Abstract
IMF Country Report No. 23/108
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IMF Country Report No. 23/108
REPUBLIC OF SOUTH SUDAN
THIRD REVIEW UNDER THE STAFF-MONITORED PROGRAM, REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY, AND PROGRAM MONITORING WITH BOARD INVOLVEMENT-PRESS RELEASE; AND STAFF REPORT
March 2023
In the context of the Second Review Under the Staff-Monitored Program, requests for modification of quantitative performance criteria, and waiver of applicability for performance criteria, the following documents have been released and are included in this package:
A Press Release including a statement by the Chairman of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on March 1, 2023, following discussions that ended on November 17, 2022, with the officials of the Republic of South Sudan on economic developments and policies underpinning the IMF arrangements under the Staff-Monitored Program with Board Involvement and Request for Disbursement through the Food Shock Window of the Rapid Credit Facility.
A Debt Sustainability Analysis Update prepared by the Staffs of the IMF and the International Development Association (IDA).
A Statement by the Executive Director for Republic South Sudan.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2023 International Monetary Fund
Press Release
PR 23/55
IMF Executive Board Approves US$114.8 Million in Emergency Financing Support to South Sudan
FOR IMMEDIATE RELEASE
The Executive Board of the International Monetary Fund (IMF) approved today a disbursement of SDR 86.1 million (about US$115.7 million) to South Sudan under the Food Shock Window of the Rapid Credit Facility (RCF).1
This emergency financing under the Food Shock Window will help South Sudan to address food insecurity while maintaining social and growth-enhancing spending.
Concurrently, the Executive Board discussed a 9-month Staff-Monitored Program with Board Involvement (PMB)2 for South Sudan, which was approved by the Management of the IMF on February 17, 2023, and assessed that South Sudan’s policy program is sufficiently robust to meet the key objectives of the PMB. Its implementation is aimed at helping the authorities establish a track record toward an IMF-supported upper credit tranche (UCT) program.
Washington, DC – March 1, 2023: The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of SDR 86.1 million (about US$114.8 million) under the Food Shock Window of the Rapid Credit Facility (RCF) to help South Sudan address urgent balance of payment needs arising from heightened food insecurity. Four consecutive years of intense flooding and the fallout from Russia’s war in Ukraine, on the heels of the COVID-19 pandemic, have exacerbated an already-dire humanitarian situation in South Sudan. A combination of flooding and the rising price of staples have exposed 8.3 million people (about two-thirds of the population) to acute food insecurity. The disbursement is expected to provide South Sudan with fiscal space to address food insecurity while maintaining social and growth-enhancing spending as well as boosting reserves.
The authorities are committed to using resources transparently and intend to channel US$20 million of the disbursement through the existing systems of trusted development partners to provide immediate humanitarian assistance that addresses food insecurity. Transparency in the use of the portion of the disbursement made available to the budget will be ensured through regular reports and an audit, which will be published.
The authorities also requested a Staff-Monitored Program and Program Monitoring with Board (PMB) involvement to build a track record of policy implementation, possibly paving the way to an IMF-supported Upper Credit Tranche (UCT)-quality program. The Board and Management welcomed the steady steps the authorities have taken since the Article IV Consultation in July 2022 to stabilize the economy, clear domestic salary arrears, mobilize additional non-oil revenue, and increase the transparency of public finances by publishing budget execution reports, oil revenue data, and the results of an independent stock-take of South Sudan’s external debts. The PMB will guide policies that safeguard macroeconomic stability, ensure debt sustainability and provide a framework for the authorities to deepen and broaden public financial management (PFM) and governance reforms. The PMB also sets targets to safeguard priority social spending and public sector salaries.
Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:
“Over the last three years, South Sudan has had to contend with overlapping economic shocks from COVID-19, historic flooding, and Russia’s war in Ukraine, which have compounded an already-difficult economic and humanitarian situation driven by weak economic management and institutions. Performance under the Staff-Monitored Program was mixed but recent corrective actions have been taken. Looking ahead, emergency financial assistance under the Rapid Credit Facility’s new food shock window will help address urgent balance-of-payments needs and mitigate the impact of elevated food prices. The authorities’ commitment to work with international partners to ensure that part of the disbursement will provide immediate humanitarian assistance to address food insecurity is welcome.
“The authorities have taken determined steps since the recent months to restore fiscal discipline and rein in monetary growth. Ensuring macroeconomic stability and debt sustainability in the near term will require closing the large fiscal gap remaining in the current fiscal year and pursuing a prudent monetary policy, including sustainably bolstering international reserves. However, the needed fiscal adjustment should protect spending on health, education and social support, especially to the most vulnerable. Refraining from further monetary financing and non-concessional borrowing is important.
“The proposed policy framework under the Staff-Monitored Program approved by Management is sufficiently robust to meet the authorities’ objectives, and its steadfast implementation could build a track record to pave the way toward a possible future Upper Credit Tranche (UCT) quality program supported by a Fund arrangement.
“South Sudan’s new Staff-Monitored Program will benefit from limited Board involvement given the significant support provided to the country by international donors, as well as the authorities’ stated intention to deepen relations with the international community by advancing macroeconomic and governance reforms.
“Continued progress on public financial management and governance reforms is essential to foster robust and inclusive growth and raise credibility with domestic and international stakeholders. This includes increased oil-sector transparency, strengthening the debt management framework and expenditure controls, regular reporting on debt and fiscal operations, and determined steps to operationalize the AML/CFT framework. Swiftly addressing the findings from the audits of the two previous RCF disbursements and decisively implementing the recommendations of the 2021 safeguards assessment remain important.
“Continued implementation of the peace process is a priority for South Sudan’s economic and social development. The authorities are highly encouraged to continue working with the international community and civil society to promote peace, stability, and national reconciliation.”
Republic of South Sudan: Selected Economic Indicators, 2019–27
The fiscal year runs from July to June.
Non-oil revenue excluding grants minus domestically-financed current expenditure minus transfers to Sudan (including pipeline fees)
Republic of South Sudan: Selected Economic Indicators, 2019–27
| 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | 2024/25 | 2025/26 | 2026/27 | ||
|---|---|---|---|---|---|---|---|---|---|
| Act. | Act. | Projections | |||||||
| Output, prices, and exchange rate | |||||||||
| Real GDP growth | 12.9 | -4.9 | -2.9 | -0.4 | 4.6 | 4.8 | 5.1 | 5.2 | |
| Non-oil | 0.5 | -11.6 | 6.0 | 7.3 | 7.1 | 7.5 | 8.4 | 8.3 | |
| Prices | |||||||||
| Inflation (%) | 33.6 | 43.5 | 0.9 | 16.5 | 10.9 | 9.8 | 8.5 | 8.4 | |
| Central government budget | |||||||||
| Revenue (%GDP) | 29.5 | 34.5 | 30.1 | 31.5 | 30.8 | 30.5 | 29.4 | 28.3 | |
| Of which: Grants | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Of which: Oil | 25.5 | 29.8 | 27.4 | 28.5 | 27.2 | 26.5 | 25.0 | 23.6 | |
| Expenditures (% GDP) | 39.4 | 38.2 | 36.7 | 28.5 | 23.9 | 23.2 | 22.7 | 24.1 | |
| Fiscal balance (% GDP) | -9.9 | -3.7 | -6.6 | 3.0 | 6.8 | 7.3 | 6.6 | 4.2 | |
| Non-oil 2: | -19.4 | -20.8 | -27.2 | -19.8 | -14.6 | -13.3 | -12.6 | -14.3 | |
| Public debt (% GDP) | 56.2 | 64.2 | 53.8 | 46.4 | 45.3 | 42.1 | 37.0 | 34.1 | |
| Balance of payments | |||||||||
| Current account (% GDP) | -19.7 | -4.9 | -1.4 | 7.0 | 6.6 | 6.4 | 4.3 | 1.0 | |
| FDI (% GDP) | 0.1 | 0.1 | 0.1 | 0.1 | 0.4 | 0.4 | 0.3 | 0.4 | |
| Reserves (in months of imports) | 0.4 | 0.4 | 0.4 | 0.5 | 0.7 | 1.0 | 1.1 | 1.2 | |
| External debt (% GDP) | 40.3 | 46.3 | 41.1 | 35.0 | 34.6 | 32.0 | 27.8 | 25.5 | |
The fiscal year runs from July to June.
Non-oil revenue excluding grants minus domestically-financed current expenditure minus transfers to Sudan (including pipeline fees)
Republic of South Sudan: Selected Economic Indicators, 2019–27
| 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | 2024/25 | 2025/26 | 2026/27 | ||
|---|---|---|---|---|---|---|---|---|---|
| Act. | Act. | Projections | |||||||
| Output, prices, and exchange rate | |||||||||
| Real GDP growth | 12.9 | -4.9 | -2.9 | -0.4 | 4.6 | 4.8 | 5.1 | 5.2 | |
| Non-oil | 0.5 | -11.6 | 6.0 | 7.3 | 7.1 | 7.5 | 8.4 | 8.3 | |
| Prices | |||||||||
| Inflation (%) | 33.6 | 43.5 | 0.9 | 16.5 | 10.9 | 9.8 | 8.5 | 8.4 | |
| Central government budget | |||||||||
| Revenue (%GDP) | 29.5 | 34.5 | 30.1 | 31.5 | 30.8 | 30.5 | 29.4 | 28.3 | |
| Of which: Grants | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Of which: Oil | 25.5 | 29.8 | 27.4 | 28.5 | 27.2 | 26.5 | 25.0 | 23.6 | |
| Expenditures (% GDP) | 39.4 | 38.2 | 36.7 | 28.5 | 23.9 | 23.2 | 22.7 | 24.1 | |
| Fiscal balance (% GDP) | -9.9 | -3.7 | -6.6 | 3.0 | 6.8 | 7.3 | 6.6 | 4.2 | |
| Non-oil 2: | -19.4 | -20.8 | -27.2 | -19.8 | -14.6 | -13.3 | -12.6 | -14.3 | |
| Public debt (% GDP) | 56.2 | 64.2 | 53.8 | 46.4 | 45.3 | 42.1 | 37.0 | 34.1 | |
| Balance of payments | |||||||||
| Current account (% GDP) | -19.7 | -4.9 | -1.4 | 7.0 | 6.6 | 6.4 | 4.3 | 1.0 | |
| FDI (% GDP) | 0.1 | 0.1 | 0.1 | 0.1 | 0.4 | 0.4 | 0.3 | 0.4 | |
| Reserves (in months of imports) | 0.4 | 0.4 | 0.4 | 0.5 | 0.7 | 1.0 | 1.1 | 1.2 | |
| External debt (% GDP) | 40.3 | 46.3 | 41.1 | 35.0 | 34.6 | 32.0 | 27.8 | 25.5 | |
The fiscal year runs from July to June.
Non-oil revenue excluding grants minus domestically-financed current expenditure minus transfers to Sudan (including pipeline fees)
Title page
REPUBLIC OF SOUTH SUDAN
THIRD REVIEW UNDER THE STAFF-MONITORED PROGRAM, REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY, AND PROGRAM MONITORING WITH BOARD INVOLVEMENT
February 21, 2023
EXECUTIVE SUMMARY
Dire and deteriorating humanitarian situation. About two-thirds of South Sudan’s population is experiencing severe food insecurity, the highest level since independence. This is a result of multiple compounding factors, including severe multi-year floods due to climate shocks, inter-communal violence in parts of the country, and the impact of Russia’s war in Ukraine that is contributing to high global food and fuel prices.
Mixed record of reform implementation. Significant reforms have been introduced since the start of the Staff-Monitored Program (SMP) in March 2021, including the unification of the official and parallel exchange rates and increased transparency of oil revenue and government operations. Fiscal pressures, however, led to the temporary resumption of overdrafts from the central bank and a return to the use of oil advances to finance the budget during the final quarter of FY2021/22, causing several quantitative targets for the third SMP review to be missed. The authorities have taken corrective steps in recent months to restore fiscal discipline and rein in money growth, which has stabilized the exchange rate and domestic prices.
Request for Rapid Credit Facility and Staff-Monitored Program with Board Involvement. The authorities have requested a disbursement of 35 percent of quota (SDR 86.1 million or about US$115.7 million) through the Food Shock Window (FSW) of the Rapid Credit Facility (RCF) to address urgent balance-of-payments needs, partly arising from the global food shock. The authorities plan to channel part of the FSW disbursement via the World Food Programme (WFP) and International Organization of Migration (IOM) making use of their systems to provide immediate humanitarian assistance to address food insecurity. To help guide their reform agenda aimed at maintaining macroeconomic stability and debt sustainability and improving governance and transparency, the authorities have also requested completion of the existing SMP and a new nine-month Staff Program Monitoring with Board Involvement (PMB) to lay the ground for an eventual Extended Credit Facility.
Staff’s view. Staff supports the authorities’ request for the RCF given the urgent nature of the BOP need and based on strong policy commitments under the PMB articulated in the attached Memorandum of Economic and Financial Policies. South Sudan has adequate capacity to repay the Fund, but subject to risks. The main downside risk to the program, although with low probability, is a potential return to full-scale civil conflict due to the very difficult humanitarian conditions. A fall in oil prices or a prolonged slump in oil production are additional downside risks. On the upside, peace dividends could prove higher than expected.
Approved By
Catherine Pattillo (AFR) and Guillaume Chabert (SPR)
An IMF team conducted a hybrid mission during November 7–17, 2022. The mission team visiting Juba in person comprised Mr. Hobdari (head), Mr. Alfi, Ms. Muehlschlegel, Mr. Zymek (all AFR), Mr. Jenkinson (Resident Representative, Juba Office), Mr. Chany (Local Economist, Juba Office), and Mr. Garang (Senior Advisor, OED). Mr. Atashbar (SPR), Ms. Ferrero, and Mr. Yamada (both AFR) participated in the mission remotely from headquarters. The team met with Minister of Finance and Planning Mr. Dier Tong Ngor, Bank of South Sudan Governor Mr. Johnny Ohisa Damian, and other high-level government officials. Staff also had productive discussions with representatives of the donor and business communities. Mr. Fernando Morán Arce and Ms. Mireille Nsanzimana (both AFR) contributed to the preparation of this report.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
PROGRAM MONITORING WITH BOARD INVOLVEMENT
A. Fiscal Policy for Sustainable and Inclusive Growth
B. Enhancing Monetary and Financial Stability
C. Strengthening PFM and Governance
PMB MODALITIES, RISKS, AND CAPACITY TO REPAY THE FUND
CAPACITY DEVELOPMENT
STAFF APPRAISAL
TABLES
1. Selected Economic Indicators, 2019/20–2026/27
2a. Fiscal Operations of the Central Government, 2019/20–2026/27 (in billions of South Sudanese pounds)
2b. Fiscal Operations of the Central Government, 2019/20–2026/27 (in percent of GDP)
3. Monetary Accounts, June 2018–June 2023
4. Balance of Payments, 2019/20–2026/27
5a. Quantitative Targets Under the Staff-Monitored Program (SMP)
5b. Quantitative Targets Under the Proposed Program Monitoring with Board Involvement (PMB)
6. Structural Benchmarks for the Third Review of the SMP and for the Proposed PMB
7. Schedule of Program Monitoring with Board Involvement (PMB) Reviews
8. Capacity to Repay the Fund
ANNEXES
I. Republic of South Sudan’s Engagement Strategy Summary
II. Reserve Money Changes and Republic of South Sudan’s Exchange Rate
III. Risk Assessment Matrix
IV. Anchoring Republic of South Sudan’s Fiscal Policy
V. Social Spending in Republic of South Sudan
VI. Republic of South Sudan’s Capacity Development Strategy
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
The Food Shock Window provides, for a period of a year, a new channel for emergency Fund financing to member countries that have urgent balance of payment needs due to acute food insecurity, a sharp increase in their food import bill, or a shock to their cereal exports.
The Executive Board of the IMF recently amended the policy for Staff Monitored Programs (SMPs) to allow for Program Monitoring with Board involvement (PMB). SMPs are informal agreements between national authorities and IMF staff to monitor the authorities’ economic program. As such, they do not entail endorsement by the IMF Executive Board. Under recent reforms to the policy on staff monitored programs, the Executive Board, in specified circumstances, has limited involvement, not amounting to endorsement of the policy program. In such cases, the Board’s role is limited to (i) opining on the robustness of the member’s policy program to meet the objectives stated in the Management approved SMP and to achieve the purpose of building or rebuilding a track record toward a UCT-quality program, and (2) in the context of reviews, to indicate if the member is on track to achieve these objectives.
