1、SOUTH SUDAN ECONOMIC MONITOR,7TH EDITIONA PATHWAY TO OVERCOME THE CRISISMARCH 2025SOUTH SUDAN MULTI-DONOR TRANSITION TRUST FUNDPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized 2025 The World Bank 1818 H Street NW,Washington DC 20433 Tel

2、ephone:202-473-1000;Internet:www.worldbank.org Some rights reserved.This work is a product of the staff of The World Bank.The findings,interpretations,and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they repr

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4、ceptance of such boundaries.Rights and Permissions The material in this work is subject to copyright.Because The World Bank encourages dissemination of its knowledge,this work may be reproduced,in whole or in part,for noncommercial purposes as long as full attribution to this work is given.Attributi

5、onPlease cite the work as follows:“World Bank(2025)South Sudan Economic Monitor.:A Pathway to Overcome the Crisis.World Bank.”All queries on rights and licenses,including subsidiary rights,should be addressed to World Bank Publications,The World Bank Group,1818 H Street NW,Washington,DC 20433,USA;fa

6、x:202-522-2625;e-mail:pubrightsworldbank.org.SOUTH SUDAN ECONOMIC MONITOR,7TH EDITIONA PATHWAY TO OVERCOME THE CRISISMARCH 2025ACKNOWLEDGEMENTSThe South Sudan Economic Monitor(SSEM)is the seventh issue of a World Bank report series that assesses key economic developments,prospects,and policies in So

7、uth Sudan.The current Monitor is intended for a wide audience including policymakers,business leaders,the community of analysts,and development partners engaged in economic debate around macroeconomic and structural reform priorities in South Sudan,as well as the general public.The SSEM was prepared

8、 under the overall guidance and supervision of Maryam Salim(Country Director),Charles Undeland(Country Manager),Hassan Zaman(Regional Director),Marco Hernandez(Practice Manager)and Rinku Murgai(Practice Manager).The SSEM was prepared by Cristina Savescu(Lead Economist),Kamer Karakurum Ozdemir(Senior

9、 Economist),Zerihun Getachew(Economist),Laura Olivera Garrido(Economist),Tom Bundervoet(Lead Economist),and Franck Adoho(Senior Economist).The team is thankful for comments and support from Tehmina Khan(Lead Economist and Program Leader).The team is grateful for the inputs provided by Henok Fasil Te

10、lila(Consultant),Solomon Tsehay Feleke(Consultant),and Reja Glady Joseph Waiwai(Consultant).The team would like to thank the South Sudan Multi-Donor Transitional Trust Fund(MDTTF)for providing resources to support dialogue and analytical diagnostics on macroeconomic developments by the World Bank th

11、at have been used as inputs into the SSEM.The team is also grateful to colleagues in South Sudan for their peer review and feedback.The team thanks Zewditu Banteyehun Haile(Operations Officer),Lomoro Abdalla John Sindani(Consultant),and Gelila Woodeneh(Senior External Affairs Officer)for their suppo

12、rt and guidance on publication and outreach.The team thanks Lindrio Christine Cirilo Opeli for administrative support.The report was edited by Angela Takats and designed by Lucy Victoria Davis.Cover photo credit:Mayak Akuot.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisSOUTH S

13、UDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisSOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisTABLE OF CONTENTSTABLE OF CONTENTSList of Acronyms.viList of Tables.viList of Figures.viiExecutive Summary.ixPart 1:The State of the Economy and Medium-term Outlook.11.1

14、 Recent Economic Developments.11.1.1 The Global Economy:A Challenging External Environment.11.1.2 Economic Growth:Depressed Economic Activity.31.1.3 Prices:Double Digit Monthly Inflation Worsens Food Insecurity.61.1.4 External Sector:The Oil Shock and Limited Buffers are Straining the Balance of Pay

15、ments.91.1.5 Financial Sector:Limited Financial Intermediation and High Risks to Financial Stability.101.1.6 Monetary Policy:Excess Liquidity Has Put Pressure on the Exchange Rate.111.1.7 Fiscal Policy:Disorderly Adjustment has Squeezed Social and Pro-growth Capital Spending.141.2 Medium-term Outloo

16、k and Policy Options.181.2.1 Business-as-usual Pathway:A Sluggish Recovery with Significant Downside Risks.181.2.2 Reform Pathway:Key Policies for Macroeconomic Stability.22PART 2.Special Focus:Poverty Trends and Features.272.1 Poverty in South Sudan:A Grim Picture.282.2 Proximate Drivers of the Inc

17、rease in Poverty Between 2016 and 2022.322.3 Summary and Additional Policy Options.33References.37Annex 1.Data Limitations in South Sudan.39Annex 2.Fiscal Year 2024/25 Budget.40Annex 3.Micro-simulation methodology for poverty rates.43SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the cri

18、sisvLIST OF ACRONYMSBAPCO Bashayer Pipeline CompanyBoSS Bank of South Sudanbpd Barrels per dayCOVID Coronavirus diseaseCPI Consumer Price IndexDPOC Dar Petroleum Operating Company FAO Food and Agriculture OrganizationFX Foreign exchangeFY Fiscal yearGDP Gross domestic productHBS Household Budget Sur

19、veyHFS High Frequency SurveyIMF International Monetary FundMoFP Ministry of Finance and PlanningPFM Public financial managementPIT Personal income taxR-ARCSS Revitalized Agreement on the Resolution of ConflictSSA Sub-Saharan AfricaSSBS South Sudan Bureau of Statistics SSEM South Sudan Economic Monit

20、orSSP South Sudanese PoundTDF Term Deposit FacilityUS$US dollarWB World BankLIST OF TABLES Table 1.Key economic indicators 20232027.5Table 2.Dynamics of severe food insecurity in South Sudan.8Table 3.Vulnerability of South Sudan and other east and central African countries to natural hazards.9Table

21、4.Financial stability indicators.11Table 5.Budget outturns FY23/24.16Table 6.Outlook for key indicators in alternative pathways.22Table 7.Policy options.24SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisviLIST OF FIGURESFigure ES.1.South Sudan annual oil production.xFigure ES.2.

22、South Sudan inflation vs.regional peers.xFigure ES.3.Number of people in acute food security:South Sudan vs.regional peers.xFigure ES.4.Policy options for the next 6 months.xiiFigure 1.Contributions to global growth.2Figure 2.Annual changes in oil demand.2Figure 3.Headline consumer price inflation.2

23、Figure 4.Commodity price projections.2Figure 5.South Sudan GDP growth.4Figure 6.Oil production and revenues.4Figure 7.Cereal production.4Figure 8.Frequency of conflict events(number).4Figure 9.Overall and food inflation .6Figure 10.Crop prices .6Figure 11.Number of severely food insecure people.7Fig

24、ure 12.Percentage of the population by food security status,2022.8Figure 13.Current account balance and oil exports.10Figure 14.Gross international reserves.10Figure 15.Debt service,%of GDP.10Figure 16.South Sudans imports and exports with selected neighbors,million US$.10Figure 17.South Sudan excha

25、nge rate,SSP/US$.13Figure 18.Growth of broad money and inflation.13Figure 19.Overdraft vs.exchange rate.13Figure 20.Fiscal aggregates,billion SSP.18Figure 21.South Sudan non-oil revenue.18Figure 22.FY24 Q2 budget execution and quarterly threshold.18Figure 23.Real GDP growth.19Figure 24.Oil productio

26、n by Joint Operating Company.20Figure 25.Long-term pathways of real GDP per capita.21Figure 26.Poverty by geographic unit,20162022.28Figure 27.Annual mean household consumption growth by percentile,20162022.29Figure 28.Poverty rates.30Figure 29.Distribution of the poor.30Figure 30.The Gini index of

27、inequality in household consumption,2016 and 2022.31Figure 31.Share of adults 18 years and plus that never attended school.31Figure 32.Contribution of different factors to the change in poverty 20162022,percentage points.32SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisviiSOUTH

28、 SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisEXECUTIVE SUMMARYEXECUTIVE SUMMARYSouth Sudans socio-economic outcomes have worsened over the past decade due to recurrent conflicts,fragility,and macroeconomic mismanagement compounded by global economic and climate shocks.Even prior t

29、o the oil shock of early 2024,per capita gross domestic product had dropped by 18 percent relative to its 2015 level;with prices rising 93-fold over this period.The erosion in living standards has left three in four people living in poverty as of 2022.This dire situation is the result of:(i)nascent

30、institutions and weak governance;(ii)persistent mismanagement of the countrys abundant natural capital,namely,oil;and(iii)recurrent community-level conflicts and violence that led to nationwide armed conflict in 2016 and localized ongoing conflict after the 2018 peace agreement.Overlapping exogenous

31、 shocks such as the COVID-19 pandemic and historic flooding have also impeded economic recovery.Macroeconomic policy challenges,characterized by the need for stronger monetary and fiscal policy frameworks and improved policy coordination,have contributed to economic imbalances and increased vulnerab

32、ility to shocks.The Bank of South Sudan(BoSS)faces difficulties in achieving policy objectives due to an underdeveloped financial sector and money market.The ability to target monetary aggregate is further complicated by substantial cash holdings outside banks.Additionally,the BoSS has limited capac

33、ity for timely,high-quality data production,which affects transparency and regulatory capabilities.The recent oil shock has further impacted the BoSSs ability to calibrate monetary policy and manage exchange rate flexibility.The shock has necessitated a resumption in monetary financing of the centra

34、l government deficit and given the central banks limited capacity to manage liquidity by sterilizing its interventions,the monetization contributed to higher depreciation and inflation.At the same time,the lack of fiscal space and buffers,and overdependence on volatile oil revenues to fund the budge

35、t has constrained the governments capacity to respond effectively to external shocks,resulting in a procyclical fiscal policy.Despite improvements in non-oil revenue collection in FY24,the lack of fiscal buffers and limited availability of non-monetary financing has led to disorderly adjustments,res

36、ulting in further accumulation of salary arrears and cuts to expenditures.Both social spending and capital budget execution have consistently fallen short of budget allocations in recent years.The FY24/25 budget,approved with delays,projects a fiscal deficit of 11.7 percent of GDP.The country is now

37、 facing a severe crisis,following the collapse of oil production since February 2024.The conflict in neighboring Sudan has disrupted the flow of goods and services,including oil exports which account for almost all the countrys exports.The conflict has also triggered a massive influx of refugees and

38、 returnees.The rupture of the main Dar Blend oil export pipeline in February 2024 affected oil production(Figure ES.1),leading to a sharp decline in export revenues with losses estimated at around US$7 million per day.As of mid-March 2025,the Dar Blend pipeline was still not operational.The oil shoc

39、k strained public finances,leading to the build-up of public salary arrears and further pressure on the already inadequate levels of spending on essential public services like health and education1.The economy is projected to contract by 30 percent in FY24/25,marking the fifth consecutive year of ne

40、gative growth.In FY25,GDP per capita is estimated to decline to around half of the FY20 levels.1 The preliminary FY24 budget outturn shows a significant underfunding of social sectors.Education and health sector outturns were at 39 percent and 25 percent of allocated budget,respectively,highlighting

41、 slow execution and funding issues.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisixFigure ES.1 South Sudan annual oil production Figure ES.2 South Sudan inflation vs regional peers Source:Ministry of Petroleum and WB calculations.Source:World Economic Outlook and WB calculatio

42、ns.Figure ES.3 Number of people in acute food insecurity:South Sudan vs regional peers Source:IPC.Rampant inflation has created a cost-of-living crisis,pushing households deeper into poverty.With an estimated annual inflation rate of 105 percent in 2024,South Sudan is an outlier in the region(Figure

43、 ES.2).Driven by currency depreciation,supply disruptions,and the monetization of fiscal deficits,inflation has continued to increase,with the monthly inflation rate reaching 22 percent in November 2024.The governments inability to control inflation has led to widespread economic hardship with house

44、holds finding it increasingly difficult to afford even necessities.Extremely high and rising food insecurity poses a significant threat to the well-being of millions of people(Figure ES.3).Nearly half the population faces the risk of acute food insecurity,with over two million children at risk of ma

45、lnutrition.Catastrophic and recurrent flooding has led to crop destruction,food supply disruptions,disease outbreaks,and the displacement of 330,000 people in 2024 alone.The ongoing conflict in Sudan has also affected agricultural production and supply chains.These factors have led to widespread hun

46、ger and malnutrition,with severe consequences for public health and social stability.Poverty affects almost all South Sudanese.2 More than three-quarters of the South Sudanese population(76 percent)lived below the national poverty line in 2022.This represents a 7-percentage point increase since 2015

47、,affecting all states.Extreme deprivation,defined as the share of households that cannot even afford basic food,rose 4 percentage points to 70 percent in 2022.Since then,the poverty rate is estimated to have further increased to 84 percent in 2023 and to a high of 92 percent in 2024 as GDP collapsed

48、 due to the oil pipeline closure and as prices soared.This represents potentially close to an additional four million people falling into poverty.2 The poverty line amounts to SSP 358,724 per person per year in 2022 prices,which corresponds to approximately US$1.5 per adult per day using the average

49、 official exchange rate for 2022.020406080100120ETHKENRWASSDTZAUGA%annual averageSSA Avrg.02040600510SSDUGAKENTAZ%of food insecurePopulation in millionsNo.of people in acute food insecurity%of analyzed population(RHS)SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisx 010203040506

50、070802019/20 2020/21 2021/22 2022/23 2023/24 22024/25eMillion barrelsFiscal challenges are being compounded by weak governance and a lack of transparency in the management of oil revenues,which are undermining fiscal sustainability and public financial management(PFM).Weak domestic revenue mobilizat

51、ion,notwithstanding a notable increase in non-oil revenue in recent years,and continued spending pressures have led to a growing fiscal deficit,increasing the already high risk of debt distress and economic instability.Meanwhile,basic public services,such as health and education which are crucial fo

52、r social cohesion and livelihoods remain grossly underfunded and their provision is mostly dependent on international donors.A complex global economic outlook presents heightened risks for South Sudan and underscores the need for immediate action.Escalating conflicts and geopolitical tensions,increa

53、sed inflation,slower economic growth in worlds major economies pose substantial risks to the global outlook.Additionally,potential reductions in global aid and humanitarian support may have material consequences,as South Sudan is a large recipient of aid amounting to an estimated annual average of 2

54、3.8 percent of GDP during 2020-24.3 Against this challenging background,South Sudan is at a critical juncture in its development trajectory and the government has a decision to make about the economic path it chooses as the country moves forward.The outcomes of a business-as-usual economic pathway w

55、ith limited reforms will drastically fall short of meeting the basic needs of the South Sudanese.Such a path is likely to result in limited recovery driven by the gradual resumption of oil production followed by a protracted and fragile development path.This path is likely to be characterized by con

56、tinued macroeconomic instability,exceptionally high and chronic poverty,and limited progress in public service delivery.In this case,economic activity would bounce back in FY26,with a GDP growth rate of 53.7 percent driven by oil production,while dropping to a mere 0.6 percent in FY27.Inflation woul

57、d decline to single digit levels in FY 27,as the economy slows.Fiscal deficit will ease with the help of the recovery in oil revenues but remain elevated throughout the projection period;at an average of 1.9 percent in FY2026-27.,An extrapolation to the long-term,using the average real GDP growth ra

58、te of the five years prior to the Dar oil shutdown,suggests real GDP per capita would continue its declining trend and the economy would remain highly vulnerable to external shocks and internal disruptions,with no improvement in living standards for most of the population.The persistence of high inf

59、lation,fiscal imbalances,and food insecurity would continue to fuel social tensions and undermine development prospects.Conversely,implementing key reforms could place the country on a new pathway by helping to introduce economic stability and laying the foundations for a strong recovery.This altern

60、ative pathway would involve urgent and full implementation of the governments policy and institutional reform commitments in the Revitalized Agreement on the Resolution of Conflict(R-ARCSS)in South Sudan and close collaboration with all stakeholders,including international partners and the private s

61、ector.It would entail a strengthened macroeconomic framework,transparent fiscal policy,and implementation of structural reforms.Increasing exchange rate flexibility and curtailing monetary financing of the deficit would contribute to macroeconomic stabilization.While some of these measures may entai

62、l short-term costs,their medium-to long-term benefits are expected to greatly surpass these initial costs.For instance,increased exchange rate flexibility may lead to short-term inflation,however,as the economy adjusts more effectively to shocks and investor sentiment improves,it will ultimately res

63、ult in stronger growth momentum.Strengthening fiscal management would involve improving oil revenue management,boosting non-oil revenues,fostering growth in the agriculture sector,prioritizing social spending,and implementing a credible strategy to clear arrears on government salaries.The government

64、s declared policy priorities of clearing arrears,funding social sectors,and supporting economic diversification are crucial in this respect.Figure ES.4 below presents the policy options for the next 3-6 months.At the same time,addressing pervasive poverty would entail more specific interventions to

65、enhance other drivers of growth,particularly agriculture production where three in four working age adults are involved,create opportunities for young people,and establish an effective social protection system in the country.3 The aid estimate is based on OCHA financial tracking service.SOUTH SUDAN

66、ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisxi13fees for food importsFEESBANK2 245TAXFigure ES.4 Policy options for the next 6 months POLICY OPTIONS FOR THE NEXT 3-6 MONTHSREDUCING INFLATIONSOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisxii1Continue to to boost non

67、-oil revenues2Invest in pipeline to recover oil production to FY23 production levels(139,000 bpd)3OIL456Improve oil revenue use of oil revenues Nilepet profitPOLICY OPTIONS FOR THE NEXT 3-6 MONTHSADDRESSING FISCAL PRESSURESSOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisxiiiSOUT

68、H SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisPART 1PART 1:THE STATE OF THE ECONOMY AND MEDIUM-TERM OUTLOOK 1.1 Recent Economic Developments1.1.1 The Global Economy:A Challenging External EnvironmentThe global economic outlook for 20252027 remains complex with subdued growth suppo

69、rted by gradual disinflation and monetary easing subject to renewed risks.Both advanced and emerging economies are expected to experience disinflation,along with moderate improvements in trade and investment,contributing to a global economic growth rate of 2.7 percent annually over the 20252026 peri

70、od.However,trade and investment are projected to expand at a slower pace compared to the pre-pandemic decade,with overall output unlikely to return to its pre-pandemic trajectory due to the lasting effects of recent overlapping shocks which have disproportionately impacted the most vulnerable nation

71、s(World Bank,2025).Global inflation is steadily declining,driven in part by lower commodity prices,including for energy,and the delayed effects of monetary tightening,but the disinflation process remains uneven across countries.Monetary policy rates are expected to be reduced further,though they are

72、 likely to remain significantly higher than the low levels of the 2010s in advanced economies.Economic performance is expected to diverge among both advanced and emerging economies,with Sub Saharan Africa being one of the regions where growth is projected to strengthen.While Europe is likely to see

73、sluggish growth,the outlook for the United States has been revised upward(World Bank,2025).A modest recovery is projected in China driven by weak domestic demand.Meanwhile,growth in Sub-Saharan Africa is expected to average 4.2 percent in 20252026,driven by stronger growth in industrial commodity-ex

74、porting countries and supported by declining inflation and easing financial conditions.(Figure 1).The growth outlook for South Sudans key economic partners in the region is positive,with growth in Uganda projected to accelerate mainly driven by an oil-related infrastructure boom ahead of the start o

75、f oil,while growth in Kenya is benefiting from a more dynamism in the private sector as a result of reforms and more accommodative monetary policy(World Bank 2025).In Ethiopia,growth is expected to strengthen gradually,benefiting from last years macroeconomic reforms.Persistent conflict in Sudan,how

76、ever,and country-specific challenges continue to weigh on the regions overall economic prospects.Moreover,per capita income growth remains insufficient to significantly reduce poverty levels across SSA.The price of oil,a critical resource for South Sudans economy,is gradually easing as global demand

77、 for oil is moderating and remains subject to significant risks.After rebounding from pandemic-induced lows,oil demand growth is moderating,and the market is expected to remain well-supplied.Oil prices are projected to decline to US$72 in 2025 and further to US$71 in 2026,even as most of the 2.2 mil

78、lion barrels per day in OPEC voluntary cuts are anticipated to be extended(IEA,2024a).Weak economic SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis1growth,sluggish demand in China,and a reduced perception of risks to oil infrastructure in the Middle East are weighing on short-t

79、erm oil prices(World Bank,2024a).Gradual shifts towards clean energy and reduced global demand could cause volatility(IMF,2024a),and could present significant challenges for oil-dependent economies over the long-term as it is projected to lower oil demand(IEA,2024b).As a major oil exporter,South Sud

80、an must navigate these shifts while diversifying its economy to mitigate potential shocks(IMF,2024b).Escalating conflicts and geopolitical tensions,higher inflation,slower growth in major economies,and extreme weather events linked to climate change present significant downside risks to the global o

81、utlook.Emerging markets face external challenges stemming from shifting global dynamics,including a stronger risk appetite in the United States,a firmer US dollar,and rising US bond yields.Export-dependent nations,such as South Sudan,are particularly vulnerable as global trade growth is projected to

82、 remain below the 20102019 average.Insufficient policy action in China could lead to economic stagnation and reduce demand and prices for minerals and metals,as well as curtail Chinese investments in the SSA region.Figure 1.Contributions to global growth Figure 2.Annual changes in oil demand Figure

83、3.Headline consumer price inflation Figure 4.Commodity price projections (Chen,Fornino,and Rawlings,2024).Source:World Bank;International Energy Agency(IEA);Haver Analytics;Bloomberg;Global Economic Prospectus January 2025.Note:AEs=advanced economies;e=estimate;EMDEs=emerging market and developing e

84、conomies;f=forecast;RHS=right-hand scale.Aggregates are calculated using real US dollar GDP weights at average 201019 prices and market exchange rates.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis201234012342010-19 average2024e2025f2026fUnited StatesChinaOther EMDEsEuro areaO

85、ther AEsWorld(RHS)Percentage pointsPercent 0123202320242025ChinaIndiaAEsRest of world2010-14 avg.2015-19 avg.Million barrels per day024681012Nov-19Mar-20Jul-20Nov-20Mar-21Jul-21Nov-21Mar-22Jul-22Nov-22Mar-23Jul-23Nov-23Mar-24Jul-24Nov-24WorldAdvanced economiesEMDEsPercent 501001502002502019202020212

86、0222023202420252026EnergyMetals and mineralsIndex,100=2015-19 averageConflicts and instability particularly the war in Sudan and ongoing unrest in the Sahel pose significant challenges to the Sub-Saharan Africa region.For South Sudan,the conflict in Sudan has disrupted trade,exacerbated food insecur

87、ity,and increased refugee inflows,further delaying economic recovery efforts(IMF/WB,2024).Moreover,fiscal risks in SSA remain elevated,with high debt service costs limiting the ability of many countries to invest in growth-enhancing sectors(World Bank,2024b).These constraints underscore the importan

88、ce of addressing vulnerabilities to support sustainable growth and regional stability.1.1.2 Economic Growth:Depressed Economic ActivitySouth Sudans heavy reliance on oil for economic activity,exports,and fiscal revenues makes it highly vulnerable to fluctuations in oil output and prices.The oil sect

89、or is the primary driver of the countrys economy,contributing about 5060 percent of GDP,while oil-related revenues account between 8090 percent of government revenue,underscoring the tight link between fiscal sustainability and oil prices.Despite possessing significant proven oil reserves,the countr

90、y faces challenges in leveraging this resource for its development due to insufficient investment and infrastructure damage caused by conflict and climate shocks.Moving forward,the country could face a less favorable external environment due to the global energy transition.Moreover,one of South Suda

91、ns key oil sector operators,the Petronas International Corporation,announced its official exit from the country in August 2024 creating uncertainty regarding the management of its assets.Petronas has been a key partner in the Joint Operating Companies,with interests in Blocks 3/7,1/2/4,and 5A,throug

92、h partnerships with Chinas CNPC and Sinopec,Indias ONGC and Nilepet,in assets producing 155,900 barrels per day(bpd)in FY22.South Sudans economy contracted for a fourth consecutive year,afflicted by spillovers from the conflict which affected critical oil export infrastructure,economic mismanagement

93、,and floods.The rupture of an oil pipeline in Sudan,through which two-thirds of South Sudanese oil was being transported to Port Sudan,plunged the economy deeper into recession.Even prior to this shock the South Sudanese economy had been under stress due to consecutive years of severe flooding,the s

94、pillover effects of the Russian invasion of Ukraine,and the impacts of COVID-19,which have exacted a toll on the standard of living of the South Sudanese.The conflict in Sudan led to a disruption in the flow of oil exports,which account for almost all of countrys exports,while triggering a massive i

95、nflux of refugees and returnees,and exacerbating existing economic challenges.The pipeline shutdown has resulted in substantial losses in export and government revenues,with oil export revenues declining by around an estimated US$6.8 million per day.More than half of South Sudans government revenues

96、 were derived from Dar Blend in 2023.The pipeline rupture in February 2024 was caused by diesel shortages at pump stations used to power heaters that prevent crude oil gelling.Gelling led to increased pressure and ultimately the pipelines failure.Sudan declared force majeure,halting oil transportati

97、on through the pipeline to the Bashayer Oil Terminal on the Red Sea.The Bashayer Pipeline Company(BAPCO)oil pipeline,which spans 1,368 kilometers from the Upper Nile State in South Sudan to Port Sudan,had previously transported around 95,000 barrels per day(bpd)of Dar crude oil from Blocks 3 and 7,o

98、perated by the Dar Petroleum Operating Company(DPOC),accounting for 65 percent of South Sudans oil production prior to the disruption.44 The Dar Petroleum Operating Company(DPOC)is a consortium that includes Nilepet,Chinas CNPC and Sinopec,and Malaysias Petronas.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-

99、A pathway to overcome the crisis3Figure 5.South Sudan GDP growth Figure 6.Oil production and revenues Source:World Bank,SSBS.Source:MoFP.Figure 7.Cereal production Figure 8.Frequency of conflict events(number)Source:FAO,2024a.Source:ACLED.2024 data covers January to October.Conflict events represent

100、 number of political violence events.The oil infrastructure shock caused a sharp deterioration in the macroeconomic situation,plunging South Sudan further into a deep recession,depressing economic activity and exports,and putting pressure on the balance of payments.Since the BAPCO pipeline is the on

101、ly export route through Port Sudan and given limited storage capacity,this has caused South Sudans oil production to plunge to around 60,000 barrels per day(bpd)from an average of 144,000 bpd in the first half of FY24(Figure 6).Annual oil production dropped by 12 percent in FY24 and,due to the large

102、 share of the oil sector in South Sudans GDP(64 percent),this contributed to an estimated 7.2 percent GDP contraction in FY24(Table 1),with negative spillovers for poverty and food security.Better outcomes in the agriculture sector,which is the main source of livelihood for nearly 80 percent of hous

103、eholds,have prevented an even sharper decline.Improvements in security have facilitated some of the returning displaced households to engage in farming.Coupled with less extensive flooding in 2023,this has resulted in a 6.2 percent increase in area harvested and 8.3 percent increase in crop producti

104、on in FY24 compared to FY23 and 20.3 percent above the five-year average(Figure 7).Yet the output gap in the agricultural sector,with respect to its potential remains significant,due in large part to still ongoing and widespread fragility,recurrent flooding,and high input costs,including for seed an

105、d hand tools,as well as disruptions in input distribution.Torrential rains in August 2024 and the overflow of the River Nile and its tributaries caused flooding and crop losses,with the most affected states being Unity,Warrap,Lakes,and Jonglei(FAO,2024a,b).SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A path

106、way to overcome the crisis44005006007008009001000110012001300400600800100012001400201220132014201520162017201820192020202120222023Production,tonnesArea harvested,haYield,kg/haThousands 020406080100120Jan-18Oct-18Jul-19Apr-20Jan-21Oct-21Jul-22Apr-23Jan-24Oct-24-15-10-50510152025302019/20 2020/21 2021

107、/22 2022/23 2023/24PercentAggregate GDP Oil GDP Non-Oil GDP8284868890920102030405060702019/20 2020/21 2021/22 2022/23 2023/24PercentMillion barrelsOil productionDPOCGPOCSPOCOil revenue,%of total revenue(RHS)Table 1.Key economic indicators 20232027 FY23FY24FY25FY26FY27Annual percent change unless ind

108、icated otherwise Real GDP growth,at constant market prices-1.3-7.2-30.253.70.6 Agriculture-1.78.00.51.02.0 Industry-4.3-11.6-43.496.10.0 Services3.62.3-2.91.12.0 Inflation(Consumer Price Index)18.035.0177.929.94.9 Current account balance(%of GDP)5.14.0-5.23.63.7 Net foreign direct investment,inflow(

109、%of GDP)0.81.74.42.73.2 Fiscal balance(%of GDP)3.3-6.5-3.0-2.1-1.7 Revenues(%of GDP)32.726.721.429.129.6 Debt(%of GDP)39.546.050.948.149.0 Primary balance(%of GDP)3.7-6.5-1.0-0.40.0 GDP nominal in US$(millions)72876496408256685636 Memo items:Oil production(thousands of bpd)13912266139139 Nominal GDP

110、,LCU billions54857985154813090832629Source:World Bank estimates,Government of South Sudan.The dire macroeconomic situation has upended the recovery in the private sector that was underway in FY22 and FY23.Depressed economic activity,accelerated depreciation of the exchange rate,and spiraling inflati

111、on that eroded purchasing power and likely pushed more people into poverty,have discouraged private economic activities and investment,and likely affected job creation and labor incomes.Domestic credit to the non-governmental sector grew at a much lower pace in FY24 to an estimated 3.4 percent of GD

112、P,up from 2.4 percent of GDP the previous fiscal year.Despite diminishing levels of conflict and violence(Figure 8),supply chain disruptions,increased check points,and multiple taxes continue to impact private sector economic activities and agricultural production.Supply constraints have been furthe

113、r exacerbated by the recent protest of importers against the revised customs valuations following the FY25 Finance Act and applying the daily prevailing exchange rate instead of the previous fixed SSP 300 per one dollar worth of imports.Domestic demand was negatively affected by further accumulation

114、 of public wage arrears and the marked slowdown in public capital spending in the second half of FY24.Public wage arrears,for both domestic and foreign workers,increased to nearly 11 months,affected by the ongoing process of vetting the public workers and the sharp decline in government oil revenues

115、 since February 2024 following the oil pipeline disruptions.5 The build-up in arrears,in conjunction with high inflation,undermined household consumption and contributed to increased economic hardship.Meanwhile capital spending as a share of GDP declined by 4.3 percentage points to 5.0 percent of GD

116、P in FY24.5 The vetting of local government employees is underway,while the vetting of civil servants which started in August 2023 was completed in early 2024(IMF,2024b).SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis51.1.3 Prices:Double Digit Monthly Inflation Worsens Food Ins

117、ecurityInflation had been relatively subdued but began to rise six months into the Sudan conflict.Following the 2021 exchange rate unification,inflation had been subdued,supported by easing supply constraints,receding floods,and reductions in localized violence.Subsequently,fiscal mismanagement,the

118、monetization of fiscal deficits,and exchange rate volatility linked to oil price fluctuations have contributed to inflationary pressures and the oil shock amplified these challenges.Inflation began to rise significantly from the 5.7 percent low recorded in October 2023,reflecting the spillover effec

119、ts of regional instability and the disruption of economic activities and subsequently the oil shock.Headline inflation,which had been rising steadily since November 2023,increased sharply after the oil shock.The sharp decline in oil exports caused a sharp depreciation of the South Sudanese pound,fue

120、ling inflation.High passthrough of the South Sudanese pound depreciation,especially for food and fuel prices,has contributed to a sharp increase in inflation.Consumer price inflation reached 139 percent in August 2024,with the surge in inflation primarily fueled by food inflation,which climbed to 12

121、1.8 percent(Figure 9).Inflation pressures stemmed also from supply constraints and higher transportation costs following the increases in fuel prices 220 percent for diesel and 216 percent for petrol between January and October 2024.Prices of cereals in Juba were up by 130 percent year-on-year for m

122、aize,110 percent for sorghum,and 317 percent for wheat flour by October 2024(Figure 10).Figure 9.Overall and food inflation Figure 10.Crop prices Source:South Sudan Bureau of Statistics.Source:WFP.Inflation remains elevated with dire consequences for households that have almost no buffers to respond

123、 to the inflation shock.A new Consumer Price Index(CPI)series introduced by the South Sudan Bureau of Statistics(SSBS)shows that monthly inflation spiked to 22 percent in November 2024,up from 6.6 percent the previous month,before easing somewhat to 13.2 percent in December 2024.6 The biggest contri

124、bution to inflation came from higher food and non-alcoholic beverage prices,which have a 48.2 weight in the household consumption basket,which shot up to 35 percent month-on-month in November 2024,nearly three times the rate recorded in the previous month.Housing,water,and utility prices,which repre

125、sent 44.4 percent of the household consumption basket,rose by 8.1 percent that month.Inflation in December 2024 diverged significantly across the states,ranging from 6.9 percent in Juba to 106 percent in Kuajok.The disruption in cross-border trade of basic food has significantly impacted food supply

126、 in South Sudan.During the third quarter of 2024,maize shipments from Uganda plummeted falling 30 percent compared to the previous quarter,87 percent compared to the same quarter in 2023,and 96 percent below the five-year average.Sorghum shipments also dropped sharply,declining 52 percent from the p

127、revious quarter,87 percent from 2023 levels,and 98 percent below the five-year average.Reduced SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis6MaizeSorghum-50050100150200250300350Jan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23May-23Jul-23Sep-23Nov-23Jan-24Mar-24May-24Jul-24Sep

128、-24%change,year-on-year-40-20020406080100120140160OverallFoodJan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23May-23Jul-23Sep-23Nov-23Jan-24Mar-24May-24Jul-24%change,year-on-year6 According to the latest inflation publication from the SSBS.Since August 2024,the CPI coverage was expanded to include th

129、e seven remaining state capitals in addition to Wau,Juba,and Malakal,causing a structural break in the inflation series.production in Uganda and the ongoing conflict in Sudan are expected to continue constraining the sorghum supply in South Sudan.Inflation in Sudan rose to 145 percent in January 202

130、5,according to official figures.Recently South Sudan has signed a memorandum of understanding with Djibouti,Uganda and Ethiopia to create a land corridor for strengthening regional trade ties which could help alleviate pressures over the medium term.Additional factors,such as losses in purchasing po

131、wer,elevated border fees,increased transport costs,and unofficial taxation at multiple checkpoints along trade routes,have likely negatively affected grain trade.These challenges have diverted regional grain trade to markets with higher margins,such as the Democratic Republic of Congo,Kenya,and Rwan

132、da,following the reopening of Ugandas border with Rwanda in early 2022.7 These shifts are expected to further disrupt food supplies,intensify inflationary pressures,and elevate the already high risk of food insecurity in South Sudan.8 Recurrent flooding,insecurity,and high food prices have exacerbat

133、ed food insecurity,affecting nine million people(78 percent of the total population).9 The inflow of more than one million returnees and refugees as of January 2025,of which 76 percent are South Sudanese returnees,worsened the food security situation.10 The cost of the minimum expenditure basket in

134、January 2025 reached SSP 449,640,up 281 percent with respect to a year earlier(REACH,2025).High prices coupled with supply disruptions due to flooding,together with lower humanitarian aid,are putting additional pressure on a population already struggling with high levels of food insecurity.11 Floodi

135、ng has impacted 1.4 million people and displaced nearly 330,000,with the areas most affected by flooding being Unity,Jonglei,Western Bahr el Ghazal,Lakes States,and the Abyei Administrative Area.Furthermore,flooding in Renk,the main entry point for people displaced by the conflict in Sudan,has contr

136、ibuted to a cholera outbreak.During the 2024 lean season(AprilJuly 2024),56 percent of the population(7.1 million)suffered from food insecurity;and this is projected to increase to 7.7 million people in the AprilJuly 2025 lean season(Figure 11).Figure 11.Number of severely food insecure people Sourc

137、e:IPC.The severity of food insecurity varies across the regions(Figure 12).The states affected by frequent climate-related shocks and returnees/refugees experienced a high incidence of food insecurity(Table 2).The incidence of food insecurity was slightly below 50 percent in the Western Bahr el Ghaz

138、al and Eastern Equatorial states,while it was lowest in the Western Equatorial state in AprilJune 2024.Its incidence is most severe in Jonglei,at 88 percent,closely followed by Western Equatoria,at 82 percent,which may be primarily attributed to persistent conflict and security challenges affecting

139、these states.Conflict is disrupting agricultural activities and breaking food supply chains,leading to inadequate access to reliable food sources.These challenges likewise represent major obstacles to the effective delivery of humanitarian assistance(HRW,2023).-2 4 6 8May-July2020No.of people in mil

140、lionsApril-July2021April-July2022Oct-Nov2022Dec 2022-Mar 2023April-July2023April-July2024April-July2025SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis77 Multiple unauthorized checkpoints along trade routes resulted in increased transportation costs and hence increased prices of

141、 goods.Checkpoints are numerous,and there was one check point for each 16 km along major trade routes.For instance,there were 15 check points along 192 km long Juba-Nimule Road,which is South Sudans main trade gateway.In early December 2024,the government ordered removal of all illegal checkpoints a

142、long trade routes in South Sudan.However,previous experience shows that after the authorities order closure of illegal checkpoints,they often continue,or close and then reemerge.8 FEWSNET(2024).9 UNOCHA(2024).10 IOM(2025).11 REACH(2025).Figure 12.Percentage of the population by food security status,

143、2022 Source:Estimates based on 2022 HBS;2021 data of FSNMS(Food Security and Nutrition Monitoring System)(dashboard),Food Security Indicators Data,CLiMIS,Juba,South Sudan,https:/climis-southsudan.org/fsi/data.Table 2.Dynamics of severe food insecurity in South Sudan Feb 2023-Mar 2022 Sep 2023-Nov 20

144、23 Dec 2023-Mar 2024 Apr 2024-June 2024 Apr 2025-June 2025 National 0.55 0.46 0.46 0.56 0.57 Central Equatoria 0.52 0.47 0.33 0.52 0.52 Eastern Equatoria 0.44 0.37 0.32 0.46 0.45 Jonglei 0.72 0.61 0.59 0.68 0.62 Lakes 0.52 0.53 0.48 0.60 0.57 Northern Bahr el Ghazal 0.57 0.46 0.51 0.59 0.62 Unity 0.

145、68 0.58 0.61 0.66 0.72 Upper Nile 0.54 0.56 0.57 0.67 0.65 Warrap 0.63 0.37 0.44 0.55 0.59 Western Bahr el Ghazal 0.30 0.49 0.33 0.49 0.40 Western Equatoria 0.35 0.18 0.19 0.26 0.26 Returnees 0.60 0.70 0.75 0.85Source:IPC(2022,2024).Note:The red color shows states with more than a 50 percent food in

146、secure population.More areas are being affected by severe food insecurity.Parts of the country which were at stressed level(Phase 2)of food insecurity in 2022,have since moved to either crisis level(Phase 3)or emergency level(Phase 4).When comparing 2024 to 2022,the area of South Sudan that was expe

147、riencing Phase 2 and 3 levels of food insecurity has been expanding as several counties shifted from Phase 2 level to either Phase 3,4,or 5(catastrophe).Yambio,Ezo,and Nazra counties remain under Phase 2 level of food insecurity while the rest of South Sudan became either crisis or emergency level o

148、f food insecurity in 2024.Climate-related shocks,conflict,and violence put pressure on the food security status of households.South Sudan,with the highest natural hazards vulnerability index,has the lowest coping capacity in the world to mitigate the negative impacts of natural hazards,ranking first

149、 in the world in terms of lacking coping capacity(Table 3).SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis841342546595231115172021252930303153586959506152554146442030132029141911251620SouthSudanJongleiWesternEquatoriaWesternBahr elGhazalLakesCentralEquatoriaUpper NileUnityGhaza

150、lEasternEquatoriaWarrapFood secureMarginally food secureModerately food insecureSeverely food insecureNorthern Bahr elPercentage of individualsTable 3.Vulnerability of South Sudan and other east and central African countries to natural hazards Hazard exposure Vulnerability Lack of coping capacityOve

151、rall riskIndex RankIndex RankIndex RankIndex RankSouth Sudan 6.9398.929.318.32DRC8.387.778584Sudan 8.387.496.7227.48Ethiopia 8156.6166.7227.113Uganda 5.8386.8146.9196.518Kenya 6.7325.1305.7476.222Burundi5466.4206.722623Rwanda 1.61455.7384.7723.589Source:INFORMRISK(2024).1.1.4 External Sector:The Oil

152、 Shock and Limited Buffers are Straining the Balance of PaymentsSouth Sudans external position has worsened in the wake of the oil production shock.The high volatility of external accounts demonstrates how vulnerable the mono commodity exporter is to oil revenue fluctuations.The current account surp

153、lus contracted in FY24,dropping by more than 2 percentage points of GDP.Oil exports,which typically account for nearly 98 percent of South Sudans exports and are the countrys main source of foreign exchange,collapsed following the shutdown in the BAPCO oil pipeline that usually carries nearly 70 per

154、cent of the countrys oil production to Port Sudan(Figure 13).External buffers have been historically very low and inadequate,with gross international reserves averaging 0.5 months of import over the past four years,and have declined further to 0.3 months in FY24 well below the 4.5 months of import c

155、overage targeted by the government(Figure 14).The sharp drop in oil production caused exports to collapse.Oil exports are estimated to have declined by 16 percent in FY24 to US$3.7 billion,as output has averaged around 122,000 bpd in FY24,down from 139,000 bpd in FY23.Oil production averaged only ar

156、ound 60,000 bpd since February 2024,resulting in forgone export revenues of US$6.8 million per day.South Sudan is also heavily dependent on imports to meet its domestic demand,including for staple food,fuel,medicine,as well as intermediate and capital goods.Imports of goods and services amount to ne

157、arly two-thirds of GDP.Despite its large agriculture potential,South Sudan relies on imports to meet domestic food demand,with the food needs exceeding domestic cereal production by nearly 20 percent.Food imports averaged nearly 64 percent of total merchandise imports over the 20202022 period(FAO,20

158、24b).The war in Sudan has significantly impacted trade through both the large influx of refugees,disruption to trade routes,and higher costs.The conflict in Sudan has disrupted trade with Sudan and diverted it to other Eastern African countries,albeit at a much higher cost due to poor connectivity.T

159、he large inflow of refugees and South Sudanese returnees in the wake of the start of the conflict in Sudan,exceeding one million people,has increased demand for food,and the security situation in Sudan has disrupted the supply of staple goods,mostly food and fuel.The sharp exchange rate depreciation

160、 has increased the costs of imports significantly,but imports of many staples are cost inelastic.Furthermore,the war in Sudan has increased insurance and freight costs for oil exports.With weak trade facilitation and heavy export concentration on oil,South Sudan runs a large trade deficit with its n

161、eighbors.South Sudan has large trade deficits with neighboring Uganda12 and Kenya as it is dependent on imports while its non-oil exports are negligible(Figure 15).12 Most imports are from Uganda through the Nimule border that transits 90 percent of cargo into South Sudan.SOUTH SUDAN ECONOMIC MONITO

162、R-ISSUE 7-A pathway to overcome the crisis9South Sudan has almost no external buffers in a context of structurally high external financing needs that reflect large external imbalances.Sizeable development spending needs and external debt-service obligations on a large stock of non-concessional debt

163、over the medium term,amounting to nearly 6.8 percent of GDP in FY24 and projected to reach 9.7 percent in FY25(Figure 16),including for oil-backed loans,will continue to put pressure on the balance of payments.This is compounded by structurally lower oil export revenues and the expected decline in i

164、nternational aid following a temporary hike in the post-COVID period.Russias invasion of Ukraine,the Sudan conflict,and the US administration policy on foreign aid will continue to weigh on international aid.Figure 13.Current account balance and oil exports Figure 14.Gross international reserves Sou

165、rce:IMF,MOP,WB staff calculations.Source:BoSS.Figure 15.Debt service,%of GDP Figure 16.South Sudans imports and exports withselected neighbors,million US$Source:IMF DOTS;Bank of Uganda.Source:IMF/WB Joint DSA,June 2024.1.1.5 Financial Sector:Limited Financial Intermediation and High Risks to Financi

166、al StabilityFinancial intermediation by South Sudans banking system remains limited,representing an important barrier to economic diversification.More than two-thirds of commercial banks income is generated from foreign exchange transactions rather than interest income,and the lack of financial inte

167、rmediation and access to credit for the non-oil economy acts as one of the barriers to economic diversification.Domestic credit to the private sector remains among the lowest in Sub-Saharan Africa,standing at an estimated 3.4 percent of GDP at the end of June 2024,while claims on the central governm

168、ent nearly doubled to 49.5 percent of GDP by June 2024 crowding out the private sector further.Deteriorating macroeconomic conditions have disrupted the recovery in the private sector observed over the previous SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis103.76.89.7024681012

169、FY22/23FY23/24FY24/25MultilateralBilateralCommercialDomesticTotalPercent of GDP0100200300400500600ImportExportImportExportUgandaKenya2020202120222023Million US$0.00.10.20.30.40.50.6050100150200250FY20FY21FY22FY23FY24Months of importsMillions of US$Gross reserves,months of import(RHS)Gross reserves,i

170、n million US$-15-10-505101520250,01,02,03,04,05,0FY20FY21FY22FY23FY24(Percent of GDP)Billion US$Current account balance(RHS)Oil revenue,billion US$two fiscal years and likely affected demand for credit.By end June 2024,credit to the non-government sector rose by 109.8 percent to 3.4 percent of GDP,a

171、fter more than doubling to 2.4 percent of GDP as of June 2023(increasing 263.7 percent).The growth in domestic credit was driven by increased credit to manufacturing(221 percent);domestic trade,restaurants and hotels(155 percent);and financial services(122 percent),while credit to other sectors grew

172、 at a slower pace:real estate(88 percent)and household services(85 percent).However,private sector credit to foreign trade dropped by 75 percent,while credit to building and construction slowed to 64 percent.The large oil shock has likely affected the incomes of commercial banks and has heightened f

173、inancial stability risks.The sharp decline in the supply of foreign exchange has likely negatively affected the banks income.While the banking systems average capital adequacy ratio stood at 10.1 percent at the end of FY24,some of the domestic commercial banks have much lower capital adequacy ratios

174、.Furthermore,for some commercial banks,the large exposure to foreign exchange denominated liabilities,likely exceeding 80 percent,exposes these banks to FX risks if not matched by the composition of their assets.Non-performing loans remain low at 1.9 percent.Table 4.Financing stability indicators 20

175、20 2021 2022 2023 Sept 2024 FX denominated assets to total assets 68.5 76.7 78.6 84.9 82.0 FX denominated liabilities to total liabilities 68.5 76.7 78.6 84.9 82.3 FX denominated loans to total loans 93.4 103.6 96.7 96.2 99.0 Non-performing loans net of provisions to capital 4.3 0.0 8.6 6.9 4.4 Non-

176、performing loans to total gross loans 2.7 2.7 2.4 1.2 0.8 Liquid assets to total assets 26.5 Regulatory capital to risk-weighted assets 15.0 10.8 8.3 8.5 6.8 Source:Bank of South Sudan.The BoSS has been continuing its effort to address the undercapitalization of the domestic banking sector.Several l

177、icensed commercial banks,while not systemically large,remain undercapitalized.The licenses of two inactive domestic banks were revoked in December 2022 as a first step towards resolving the issue.Following the revocation,the BoSS established a dedicated liquidation team,but limited legal expertise o

178、n treatment of assets and liabilities has hindered the wind-down process.The BoSS sought Cabinet approval for its recently adopted action plan on banking sector reform to ensure that it enjoys broad political support.1.1.6 Monetary Policy:Excess Liquidity Has Put Pressure on the Exchange RateWeaknes

179、ses in South Sudans monetary policy framework,despite recent efforts to improve it,combined with poor coordination of fiscal policy,have contributed to a challenging macroeconomic environment.The monetary aggregate targeting framework,with broad money as the nominal anchor and reserve money as the o

180、perational target,was ineffective in addressing worsening macroeconomic imbalances,particularly in the context of a significant oil production shock.13 Large cash holdings outside the banking system have also affected the effectiveness of monetary policy.The introduction of daily cash withdrawal lim

181、its on September 16,2024,has further discouraged deposits,however,the limit was lifted in December 2024.The monetary and banking policy objectives for 2025 include achieving inflation of 61.5 percent,supporting growth of 6.8 percent,encouraging commercial banks to increase lending to the private sec

182、tor to 40 percent of their total deposits,and rebuilding international reserves to the equivalent of 4.5 months of imports.13 Monetary policy targets a 10 percent annual reserve growth.14 Empirical evidence shows that a one percent change in reserve money typically leads to a roughly one percent dep

183、reciationof the South Sudanese Pound(SSP)against the dollar(IMF,2023).SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis11The large oil shock has further affected the BoSS ability to conduct monetary policy and manage exchange rate flexibility,putting pressure on the foreign excha

184、nge rate market.The large decline in the inflows of foreign exchange linked to the plunge in oil exports contributed to the sharp decline in BoSS international reserves to an estimated US$64 million(equivalent to 0.3 months of imports)at the end of June 2024 from an already low of US$267 million(0.7

185、 months of imports)at the end of March 2024.The BoSS resumed monetary financing of the central government deficit in FY24 and was not able to fully sterilize the intervention,contributing to higher depreciation and inflation.The sharp drop in fiscal revenues and lack of financing options prompted a

186、resumption in monetary financing in the first half of 2024.BoSS claims on the central government increased by an estimated 5.4 percentage points of GDP between FY23 and FY24 and the central bank was not able to sterilize this,contributing to higher demand for foreign exchange.BoSS overdrafts increas

187、ed by 74.4 percent between January and October 2024,leading to reserve money growth far exceeding the target(Figure 19).During the same period,money supply expanded by 182 percent,driving annual growth in broad money(M2)from 107 percent in FY23 to 116 percent in FY24,and further to 178 percent by Oc

188、tober 2024(Figure 18).These developments exerted significant pressure on the exchange rate,and while the BoSS initially delayed the exchange rate adjustment,it reversed course and allowed a gradual depreciation once it became clear that the shock was persisting.14The BoSS intensified the use of open

189、 market operations to manage liquidity,but with limited impact.The BoSS issued a Term Deposit Facility(TDF)in the second half of FY23/24 to absorb excess liquidity stemming from monetary financing,complementing the declining foreign exchange(FX)auction volumes.As a result,outstanding credit under th

190、e TDF rose to SSP 70 billion in August 2024,up from SSP 34 billion in August 2023;and issued a TDF worth SSP 120 billion between September 2024 and January 15,2025.Although the BoSS introduced a 336-day tenor TDF in August 2023,demand has been predominantly concentrated in shorter maturities.While t

191、he longer tenor has played a supportive role in strengthening the monetary policy framework,its impact on liquidity management has been limited.Foreign exchange auctions,which were the BoSS main liquidity management tool,were affected by the drop in oil export revenues and depletion of foreign excha

192、nge reserves.South Sudan successfully unified the official and parallel foreign exchange markets in 2021,transitioned to a market-based auction system,and implemented a flexible exchange rate policy prior to the oil shock.As the parallel market exchange rate depreciated markedly in the wake of the s

193、hock,FX auctions rules were modified,contributing to the widening premium.Foreign exchange auctions were suspended between mid-December 2023 and mid-January 2024 and resumed in mid-January 2024 with a reduced FX auction volume.Weekly forex auction volume declined from US$5 million in April 2023(US$3

194、 million for commercial banks and US$2 million for forex bureaus)to US$2 million as of October 2024,with commercial banks and forex bureaus earmarked at US$1 million each.The BoSS struggled to settle the auctioned forex since October 2024,and the forex auctions were again suspended until mid-January

195、 2025.A term deposit from the Abu Dhabi National Bank has been obtained to boost BoSS foreign assets,which raised gross reserve levels to US$344 million as of end October 2024.The parallel market exchange rate premium widened significantly due to substantial loss of international reserves,limited fo

196、rex auction volumes,continued monetary financing of fiscal deficits,and an inability to mop up excess liquidity.Despite the BoSS efforts to regulate parallel market operators to stabilize the foreign exchange market,the premium in the parallel market rose from less than 5 percent(average)following t

197、he 2021 exchange rate unification to 179 percent in late-July 2024,before narrowing to 46 percent in October 2024 and to 29 percent as of end January 2025.This occurred as the official rate depreciated gradually,once it was clear that the shock would persist,and was helped by the recent appreciation

198、 of the parallel market exchange rate(Figure 17).Changes in trade patterns in the wake of the Sudan war have also affected the demand for US dollars.Trade with Sudan is reportedly conducted in SSP while that with other countries is transacted in US$(IMF,2024b).Since the beginning of 2024,exchange ra

199、te depreciation accelerated,with the official exchange rate depreciating by 259 percent and the parallel rate by 343 percent as of December 2024.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis12Figure 17.South Sudan exchange rate,SSP/US$Figure 18.Growth of broad money and infla

200、tion Source:Bank of South Sudan.Source:Bank of South Sudan.Figure 19.Overdraft vs.exchange rate Source:Bank of South Sudan.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis130501001502002503000100020003000400050006000Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22Jan-23Apr-23Jul

201、-23Oct-23Jan-24Apr-24Jul-24Oct-24Jan-25PremiumParallel EXRPremium,%Exchange rate,SSP/US$05001.0001.5002.0002.5003.0000500100015002000250030003500Overdraft(right)Jan-21Mar-21May-21Jul-21Sep-21Nov-22Jan-22Mar-22May-22Jul-22Sep-22Nov-22Jan-23Mar-23May-23Jul-23Sep-23Nov-23Jan-24Mar-24May-24Jul-24Sep-24S

202、SP per USDSSP,in billion050100150200-20.00.020.040.060.080.0100.0120.0Jan-21Jul-21Jan-22Jul-22Jan-23Jul-23Jan-24Jul-24Annual change,%Annual change,%Broad Money(M2)(right)1.1.7 Fiscal Policy:Disorderly Adjustment has Squeezed Social and Pro-growth Capital SpendingFiscal policy remains highly procycli

203、cal,with no buffers against oil revenue volatility.Oil revenues have historically accounted for nearly 90 percent of government revenues and contribute to the volatility in public finances.Despite a legal fiscal framework that provides for both a stabilization and future generations fund,these have

204、not been fully operationalized.Weak coordination between monetary and fiscal policy has historically underpinned macroeconomic imbalances and macroeconomic stability risks.While there were substantive improvements under the IMF program that lasted from February 2023 to November 2024,these challenges

205、 have come to the fore with the recent oil production shock.The budget deficit expanded significantly in FY24,driven by the loss in oil revenues in the second half of the year.Spending on security and infrastructure continues to absorb about one-third of overall spending,amounting to nearly 10 perce

206、nt of GDP.The FY23/24 budget planned to increase civil service salaries by 400 percent,raise capital expenditure to 21 percent of the total expenditures,and reduce the deficit to 4.6 percent of GDP(Table 5).Oil revenues had already declined by 5 percentage points of GDP in FY23/24 despite performing

207、 well in the first half of the fiscal year,plunging since the shutdown of the BAPCO oil pipeline in February 2024.In nominal terms,both expenditures and revenues exceeded the SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis14Box 1.Monetary,Inflation,and Exchange Rate Challenges

208、in South Sudan:Insights from Country ExperiencesSouth Sudan,heavily dependent on oil for 98 percent of its total goods exports and 90 percent of government revenues,is deeply vulnerable to external shocks due to its reliance on a single commodity.This situation exhibits characteristics of the resour

209、ce curse,where resource wealth can lead to volatile economic cycles,inflationary pressures,and exchange rate instability.Historically,South Sudan adopted a fixed exchange rate regime following its independence in 2011 to stabilize the South Sudanese Pound(SSP).However,this approach led to significan

210、t distortions,particularly during periods of falling global oil prices.In 2015,the country moved toward a more flexible regime,officially adopting a managed float in response to market pressures.Despite this,challenges remain,as misalignments between the official and parallel market rates continue t

211、o create economic instability.Between 2017 and 2020,the exchange rate saw some stabilization,but the COVID-19 pandemic and a decline in oil revenues caused further depreciation and inflation.As part of the IMF Staff Monitored Program(SMP)approved on March 30,2021,foreign exchange reforms were introd

212、uced to liberalize FX markets and eliminate distortions between parallel and official exchange rates.The reforms included opening FX auctions to banks,allowing commercial banks to trade FX at market rates,and aligning the official exchange rate with market rates.By mid-August,these changes led to th

213、e convergence of exchange rates and the adoption of a market-based reference rate instead of the official rate.This resulted in a significant appreciation of the parallel market exchange rate and narrowing of the premium,helping reduce inflation by December 2023.The government committed to a market-

214、determined exchange rate and stopping fiscal deficit monetization.The BoSS improved the FX auction system,aligned bank reference rates with market rates,and introduced the Term Deposit Facility(TDF)for commercial banks,extending tenors up to 336 days by September 2023.Several resource-rich,fragile c

215、ountries have faced similar dilemmas and offer valuable lessons for South Sudan.Angola,for instance,initially adopted a fixed exchange rate to stabilize its currency amid volatile oil prices.However,this approach eventually led to economic distortions,pushing the country to shift toward a more flexi

216、ble regime.Similarly,Botswanas experience with a managed float exchange rate system demonstrates how flexibility,combined with strong institutional frameworks,can help buffer external shocks and promote economic resilience.Timor-Lestes focus on strengthening institutions further highlights the impor

217、tance of governance in ensuring successful exchange rate management.These international experiences suggest that South Sudan could benefit from transitioning to a managed float exchange rate regime,allowing the currency to adjust naturally to market forces while maintaining some central bank interve

218、ntion to curb excessive volatility.Managing these dynamics is crucial to South Sudans economic stability,but weak governance and institutional capacity exacerbate the challenges.South Sudan is ranked at the bottom of Transparency Internationals 2024 Corruption Perceptions Index;placed 180th out of 1

219、80 countries ranked.Without broader institutional reforms even the most effective monetary policies are unlikely to achieve lasting stability,which reflects a pressing need for governance reforms to reduce corruption and improve public financial management.budgeted amounts due to high inflation and

220、exchange rate depreciation.The preliminary outturn suggests the deficit widened,estimated at 6.5 percent of GDP.Non-oil revenues performed relatively well,supported by reforms in tax administration and the significant adjustment in the customs valuation exchange rate.The government continued its eff

221、orts to strengthen non-oil revenue mobilization by broadening the tax base,reducing tax exemptions,and increasing the customs valuation exchange rate from SSP 90 to SSP 300 per US$in November 2023.It also continued PFM reforms and efforts to digitalize modernizing the tax collection system using sca

222、nners.Nevertheless,non-oil revenues increased slightly as a share of the estimated GDP in FY24 compared to FY23,partly due to a rise in customs revenue following the change in the exchange rate applicable.Meanwhile,the share of personal income tax(PIT)collections decreased,linked to a significant bu

223、ild-up in salary arrears.The South Sudan Revenue Administration(SSRA)has implemented reforms within the SSRA that have notably increased non-oil revenue collection from 2.6 percent in FY21/22 to 4.4 percent of GDP in FY23/24.However,further reforms are necessary for continued progress.The tax admini

224、stration system in South Sudan has traditionally been manual,creating significant compliance challenges for taxpayers.The SSRA launched an eTax portal in June 2021.This platform allows taxpayers to file returns,remit payments,and access various tax services,including applying for tax compliance cert

225、ificates and registering Taxpayer Identification Numbers(TINs).Despite these advancements,there are concerns about the long-term sustainability of the information system,which is currently managed by an external vendor.The lack of fiscal buffers and alternative financing sources has forced a disorde

226、rly fiscal adjustment.Spending has been further exacerbated by spillovers from the conflict in Sudan and the large refugee inflows.The liquidity squeeze resulted in large salary arrears and cuts to both operating expenditures and capital spending.Salary arrears currently exceed 10 months,or close to

227、 6 percent of GDP as of January 2025.Operating and capital expenditures have almost halved as a share of GDP in FY24,with the latter dropping by more than 4 percentage points of GDP.Priority was given to the Oil for Roads infrastructure scheme which accounted for a quarter of the total budget envelo

228、pe and an estimated 4.7 percent of GDP.While the execution rate of the scheme reached 87 percent,there has been limited progress in construction of roads which raised questions by limited audits conducted.Transfers to Sudan which include transit,transportation,and processing fees declined markedly,p

229、roviding some respite.There is however a large amount of unallocated expenditure which can still significantly change the composition of spending once allocated.The authorities have committed to stay current on salary payments starting in October 2024,and,once oil production resumes,to pay every mon

230、th an additional month of salary arrears to move towards clearing these.While debt remains sustainable,the large oil production shock has further increased the risks to debt distress for both external and overall public debt.The oil production shock has heightened the urgency of improving debt manag

231、ement,which has several shortcomings.South Sudans debt position remains assessed as sustainable but with a high risk of debt distress for both external and overall public debt.Due to lack of transparency on debt statistics and reliance on oil backed loans,it is difficult to estimate the overall amou

232、nt of debt in South Sudan.The latest joint IMF-World Bank Debt Sustainability Analysis update(June 2024)estimated total public debt at US$3,722.9 million(51.2 percent of GDP)as of June 2023,with external public debt accounting for two-thirds of the total(34.8 percent of GDP).15 More than 40 percent

233、of the external debt has been contracted at a high cost from commercial creditors(US$1,090 million),with a short maturity.External debt service is significant,amounting to 6.7 percent of GDP in FY23/24.15 Domestic debt is mostly owed to the Central Bank.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway

234、 to overcome the crisis15Table 5.Budget outturns FY23/24 Billions SSP2022/23 Actuals2023/24 Budget2023/24 PreliminaryTotal revenue and grants1,7961,7822133.4Oil revenue1578.11536.51894.9Tax and non-tax revenue217.6245.3238.5Grants000.0Total expenditure1,612.41,783.92656.4Ministries,Departments,Agenc

235、ies recurrent expenditure551.31,062.5511.8Wages and salaries166.1426.9211.7Operating expenses300.2489.0203.0Transfers and grants62.0141.995.2Other expenses23.04.61.9Mandatory recurrent expenditure557.7179.6337.9Transfer to Sudan(tariff,transportation and processing)445.5228.2Transfer to oil prod.Sta

236、tes(2%)17.630.827.4Transfer to oil prod.Comm.(3%)25.446.241.2Payment to future gen.fund8.6Transfer to Ministry of Petroleum(3%)25.446.241.2Interest payments18.156.60.010%National Revenue Authority Gross non-oil revenue17.10.0Capital expenditure503.4541.8402.5Oil for Roads projects462435.7377.9Other

237、projects(Capital)41.4106.224.6Unallocated payments 1404.2Source:MoFP.Note:Unallocated payments include transactions not yet classified and pending verification.Limited debt transparency,weak debt management,and recourse to oil-backed loans remain significant sources of risk.The oil production shock

238、coupled with the countrys weak debt-carrying capacity,weak debt management,and deteriorating global conditions escalated the downside risks for debt sustainability.Additionally,the conflicts in Ukraine and the Middle East adversely impacted the flow of international aid as donors reallocated funds,w

239、hile the risks of lower US aid flows have intensified.Lower risk appetite and tighter financing conditions could make more difficult the closing of the external financing gap,even on non-concessional terms.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis16While the government ha

240、s taken some steps to improve transparency,debt reporting remains weak.The government completed an external debt stocktaking exercise in 2022 and has introduced some institutional changes in debt management,elevating the debt management unit to a department.However,considerable challenges linked to

241、governance,macro policy coordination,the development of a debt strategy,and borrowing discipline remain.The World Banks assessment of debt transparency shows that South Sudan debt reporting remains weak in all aspects,including the availability,completeness,and timeliness of public debt statistics a

242、nd debt management documents posted on national authorities websites.1616 https:/www.worldbank.org/en/topic/debt/brief/debt-transparency-report/2023SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis17Box 2.Fiscal Consolidation Under Uncertainty South Sudans Budget for FY24/25 The

243、FY2024/25 budget was formulated under a period of heightened uncertainty regarding the resumption in oil production.The budget was approved with a very large financing gap of 11.7 percent of GDP,expected to be partly filled once the DPOC oil production resumes.Oil revenues are 40 percent less than t

244、he FY23/24 preliminary execution,while non-oil revenues are expected to increase to nearly 6.8 percent of GDP,supported by strengthened tax administration and collection efforts,an increased tax base,and higher customs valuation exchange rates.The budget assumes a real GDP growth of 6.8 percent,aver

245、age inflation rate of 58 percent,exchange rate of SSP 2527 per US$,and crude oil prices averaging at US$79.Once the Dar Blend oil production resumes,the government projects it can generate SSP 1.7 trillion(45,000 bpd).The remaining balance is planned to be covered by the gains from realigning the ex

246、change rate to the market rate.To rebuild fiscal space,the approved budget seeks to rationalize expenditures,eliminate off-budget expenditure,and prioritize essential spending.Recurrent expenditures account for 74 percent of the spending envelope,up from the FY2023/24 budget allocation of 59 percent

247、,with wages and salaries representing 36 percent of total spending,up from 24 percent in FY23/24(Table A.4).Expenditures are restrained to allow for salary arrears clearance.Meanwhile capital expenditures represent only 11.8 percent,less than half of the FY23/24 allocation.Mandatory expenditures inc

248、luding payments to oil transit and pipeline fees to Sudan,transfers to oil producing states and communities,and debt service payments constitute 14 percent of the spending envelope.There is no allocation for oil for roads program.The newly established Public Procurement and Disposal Assets Authority

249、(PPDAA)is considered as one of the mechanisms to ensure fiscal discipline and curb illicit contracts from all spending agencies that constitute the large share in the off-budget expenditures and weaken the budget execution performance.Already inadequately low,critical social spending continues to be

250、 squeezed.Education was allocated 5.4 percent of total budget,down from 7.8 percent in FY2023/24 while the health sector is allocated 1.3 percent,lower than the 1.9 percent allocation in FY2023/24(Table A.3).The education and health sector allocations were cut by half to 1.4 percent and 0.3 percent

251、of GDP,respectively.The social and humanitarian affairs budget has increased to 4.5 percent of the total budget(US$63 million)from less than 0.5 percent(US$9 million)in FY2023/24,due to the newly added allocation to the humanitarian and emergency fund that received SSP 173 billion(US$58.9 million).S

252、ecurity,rule of law,and public administration account for 25 percent of the total budget.Non-oil revenue mobilization efforts continue in FY24/25 benefiting from previous reforms and additional policy measures.Non-oil revenues will be supported by the reforms introduced in FY2023/24,with FY2024/25 b

253、eing the first year of full implementation of these measures.The FY2024/25 Financial Act introduces changes to the Business Profit Tax,the withholding tax,excise tax,and customs duties among others.The budget envisions a ten-fold increase in customs duties,as the valuation exchange rate is adjusted

254、from SSP 300 to the Bank of South Sudan daily reference rate.The budget reintroduces an advance payment of business profit tax(BPT)of 4 percent and a 30 percent tax on income from real estate rental incomes,while also doubling the advance BPT on most sole proprietors with no audited financial statem

255、ents.Withholding taxes on ancillary services to rent have been introduced,as well as a 10 percent withholding tax on mobile money commissions,while the withholding tax for government contract payments have been increased by 15 percentage points.Figure 20.Fiscal aggregates,billion SSP Figure 21.South

256、 Sudan non-oil revenue Source:MoFP.Source:MoFP.Figure 22.FY24 Q2 budget execution and quarterly threshold Source:MoFP.1.2 Medium-term Outlook and Policy Options The economy has been hit hard by the DPOC oil pipeline shutdown,yet establishing macroeconomic stability and laying the foundations for gro

257、wth will require more than a mere resumption of oil production,given the longer-term declining trend in peak oil production levels.A business-as-usual or baseline pathway suggests the losses in real GDP in FY24/25 will barely be recovered by the end of FY27,and the country will continue to struggle

258、in delivering public services for its people and reducing vulnerability.In contrast,under a reform pathway,South Sudan can position itself on a sustainable growth path by a full commitment to policy and institutional reforms.Under both pathways constructed for the purposes of this Economic Update,th

259、e two common underlying assumptions are:(i)the DPOC oil pipeline starts flowing by the end of FY25;and(ii)there are no further disruptions to oil production on the forecast horizon.This section discusses these two pathways,as well as the downside risks to the baseline,where oil resumption is further

260、 delayed.1.2.1 Business-as-usual Pathway:A Sluggish Recovery with Significant Downside Risks In the business-as-usual or baseline scenario,policy credibility is not established,monetary policy continues to fall short of stabilizing the economy,and fiscal policy remains unsupportive of growth and pov

261、erty reduction.Moreover,uncertainty due to the stalled political transition since the 2018 peace agreement and repeated postponement of elections continues to weigh on investor sentiment.In the medium to long term,domestic vulnerabilities arising from persistent weak governance around the management

262、 of oil revenues and limited public sector capacity will continue to constrain South Sudans growth potential.17 17 An example of lack of transparency in oil revenue management relates to the construction of the Juba-Bor Malakal highway in the context of the Oil for Roads scheme.ARC Resources receive

263、d upfront financing for the project that has not been reflected in the Ministry of Finance and Planning budget figures for part of the three-year US$1.04 billion project for the construction of the highway.This was a single sourced bidding that was not publicized.Similarly in February 2022 a separat

264、e oil-backed contract was awarded without a competitive tender.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis180123450501001502002503002019/202020/212021/222022/232023/24Non-Oil RevenueNon-Oil Revenue to GDP(%)Percent of GDPBillon SSP0100020003000400050002019/202020/212021/222

265、022/232023/242024/25BudgetRevenuesSpendingBillon SSP020406080100Figure 23.Real GDP growth Source:World Bank staff estimates.The sharp decline in oil production caused by the shutdown of the DPOC oil pipeline is expected to deepen South Sudans economic crisis in FY24/25,with the economy projected to

266、contract by 30 percent.The FY24/25 recession will mark the fifth consecutive year of negative growth,with a cumulative loss in economic activity of nearly 41 percent.As a result,in FY25,GDP per capita is projected to decline to approximately half of its level in FY20.Even with the recently announced

267、 lifting of the force majeure on oil transportation,the expectations are that resumption in oil flows through the main DPOC oil export pipeline will take time and will be slow.Accordingly,although the Ministry of Petroleum has called for a swift resumption of the DPOC oil production to bring output

268、to 90,000 bpd within six months following the lifting of the force majeure on the BAPCO oil pipeline,the baseline projection in the SSEM is for oil production to average 66,000 bpd this fiscal year,less than 50 percent of the level recorded in 2023.Much-needed investment and maintenance of oil asset

269、s are expected to remain depressed,affected by the prolonged conflict in Sudan and the exit of Petronas International Corporation.Legal uncertainties stemming from Petronas request for arbitration to International Centre for Settlement of Investment Disputes(ICSID)against the Government of South Sud

270、an regarding the takeover of its assets by the state-owned Nilepet are expected to further delay the recovery in oil production,due to the additional uncertainty regarding the future of oil asset management that may dissuade potential investors.Moreover,with several oil block agreements scheduled to

271、 expire in 2027,uncertainties surrounding oil asset management will continue and are expected to weigh on investment in the sector.The non-oil economy is expected to contract by 5.7 percent in FY24/25,affected by spillovers from the oil sector and heightened macroeconomic uncertainty,as well as recu

272、rring floods and continued localized conflict.Recurrent floods are expected to continue to impact crop production,damage infrastructure,and affect over one million people in multiple regions of the country,including through displacement.Food insecurity,conflict disruptions,and deteriorating health c

273、onditions combined will likely continue to reduce productivity and growth in non-oil sectors.More broadly,private investment is likely to remain subdued in the absence of a concerted shift in the policy stance.The overall security situation is expected to remain volatile and will continue to act as

274、an important deterrent of private investment,both domestic and foreign.The extension of the transitional period for an additional two years until February 2027,and postponement of elections to December 2026,has created further uncertainty about the timely and full implementation of the 2018 peace ag

275、reement.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis19-1.3-7.2-30.253.70.654.52.3-40.0-30.0-20.0-10.00.010.020.030.040.050.060.0FY2023FY2024FY2025FY2026FY2027BaselineBusiness UnusualFigure 24.Oil production by Joint Operating Company Source:Ministry of Petroleum,WB staff est

276、imatesUnless macroeconomic management improves to effectively control inflation and the fiscal deficit,economic recovery will be muted under a business-as-usual approach,leading to further increases in poverty.For the purposes of projections in this section,it is assumed that DPOC oil production res

277、umes in March 2025 and increases gradually to reach 90,000 bpd by the end of the FY25.Accordingly,growth is projected to rebound strongly in FY26,due to the first full year of DPOC oil production.GDP is expected to stabilize as oil production flattens.However,this is insufficient to close the gap wi

278、th 2020 GDP levels.Oil output is anticipated to remain below 140,000 bpd,reflecting the structural decline in oil production since 2012(Figure 24)linked to the maturing of some oil fields and lack of adequate maintenance and investments.Poverty rate would continue to increase under a business as usu

279、al path.It is projected that poverty will reach a striking 99.8 percent in 2025 from an estimated 92 percent in 2024.A partial recovery in non-oil industries and services,such as agriculture,could modestly support growth.Non-oil economic activity is projected to contribute a modest 1.9 percentage po

280、ints to growth over FY26 and FY27.This will be supported by increased agriculture output notwithstanding continued disruption from floods and conflict,as well as inadequate infrastructure and market access as many returnees and migrants are expected to boost labor supply in the agriculture sector.Wh

281、ile torrential rains in August 2024 and the overflow of the Nile River and its tributaries caused widespread flooding and substantial crop losses in Unity,Warrap,Lakes,and Jonglei states,above average rainfall in October and December 2024 in southern bimodal production areas is expected to benefit y

282、ields of second season crops,to be harvested in early 2025(FAO,2024b).At the same time,the services sector will support growth,benefitting from the oil sectors recovery.Easing inflation and increased public spending,including the gradual clearance of public wage arrears,are also expected to support

283、a recovery in domestic demand.Fiscal pressures are expected to remain high in the near term and public financing needs are large.Public finances continue to rely heavily on oil revenues,which collapsed in FY24/25 due to the halt in DPOC oil production resulting in an estimated fiscal deficit of 3 pe

284、rcent of GDP.While the government committed to clearing public wage bill arrears,the limited fiscal space will make this challenging in the very short term.Beyond this recent exogenous shock,weaknesses in the governance of the oil sector,with a lack of transparency and accountability,and reports of

285、corruption and misuse of revenue,18 severely undermine fiscal sustainability and public financial management.While the legal framework for the Oil Stabilization Fund and the Future Generation Fund is in place,they are not operational,limiting the ability of the government to implement counter-cyclic

286、al fiscal policies and ensure intergenerational equity.18 South Sudan ranks consistently low across international governance indicators such as Transparency Internationals CPI(180/180 in 2024)and Ibrahim Index of African Governance(54/54 in 2023).The World Banks 2022 Country Economic Memorandum stat

287、es“In the past,nontransparent oil advances,oil-backed loans,and off-budget transactions have often undermined the countrys fiscal discipline and budgetary integrity,and have led to extensive corruption,and to loss of credibility with the international community.”19 IMF estimates show a 1-to-1 passth

288、rough from the parallel exchange rate variations to food and fuel inflation within six months(IMF Country Report No.24/160,Annex II).SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis20050100150200250300350400Thousand barrels per dayGPOCSPOCDPOC201120122013201420152016201720182019

289、20202021202220232024Moreover,historically,the use of oil revenues for diversification has been limited.In the medium term,fiscal pressures are expected to remain substantial given sizable debt-service obligations on debt that has been contracted on mostly non-concessional terms,and the need to clear

290、 legacy arrears and increase social and humanitarian expenditures.Inflation is expected to remain elevated,albeit easing from the triple-digit rate expected in FY25,as the monetization of the budget deficit is expected to continue and as supply constraints persist.The recent oil supply shock which l

291、ed to high levels of monetization of the deficit coupled with supply constraints due to declining imports from Uganda,disruptions from flooding,and conflict and insecurity continues to generate inflationary pressures.Lower currency depreciation,due to increased oil-related supply of foreign currency

292、 starting with the second half of FY25,will help the disinflation process,given the high passthrough from the parallel exchange rate to inflation.Despite this,inflation is expected to remain in double-digits in FY25/26,before easing as the fiscal situation improves and the monetization of fiscal def

293、icits declines further.19 Higher agricultural production and improved security along trade routes is expected to support the disinflation process,although high inflation,insufficient food supplies,and the lingering impact of consecutive years of widespread floods and episodes of intercommunal violen

294、ce will continue to fuel inflation pressures.The collapse in oil exports and their slow recovery will continue to exacerbate external imbalances.The disruption in the main oil pipeline,which accounts for 70 percent of export capacity,is expected to cause a sharp deterioration in external balances in

295、 FY25,with the current account expected to deteriorate by nearly 10 percentage points of GDP to a 5.4 percent of GDP deficit.Low export revenues will continue to affect the supply of foreign exchange,contributing to depreciation and inflation given the high passthrough,especially to food and fuel pr

296、ices.External imbalances are projected to remain very large even as oil production recovers,given dependency on external aid representing between a fifth and a quarter of its GDP.Debt sustainability risks remain high.South Sudans total public debt was estimated at US$3.72 billion(51.2 percent of GDP

297、)as of June 2023,with external public debt representing about two-thirds of the total(IMF/WB,2024).Its debt position remains assessed as sustainable but with a high risk of debt distress for both external and overall public debt.Downside risks are substantial because of the countrys weak debt-carryi

298、ng capacity and debt management,combined with formidable macroeconomic challenges since February 2024.With the tightening of global financial conditions,and declining international aid,external financing challenges remain significant.Yet,obtaining external non-concessional financing would further bu

299、rden debt dynamics,particularly if not channeled to growth-enhancing sectors and investments.This highlights the urgent need to strengthen debt management and transparency,and put in place a regulatory framework to limit the contracting new oil-backed loans.Figure 25.Long-term pathways of real GDP p

300、er capita Source:WB staff estimates.There are significant downside risks to the baseline.A major risk stems from a delayed and slower-SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis21600700800900100011001200130014001500Millions SSP of 2009 Gradual Return to FY2020 GDP per capit

301、aBusiness as UsualFY2020FY2021FY2022FY2023FY2024FY2025FY2026FY2027FY2028FY2029FY2030FY2031FY2032FY2033FY2024FY2035than-anticipated recovery in DPOC oil production.Oil production potential after the 2012 shutdown has almost halved,and without proper maintenance the current restart in DPOC operations

302、could entail another significant reduction in its potential.In a downside scenario simulation it is assumed that the maximum capacity for DPOC oil production is half of the pre-shutdown level and oil production resumption is delayed to January 2026.This would substantially impact GDP growth,with a d

303、eeper contraction in FY25 of 38 percent and only a modest recovery in FY26(9.4 percent).Prolonged loss of oil proceeds would put pressure on the budget and external balances.Moreover,a delay in the end to the conflict in neighboring Sudan would also lead to additional refugees crossing the border to

304、 South Sudan,further worsening food insecurity and putting pressure on already weak public services.Additionally,a global economic shock that depresses global oil prices would constrain recovery and add to fiscal pressures.Climate shocks,such as flooding,could undermine agricultural output and drive

305、 inflation.Furthermore,escalating conflict would disrupt economic activities,hinder transportation and commerce,and impact growth.Finally,potential reductions in US Government development and humanitarian support globally may have material consequences,as South Sudan is a large recipient of aid.1.2.

306、2 Reform Pathway:Key Policies for Macroeconomic StabilityA reform pathway entailing bold measures in the short-term to reduce inflation and address fiscal pressures,aligned with the governments policy commitments in the R-ARCSS,would lead to improved macroeconomic policy framework,more transparent f

307、iscal policy,and a commitment to sustained structural reform efforts.Managing the macroeconomic crisis requires urgent action by the authorities to address severe macroeconomic imbalances.Addressing the economic crisis and jump-starting the economy requires strong and well-coordinated monetary and f

308、iscal policies.A reform pathway,which includes structural and sectoral policy measures,would provide for a much greater likelihood that the country moves towards a sustainable and inclusive development path(Table 6).In the long-term,assuming a growth rate of 5 percent under a reform pathway,real GDP

309、 per capita would return to its 2020 level by 2035.Under the assumption of a 0.7 percent growth,the average of the five years prior to the oil pipeline shutdown,or business-as-usual,with stalling reforms,real GDP per capita is set to decline by 30 percent with respect to FY20.For illustrative purpos

310、es,Figure 25 presents these two hypothetical long-term growth pathways.Table 6.Outlook for key indicators in alternative pathways Key economic indicatorsBusiness-as-usual ReformFY25 FY26FY27FY25FY26FY27Real GDP growth-30.253.70.6-30.254.52.3Inflation177.929.94.9177.927.34.5Fiscal balance(%of GDP)-3.

311、0-2.1-1.7-3.0-1.90.6Current account balance(%of GDP)-5.23.63.7-5.2-1.3-1.5Source:World Bank staff estimations.Note:Unallocated payments include transactions not yet classified and pending verification.The reform pathway illustrates the potential gains of macroeconomic stability.Such a reform program

312、 comprises robust macroeconomic and fiscal measures,policy and institutional reforms,collaboration among stakeholders,and targeted interventions to address the underlying causes of economic instability and poverty.The transition to the reform pathway will require balancing fiscal and external pressu

313、res with stabilization measures.It is worth noting that the governments policy priorities include clearing arrears,funding social sectors,and supporting economic diversification.SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis22For the purposes of this report,policy options for

314、the short to medium term cover those that are critical for establishing macroeconomic stability and jump-starting growth.These are grouped under two pillars and are presented in detail in Table 7:1.Reducing inflation:Macroeconomic and price stabilization are key steps in breaking the cycle of econom

315、ic decline and spiraling poverty in South Sudan.This requires enhanced exchange rate flexibility and the phasing out of monetary financing of fiscal deficits.These will mitigate inflationary pressures,which have been intensified by currency depreciation and supply chain disruptions.2.Addressing fisc

316、al pressures:There is an urgent need to improve the management of oil revenues,by improving transparency,including the Oil for Roads scheme.Recovery in oil revenues will provide an opportunity to phase out monetization of the deficit and support more inclusive and sustainable growth by channeling th

317、ese funds into high return investments and the provision of key public services.In the medium term,operationalizing legal frameworks and using the Oil Stabilization Fund to facilitate counter-cyclical fiscal policy is crucial.Measures to boost non-oil revenues should continue,alongside investments i

318、n pipeline maintenance to recover oil production to FY23 levels.Expenditure for social sectors and food security should be prioritized,as well as clearing the salary arrears.Additionally,refraining from contracting non-concessional debt and introducing clear regulations on contracting and limiting o

319、il-backed loans will help maintain fiscal stability.In the medium to long term,key structural and sectoral policies need to complement these macroeconomic and fiscal policies for South Sudan to realize its full development potential.Controlling inflation through macroeconomic stabilization will star

320、t alleviating the burden on people,facilitating the move to a sustainable and inclusive growth path,which would require a strong multi-pronged reform agenda consisting of strengthening institutions,economic diversification,investing in human capital,and building resilience.The stakes for South Sudan

321、 have never been higher.The path to recovery is fraught with challenges,but the opportunity to transform the nations future is within reach.It is imperative that the authorities act decisively and swiftly to implement the necessary reforms.This requires urgent follow through on reform commitments un

322、der the R-ARCSS to stabilize the economy,ensure inclusive growth,and lift millions out of poverty.The next section provides a detailed discussion on the trends and features of poverty in South Sudan and offers policy options to address the high and rising levels of poverty.SOUTH SUDAN ECONOMIC MONIT

323、OR-ISSUE 7-A pathway to overcome the crisis23Table 7.Policy options Policy options for the next 6 monthsPolicy options for the next 618 monthsReducing inflation Increase exchange rate flexibility and curtail monetary financing of the deficit to alleviate pressure on the exchange rate and unify offic

324、ial and parallel rates Resume and implement a transparent policy of foreign exchange auctions to mop up excess liquidity in the market and to allocate FX to the highest bidders Streamline import taxes and entry fees for food imports Remove checkpoints and multiple taxes along trade routes that escal

325、ate price of goods Strengthen supervision of commercial banks and their use of foreign exchange Undertake supply side reforms to improve business environment,increase agricultural productivity,and expand supply capacity of the economy(for a more extensive discussion,see World Bank Country Economic M

326、emorandum,2022)Addressing fiscal pressures Increase exchange rate flexibility and curtail monetary financing of the deficit to alleviate pressure on the exchange rate and unify official and parallel rates Resume and implement a transparent policy of foreign exchange auctions to mop up excess liquidi

327、ty in the market and to allocate FX to the highest bidders Streamline import taxes and entry fees for food imports Remove checkpoints and multiple taxes along trade routes that escalate price of goods Strengthen supervision of commercial banks and their use of foreign exchange Improve oil revenue ma

328、nagement and transparency:-Operationalize the existing legal framework by implementing policies and guidelines for developing and managing the petroleum and gas sector-Fulfill audit requirements of Nilepet,consistent with the R-ARCSS provision on the audit of the petroleum sector-Projects should fol

329、low the Public Procurement and Disposal of Assets Act to ensure value for money through open and transparent,competitive bidding-Operationalize the use of the Future Generations Fund and the Oil Stabilization Fund-Regulate the downstream sector(refining,exporting,and product pricing)-Publicly disclo

330、se all commitments involving crude oil and information on contracts and invoices for oil for roads scheme-Ensure that licensees,contractors,and subcontractors disclose information on all payments,monetary or in kind,in connection with petroleum activities annually-Carry out rigorous cost-benefit ana

331、lyses for future contracts Further strengthen non-oil revenue collection.Build on the last two years efforts to improve tax administration and modernization of tax collections,broaden the tax base,improve customs administration,align the customs valuation rate with the market-determined exchange rat

332、e,rationalize exemptions,increase capacity and coordination of revenue management,and integrate eTax portal with IFMIS SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisis24SOUTH SUDAN ECONOMIC MONITOR-ISSUE 7-A pathway to overcome the crisisAddressing fiscal pressures Strengthen pu

333、blic investment management to ensure a clear prioritization of spending away from capital investments without clear economic returns towards productive sectors Rationalize the wage bill and simplify the payroll.Complete the review of the workforce and identify ghost workers in the government payroll Improve fiscal discipline and adopt counter-cyclical fiscal policy to contain expenditures within t