South Sudan request to IMF discussed achievements and economic policies
Nov 17, 2020(Nyamilepedia) — South Sudan’s letter of intent to the International Monetary Fund(IMF), a document that helped secured a loan of $ 52.2 million US Dollar, discussed many policies and achievements that South Sudan has made or hope to make in the next few years.
The ambitious document, on one hand, cashes on the oil crises and the COVID-19 pandamic but on the other hand narrates the achievements the government has made while promising to restore peace and stability, and boosting economic and social welfare of the South Sudanese people.
Among the achievements the government claims to have made include “ending a five-year conflict”, containing coronavirus, caring for students aboard and proving food supports to the vulnerable populations.
“We have allocated additional resources to the health sector and spent about US$8 million to purchase necessary medical equipment, repatriate South Sudanese students from abroad and provide food support to the most vulnerable in the population.” Read part of the South Sudanese letter of intent.
The document, which was signed by the Minister of Finance and Planing, Hon. Athian Ding Athian, and the Governor of the Bank of South Sudan, Hon. Gamal Abdalla Wani, claims that the government ended the conflict, formed a transitional unity government and appointed governors.
“A revitalized peace agreement reached in 2018 has ended a five-year conflict and paved the way to the formation of the transitional unity government in February 2020 and later to an agreement on the number of states and the appointment of state governors.” Read parts of the letter of intent.
“We have also agreed on the power-sharing arrangements at the state level. Following a protracted economic downturn, economic growth turned positive in FY18/19 and inflation was brought down in FY19/20. However, the oil dependence of our economy makes it vulnerable to external shocks.” It continued.
The two finance experts tells the IMF that the BSS has introduced monetary policies that include reducing bank rate from 15 to 10 percent and reserve requirement ratio from 20 to 10 percent.
“To mitigate the economic implications of the pandemic, the Bank of South Sudan (BSS) has introduced some temporary measures. It eased monetary policy (cutting the central bank rate from 15 to 10 percent and the reserve requirement ratio from 20 to 10 percent) and suspended an earlier announced regulation of higher minimum paid-up capital for commercial banks.” They said.
“The BSS also encouraged commercial banks to allow loan moratoria and debt restructuring for distressed customers, by extending maturities and reducing monthly payments.” the official added.
Reduction of poverty, restoring economic growth and supporting peace
Among other promises, South Sudan government promises to implement fiscal consolidation, restoring economic growth, reducing poverty and supporting the peace process.
“We are committed to implement fiscal consolidation, while working on restoring economic growth, reducing poverty, and supporting the peace process.” The South Sudanese said.
We are committed to contain the fiscal deficit in FY20/21 at 2.5 percent of GDP. We are planning to close the FY20/21 balance of payments gap through a combination of IMF support and additional external financing, including donor support.” They further claimed..
“we have prepared a set of policies which would mitigate the effects of the pandemic and ensure orderly economic adjustment to the oil price shock.” South Sudan government added.
Commit to international transparency index
In addition, South Sudan government promises to commit to transparency and accountability measures required by the world bank, IMF and other higher finance institutions.
“We are committed to transparency in the use of these resources to support essential pandemic-related spending. We will ensure that all such transactions are recorded in the Integrated Financial Management Information System (IFMIS). “
“We will publish all pandemic-related procurement contracts and other related documentation, along with the names of awarded companies and their beneficial ownership information within three months after contract signing, and publish the ex-post validation of delivery of the contracts within one year after the contract signing.” South Sudan government alleges.
“We will publish reports on pandemic-related spending on a monthly basis. In addition, the Auditor General will conduct and publish an audit of all spending from this account on a quarterly basis.” They said.
“All the information listed will be published on the website of the Ministry of Finance and Planning as soon as they are completed.” They added.
In support of their request for an RCF, South Sudan said it has prepared a set of policies which would mitigate the effects of the pandemic and ensure orderly economic adjustment to the oil price shock.
“We stand ready to undertake further fiscal adjustment, if expected financing does not materialize or revenue shortfalls occur, which we would achieve by delaying non-essential public sector investment.” South Sudan said.
In addition, South Sudan said it has reinvigorated public financial management (PFM) reforms to strengthen expenditure controls and to improve the quality of public spending.
“These steps will be instrumental to develop our budgeting processes and will support our goal of maintaining a credible and sustainable fiscal path for FY21/22 and the medium term” Read part of the intent.
To stop South Sudan Pound(SSP) from depreciatin and to reduce hyper inflation in prices, the Minister of Finance and Planning promises that the government will stop borrowing from the Central Bank.
“To alleviate exchange rate pressures and bring down inflation, we will contain government borrowing from the BSS.” The Ministry said
“Following a sharp decline in oil prices at the end of FY19/20, the Ministry of Finance and Planning used its overdraft facility with the BSS to offset revenue losses.” They continued.
The Ministery of finance and planning also claims to “have partly repaid the overdraft facility.”
In addition, the government claims that it will accelerate the PFM reforms to strengthen institutions, even while acknowledging that it has made significant strides in improving the governance framework.
Although many of these policies could be economically feasible in stable countries, in South Sudan the trend has been a downward curve with minimal fluctuations.