gradual repayment of expensive oil advances. The average real interest rate on domestic debt instead is forecasted at 2.5 percent in FY2021/22 and 1.7 percent in FY2022/23.

9. This DSA assumes that the financing gaps will be closed mostly with non-concessional external loans. A financing gap is estimated to occur starting in FY2022/23 and to persist in the medium term. This analysis projects—starting in FY2023/24—new disbursements by bilateral, non-Paris club lenders with 5-percent interest rate, 15-year maturity, and 5 years grace period, and also assumes that starting in FY2024/25 there will be issuance of medium-long term domestic debt (initially about 10 percent of government financing needs), predicated on sustained macroeconomic stability and improved fiscal position. The remaining financing gaps are assumed to be closed using non-concessional loans with 5-percent interest rate, 5-year maturity, and 1-year grace period.

10. The fiscal balance is estimated to be in deficit by 0.4 percent of GDP in FY2021/22. The recovery of oil prices has increased revenue relative to the budget, narrowing the overall deficit. The fiscal balance is expected to be in deficit by 0.6 percent inFY2022/23, and to improve to a surplus of 0.1 percent of GDP in FY2023/24, predicated mainly on the recovery in oil production and improvements in non-oil revenues.

Country Classification and Determination of Stress Tests

11. SSD’s debt carrying capacity remains classified as weak (Text Table 3). The composite indicator score (CI) of South Sudan is evaluated at 1.38, a slight increase from the score of 1.29 of the previous DSA update. The CI score is determined by the World Bank’s Country Policy and Institutional Assessment (CPIA) and other variables such as real GDP growth and import coverage of foreign exchange reserves. South Sudan’s latest CI score is based on the April 2022 WEO and 2020 CPIA.

^{Text Table 3.}

Republic of South Sudan: Debt Carrying Capacity and Thresholds

^{Text Table 3.}

Republic of South Sudan: Debt Carrying Capacity and Thresholds

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^{Text Table 3.}

Republic of South Sudan: Debt Carrying Capacity and Thresholds

12. This DSA includes a tailored stress test for lower oil prices. South Sudan’s economy is highly reliant on revenues from oil exports; thus the commodity price shock stress test has been added to the standard stress tests. The commodity price stress test features a one standard deviation decline in oil prices and a 6-year period for closing the financing gap that arises. This DSA does not include the market financing tailored test, as it is not applicable yet to South Sudan.

13. The results highlight the downside risks from high reliance on oil exports. In the tailored oil-price stress test (Table 3), the present value of external debt-to GDP ratio remains above the threshold through FY2029/30, whereas the present value of external debt-to-exports ratio is above the threshold between FY2023/24 and FY2026/27. The debt service-to-exports ratio indicator and the debt service-to-revenue ratio for external debt remain above the threshold through FY2033/34 and FY2034/35 respectively. Finally, the indicator for present value of debt-to-GDP ratio remains above the threshold through FY2025/26 in the tailored commodity price stress test.

14. This DSA also includes an additional 2 percent of GDP in the contingent liability test. The contingent liability stress test has been tailored to include an additional 2 percent of GDP to account for the arrears to diplomats in foreign missions, which are estimated to amount around US$150 million. Since the exact amount of arrears is still unclear and the repayment plan is in progress, the arrears are not included in the stock of debt of the DSA, but only in the contingent liability test.

15. The repayment of arrears poses additional downside risks. Under the combined contingent liabilities scenario, the PV of external debt to GDP ratio remains above the threshold through FY2027/28, whereas the PV of debt-to-exports ratio remains below the threshold throughout the period of analysis. Both the debt service-to-exports and debt service-to-revenue indicators breach the threshold (in FY2021/22 and FY2024/25, and through FY2028/29 respectively). The PV of overall debt to GDP remains above the threshold through FY2028/29.

External Debt Sustainability Analysis

16. The PV of external-debt-to-GDP ratio under the baseline scenario is expected to be below the threshold (Figure 1, Table 1, and Table 3). The PV of external debt-to-GDP ratio is projected to be at 28.2 percent in FY2021/22, and to decrease to 26.1 in FY2022/23. The indicator is forecasted to remain below the threshold in the short and medium term reaching 18.1 in FY2031/32. The PV of debt-to-exports ratio remains below the threshold throughout the period in the baseline analysis.

17. The debt service-to-revenue ratio and debt service-to-exports ratio indicators breach the thresholds in the short/medium term (Figure 1, Table 1, and Table 3). In the baseline scenario, the debt service-to-revenue ratio exceeds its thresholds until fiscal year 2027/28. This is mainly due to the repayment of commercial external debt. The external debt service-to-exports ratio is expected to remain below the threshold after FY2024/25.

18. The alternative scenarios result in longer breaches of the threshold (Figure 1 and Table 3). Under the most extreme shock scenario (i.e., a shock to the price of oil), the PV of debt-to-GDP, the debt service-to-exports ratio, and the debt service-to-revenue all remain above the threshold in the medium term, with the PV of debt-to GDP returning below the threshold in FY2030/31. The PV of debt-to-exports ratio instead remains well under the threshold for all years forecasted.

Public Debt Sustainability Analysis

19. The PV of total public debt-to-GDP ratio is forecasted to decrease below the threshold after FY2021/22 in the baseline scenario (Figure 2 and Table 4). The indicator is forecasted to be above the threshold at 42 percent in FY2021/22, and to subsequently decrease below the threshold. This decline is contingent on the authorities’ commitment to fiscal discipline. In the combined contingent liability scenario, the PV of Debt-to-GDP Ratio indicator remains above the threshold throughout FY2028/29.

Risk Rating and Vulnerabilities

20. Although South Sudan’s debt remains assessed as sustainable, there are substantial downside risks to the baseline scenario. The rating of debt as sustainable with a high risk of debt distress for both external and domestic public debt relies on the policies implemented by the authorities and the improvements to the institutional framework for debt management. Under the baseline scenario, all debt indicators would decrease below the respective thresholds after FY2027/28. The prolonged (but contained below 26.8 percent) breach of the external debt service-to-revenue ratio is in part due to the expensive debt service to be repaid in the medium term and to the conservative assumptions on financing terms to close the estimated financing needs. The assumptions of non-concessional borrowing in this DSA imply that financing gaps are covered with debt with low maturity and 5 percent interest rate. Maintaining debt sustainability while working towards development objectives would be better supported through higher levels of financing at concessional and semi-concessional terms relative to what is assumed under the baseline. The risks to the baseline scenario––which would prolong the breaches in the thresholds––include volatility in oil prices, resumption of large-scale civil conflict, weak governance of reforms and spending, and climate-related natural disasters. These risks of prolonged fragility underscore the importance of a commitment to internal peace, economic reforms, and close cooperation with the international community.

Authorities’ Views

21. The authorities agreed with the assessment of the DSA. They recognized the importance of remaining current on their debts, discontinuing oil advances, avoiding highly non-concessional borrowings, and the prudent fiscal and monetary policies discussed in the staff report to improve South Sudan’s debt sustainability.

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Republic of South Sudan: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, FY2022–2032¹

Citation: IMF Staff Country Reports 2022, 266; 10.5089/9798400214875.002.A002

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook pre pared by the IMF research department.

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^{Table 1.}

Republic of South Sudan: External Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1 +g)]l(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing {i.e., changes in arrears and debt relief); changes in gross foreign asset s; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/21 ending in June 2021. 10/ The ratio of debt over GDP in FY2020/2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

^{Table 1.}

Republic of South Sudan: External Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1 +g)]l(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing {i.e., changes in arrears and debt relief); changes in gross foreign asset s; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/21 ending in June 2021. 10/ The ratio of debt over GDP in FY2020/2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

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^{Table 1.}

Republic of South Sudan: External Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1 +g)]l(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing {i.e., changes in arrears and debt relief); changes in gross foreign asset s; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/21 ending in June 2021. 10/ The ratio of debt over GDP in FY2020/2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

^{Table 2.}

Republic of South Sudan: Public Sector Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank. Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rate s projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term. and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/ reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years. subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 7/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/ 21 ending in June 2021. 8/ The residual in 2021 is driven by the large nominal exchange rate adjustment in South Sudan. 9/ The ratio of debt over GDP in FY2020/ 2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

^{Table 2.}

Republic of South Sudan: Public Sector Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank. Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rate s projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term. and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/ reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years. subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 7/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/ 21 ending in June 2021. 8/ The residual in 2021 is driven by the large nominal exchange rate adjustment in South Sudan. 9/ The ratio of debt over GDP in FY2020/ 2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

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^{Table 2.}

Republic of South Sudan: Public Sector Debt Sustainability Framework, Baseline Scenario, FY2021–2042

(In percent of GDP, unless otherwise indicated)

Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank. Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rate s projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term. and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/ reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years. subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 7/ The fiscal year runs from July to June, i.e., 2021 refers to FY20/ 21 ending in June 2021. 8/ The residual in 2021 is driven by the large nominal exchange rate adjustment in South Sudan. 9/ The ratio of debt over GDP in FY2020/ 2021 is computed with end of period exchange rate to take into account the large variation in the official exchange rate

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Republic of South Sudan: Indicators of Public Debt Under Alternative Scenarios, FY2022–2032

Citation: IMF Staff Country Reports 2022, 266; 10.5089/9798400214875.002.A002

* Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections.Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2032. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one -off breach) would be presented.

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^{Table 3.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, FY2022–2032

(In Percent)

Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms). non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI.

^{Table 3.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, FY2022–2032

(In Percent)

Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms). non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI.

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^{Table 3.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, FY2022–2032

(In Percent)

Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms). non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI.

^{Table 4.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public Debt FY2022–2032

(In Percent)

Sources: Country authorities; and staff estimates and projections.

^1/A bold value indicates a breach of the benchmark.

^2/Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

^3/Includes official and private transfers and FDI.

^{Table 4.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public Debt FY2022–2032

(In Percent)

	Projections 1/
	2022	2023	2024	2025	2026	2027	2028	2029	2030	2031	2032
PV of Debt-to-GDP Ratio
Baseline	42	34.7	33.0	33.4	32.5	31.6	29.9	27.6	25.0	24.0	23.1
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	42	26	16	11	8	7	6	6	6	6	6
B. Bound Tests
Bl . Real GDP growth	42	40	45	45	44	43	41	37	34	33	31
B2. Primary balance	42	41	47	48	47	46	44	41	37	36	35
B3. Exports	42	41	52	53	53	51	47	42	36	33	30
B4. Other flows 3/	42	43	50	52	51	50	46	41	35	32	29
BS. One-time 30 percent nominal depreciation	42	42	38	37	34	31	27	24	20	18	16
B6. Combination of B1-BS	42	42	44	44	43	43	42	40	37	35	34
C. Tailored Tests
Cl. Combined contingent liabilities	42	44	42	43	42	41	39	36	33	32	31
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	42	44	39	38	36	35	33	31	28	28	27
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Public debt benchmark	35	35	35	35	35	35	35	35	35	35	35
PV of Debt-to-Revenue Ratio
Baseline	142.2	111 .6	109.8	115.3	118.2	120.5	118.6	112.9	107.8	106.0	103.5
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	142	85	52	37	30	27	25	25	26	27	27
B. Bound Tests
Bl. Real GDP growth	142	112	110	115	118	120	119	113	108	106	103
B2. Primary balance	142	132	155	165	171	176	175	168	162	159	155
B3. Exports	142	133	173	185	192	196	188	173	154	145	134
B4. Other flows3/	142	139	168	179	187	189	182	167	150	141	131
BS. One-time 30 percent nominal depreciation	142	136	127	126	122	118	109	97	86	78	70
B6. Combination of B1-BS	142	134	147	151	158	164	166	162	158	156	153
C. Tailored Tests
Cl. Combined contingent liabilities	142	141	140	148	153	157	156	150	143	141	138
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	142	160	148	150	146	143	136	127	123	122	120
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Debt Service-to-Revenue Ratio
Baseline	27.0	18.3	19.8	22.8	19.0	17.3	18.5	14.7	13.6	12.1	10.8
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	27	12	7	4	2	1	1	1	1	1	1
B. Bound Tests
B1 . Real GDP growth	27	18	20	23	19	17	19	15	14	12	11
B2. Primary balance	27	18	21	25	22	24	30	24	21	20	20
B3. Exports	27	18	21	26	23	23	29	25	23	21	19
B4. Other flows3/	27	18	21	26	22	24	28	24	22	20	18
BS. One-time 30 percent nominal depreciation	27	21	26	30	25	22	24	18	16	13	11
B6. Combination of B1-BS	27	19	23	27	22	21	23	20	21	18	17
C. Tailored Tests
Cl. Combined contingent liabilities	27	18	21	24	21	22	23	17	16	14	13
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	27	24	23	23	18	16	17	16	17	16	15
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.

Sources: Country authorities; and staff estimates and projections.

^1/A bold value indicates a breach of the benchmark.

^2/Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

^3/Includes official and private transfers and FDI.

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^{Table 4.}

Republic of South Sudan: Sensitivity Analysis for Key Indicators of Public Debt FY2022–2032

(In Percent)

	Projections 1/
	2022	2023	2024	2025	2026	2027	2028	2029	2030	2031	2032
PV of Debt-to-GDP Ratio
Baseline	42	34.7	33.0	33.4	32.5	31.6	29.9	27.6	25.0	24.0	23.1
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	42	26	16	11	8	7	6	6	6	6	6
B. Bound Tests
Bl . Real GDP growth	42	40	45	45	44	43	41	37	34	33	31
B2. Primary balance	42	41	47	48	47	46	44	41	37	36	35
B3. Exports	42	41	52	53	53	51	47	42	36	33	30
B4. Other flows 3/	42	43	50	52	51	50	46	41	35	32	29
BS. One-time 30 percent nominal depreciation	42	42	38	37	34	31	27	24	20	18	16
B6. Combination of B1-BS	42	42	44	44	43	43	42	40	37	35	34
C. Tailored Tests
Cl. Combined contingent liabilities	42	44	42	43	42	41	39	36	33	32	31
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	42	44	39	38	36	35	33	31	28	28	27
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Public debt benchmark	35	35	35	35	35	35	35	35	35	35	35
PV of Debt-to-Revenue Ratio
Baseline	142.2	111 .6	109.8	115.3	118.2	120.5	118.6	112.9	107.8	106.0	103.5
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	142	85	52	37	30	27	25	25	26	27	27
B. Bound Tests
Bl. Real GDP growth	142	112	110	115	118	120	119	113	108	106	103
B2. Primary balance	142	132	155	165	171	176	175	168	162	159	155
B3. Exports	142	133	173	185	192	196	188	173	154	145	134
B4. Other flows3/	142	139	168	179	187	189	182	167	150	141	131
BS. One-time 30 percent nominal depreciation	142	136	127	126	122	118	109	97	86	78	70
B6. Combination of B1-BS	142	134	147	151	158	164	166	162	158	156	153
C. Tailored Tests
Cl. Combined contingent liabilities	142	141	140	148	153	157	156	150	143	141	138
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	142	160	148	150	146	143	136	127	123	122	120
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Debt Service-to-Revenue Ratio
Baseline	27.0	18.3	19.8	22.8	19.0	17.3	18.5	14.7	13.6	12.1	10.8
A. Alternative Scenarios
A1. Key variables at their historical averages in 2022-20422/	27	12	7	4	2	1	1	1	1	1	1
B. Bound Tests
B1 . Real GDP growth	27	18	20	23	19	17	19	15	14	12	11
B2. Primary balance	27	18	21	25	22	24	30	24	21	20	20
B3. Exports	27	18	21	26	23	23	29	25	23	21	19
B4. Other flows3/	27	18	21	26	22	24	28	24	22	20	18
BS. One-time 30 percent nominal depreciation	27	21	26	30	25	22	24	18	16	13	11
B6. Combination of B1-BS	27	19	23	27	22	21	23	20	21	18	17
C. Tailored Tests
Cl. Combined contingent liabilities	27	18	21	24	21	22	23	17	16	14	13
C2. Natural disaster	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
C3. Commodity price	27	24	23	23	18	16	17	16	17	16	15
C4. Market Financing	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.

Sources: Country authorities; and staff estimates and projections.

^1/A bold value indicates a breach of the benchmark.

^2/Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

^3/Includes official and private transfers and FDI.

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Republic of South Sudan: Drivers of Debt Dynamics–Baseline Scenario¹

Citation: IMF Staff Country Reports 2022, 266; 10.5089/9798400214875.002.A002

1/ Analyses on unexpected changes in debt are unavailable due to the lack of data.2/ The current DSA assumes more extern al financing for peace process than the previous DSA, which makes its Gross Nominal PPG Extern al Debt and Gross Nominal Public Debt larger than the previous DSA.

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Republic of South Sudan: Realism Tools¹

Citation: IMF Staff Country Reports 2022, 266; 10.5089/9798400214875.002.A002

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