These governments and international financial institutions, including the World Bank, the International Monetary Fund and the African Development Bank, are working with the Government of the Republic of South Sudan to explore concrete options to help bridge the fiscal gap exacerbated by the oil shutdown of the past year, as well as plans to diversify South Sudan’s economy to allow for sustainable long-term growth.
The South Sudan Economic Partners Forum is an opportunity for representatives of governments and international financial institutions to discuss strategies to address South Sudan’s economic challenges with South Sudanese government officials and offer support for sound government policy-making.
South Sudan produces nearly three-fourths of the former Sudan’s total oil output of nearly a half million barrels per day. The government of South Sudan derives nearly 98% of its budget revenues from oil. Oil is exported through two pipelines that run to refineries and shipping facilities at Port Sudan on the Red Sea, and the 2005 oil sharing agreement with Khartoum called for a 50-50 sharing of oil revenues between the two entities. That deal expired on 9 July 2011, however, when South Sudan became an independent country.
The economy of South Sudan undoubtedly will remain linked to Sudan for some time, given the long lead time and great expense required to build another pipeline. In early 2012 South Sudan suspended production of oil because of its dispute with Sudan over transshipment fees. This had a devastating impact on GDP, which declined by at least 55% in 2012. South Sudan holds one of the richest agricultural areas in Africa with fertile soils and abundant water supplies. Currently the region supports 10-20 million head of cattle. South Sudan does not have large external debt or structural trade deficits and has received more than $4 billion in foreign aid since 2005, largely from the UK, US, Norway, and Netherlands.
Following independence, South Sudan’s central bank issued a new currency, the South Sudanese Pound, allowing a short grace period for turning in the old currency. Annual inflation peaked at 79% in May 2012. Long term problems include alleviating poverty, maintaining macroeconomic stability, improving tax collection and financial management, focusing resources on speeding growth, and improving the business environment.