12th November, 2020
South Sudan has secured its first loan of US$52.3 million from the International Monetary Fund (IMF) since joining the Fund in 2012 to address its urgent balance of payments needs.
Announcing approval for the disbursement of the funds under the Rapid Credit Facility (RCF), the IMF Executive Board said in a statement released on Thursday that the coronavirus pandemic and oil price shock created a severe economic disruption, leading to a sharp decline in South Sudan’s growth and reversing some early gains from political stability
“The disbursement will help finance South Sudan’s urgent balance of payments needs, contain the fiscal impact of the shock and will provide critical fiscal space to maintain poverty-reducing and growth-enhancing spending,” the statement said.
According to the IMF, prior to the COVID-19 pandemic, South Sudan had achieved significant progress due to improved political stability and an uptick in global oil prices. Economic growth rebounded, inflation declined, and the exchange rate stabilised.
However, the pandemic and oil price shock created a severe economic disruption, leading to deterioration in the fiscal and external balances, and a sharp decline in growth, reversing some early gains from political stability.
South Sudan economy is projected to contract 3.6 percent in fiscal year20/21, about 10 percentage points below the pre-pandemic baseline.
The authorities have committed to public financial management reforms, transparency and accountability to ensure that the RCF resources are used appropriately and for their intended purpose.
Following the Executive Board discussion, IMF Deputy Managing Director and Acting Chair, Mr Mitsuhiro Furusawa remarked that the health and economic impact of the pandemic, coupled with the decline in oil prices, led to a collapse of revenues and have created an urgent balance of payments and fiscal financing needs.
“The authorities’ efforts to address the human and economic effects of the pandemic are appropriate and have helped limit its spread. Additional financing from the international community remains critical to close the external financing gap and ease the adjustment burden,” he observed.
Mr Furusawa said that the authorities were implementing public financial management reforms to enhance the budget process and improve governance.
Towards that objective, they have established a Public Financial Management Oversight Committee and are preparing a reform strategy. With technical assistance, they are strengthening budget and cash management systems.
“The authorities are committed to full transparency and accountability of crisis-related spending, including publishing information on procurement and ex-post audits,” Mr Furusawa added.