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South Sudan facing "massive" economic challenges: IMF

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December 13, 2016 (JUBA) - South Sudan faces massive economic challenges owing to its ongoing conflict and subdued oil prices, the International Monetary Fund (IMF) said on Tuesday.

A team from the IMF, upon conducting a review mission in the war-torn nation, advocated for decisive economic measures and lasting peace are key to rebuilding confidence in South Sudan’s economy.

"Restoring of macroeconomic stability will require immediate reduction of the large fiscal imbalance that in the last couple of years has led to a rapid expansion in government borrowing from the central bank and the accumulation of significant arrears," said Jan Mikkelsen, who led the IMF team.

"For this to be effective, it will require simultaneous efforts to promote reconciliation and address the security challenges and humanitarian emergency," he added.

The conflict in South Sudan, which broke out in December 2013, has witnessed the displacement of nearly two million people. Ten of thousands have also been killed.

According to the IMF delegation, South Sudan’s real income, adjusted for terms of trade losses, has declined by about 50 percent since 2013 and the number of people in need of humanitarian assistance has risen to unprecedented levels.

"Inflation has soared to about 500 percent (12 months through October), the exchange rate has depreciated steeply, and foreign exchange reserves are close to exhaustion," partly reads the IMF’s statement.

The IMF team, however, said the country’s 2016/17 fiscal year budget recently adopted is a vital step in the right direction towards restoring macroeconomic stability.

"The budget reflects most of the revenue and expenditure measures proposed by the IMF mission in May 2016 and presents a substantial reduction in the deficit from about 30 percent of GDP in 2015/16 to about nine percent of GDP," it stressed.

The team commended the authorities’ decision to stop direct loan advances from the Bank of South Sudan to the government and to limit overall domestic financing.

"The mission urges the authorities to adopt further measures, including eliminating fuel subsidies and ghost workers and reducing costs of foreign diplomatic missions," Mikkelsen said.

The world financial body, however, recommended that given a substantial decline in real wages for civil servants in 2016/17, wages for lower grades be raised somewhat to compensate for the loss of purchasing power.

"These additional measures would reduce the overall deficit and financing requirement, which would be closed through domestic financing, essentially Treasury bills. If implemented, this budget would contribute to lowering inflation substantially and to stabilizing the exchange rate," Mikkelsen said.

The IMF mission lauded measure taken to improve the public financial management framework, particularly the establishment of the Cash Management Committee.

"To further strengthen expenditure control and ensure successful implementation of the budget, the mission recommends the following additional measures: strengthening the cash management framework, tightening commitment controls with a view to reducing arrears, and passing the Procurement Act," Mikkelsen said.

(ST)

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  • 14 December 2016 08:18, by Dengda

    I hope they deaf will listen, however, I am afraid Stephen Dhieu while implementing these measures, will be sack by greediest and lobbyist group of corrupters. Hon. Late Elijah Malong when he tied the control of individuals checks in Central Bank of South Sudan as result he lost his job. Koriom as alternative compliance of the government Reckless use of Hard currency, look at country economic now

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    • 14 December 2016 21:27, by Native Boy

      This Internationals ngot ngot, claims exoertis in everything in South Sudan. How credible is this IMF team report?
      2016/2017 fiscal budget of RSS 40% swallowed by security yet the true security of this country does not require procurement of even 1 AK47 but rather radical political repentance (telling the truth) forgiveness, reconciliation,incivility and capture of lessons. What are u hiding?

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      • 14 December 2016 21:36, by Native Boy

        I agree with your least recommendations which also lack time bound and who is responsible for a particular what? Esp
        1. Cash management committee
        2. Passing of procurement act, though too late after billions went missing
        3. capitalize in internal financing while reducing borrowing from Central Bank, which again goes back to the reforms agenda population is groaning about
        4. Raising civil salary

        repondre message

  • 14 December 2016 08:33, by Joyuma John

    In my opinion ,The recommendation by IMF team of experts, toward improving economy situation in South Sudan are absolutely correct ,but they should have to dwell a lot on how we can stop war which is a core factor that hamper the local production and prevent common man access to basic needs locally.

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  • 14 December 2016 09:41, by Son of Nuer

    South Sudan or Juba become ghost city of JEC

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  • 14 December 2016 15:15, by Matueny JALAP

    The IMF just got it right if the government aims to re-balance South Sudan model towards exports and away from solely relying on consumption hence if victorious, we could have a popular mandate to enact our free market reforms following deep disenchantment with govt failure to fulfill pledges to slash high unemployment of about 75 percent and deliver growth otherwise, we expect showdown reforms.

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