South Sudan is seeking $250 million in financing from the International Monetary Fund (IMF) to address its ongoing balance of payment challenges and stimulate economic growth.
The request comes in response to a significant decline in oil revenue, a crucial source of the nation’s income, following damage to a key pipeline.
The pipeline, which transports two-thirds of South Sudan’s crude oil, sustained damage in February.
Repairs have been delayed due to conflicts in neighboring Sudan, where the conduit passes through areas controlled by the army and the paramilitary Rapid Support Forces.
Also, a blockade on the Red Sea has further hampered oil exports, exacerbating the economic strain.
Bank of South Sudan Governor James Alic Garang, speaking at the African Development Bank’s annual meetings in Nairobi, emphasized the urgency of securing alternative financial support.
“We are facing severe challenges with our oil exports, which constitute about 90% of our revenue,” Garang said. “The impact on our economy is profound, reducing the volume of oil available for international markets and decreasing the hard currency inflow essential for meeting our obligations.”
Since 2020, South Sudan has received three rapid credit facilities from the IMF. These measures led to the initiation of a program monitoring with board involvement last year.
The first two reviews of this program were completed this month, with a third scheduled for November. After this, the government will seek the full quota of approximately $250 million.
Governor Garang highlighted that meeting the IMF’s policy requirements is crucial for securing the funds.
“We have already delivered an audit of the central bank’s financial statements for 2021,” he noted. “However, there are still areas where we need to intensify our efforts. With the IMF, there is no free lunch. We’re working very hard to meet those policy requirements.”
Efforts to increase non-oil revenue have been made, but they fall short of the country’s needs. The decline in oil production has significantly affected foreign exchange reserves, which can now only cover about two months of imports, compared to the IMF’s threshold of 3.5 months.
In addition to seeking IMF assistance, South Sudan is in discussions with Qatar for a resolution following a $1 billion court award to the Qatar National Bank over a defaulted loan. “We are negotiating to pay part of it, but we’ll still need to settle this debt,” Garang stated.
The $250 million from the IMF is expected to address several critical areas, including economic growth, inflation control, and the distribution of resources across the country.
It will also support essential sectors such as education and health, providing much-needed relief as South Sudan navigates through these economic challenges.
