Opinion: International Monetary Fund not helping South Sudan in Fixing Country’s Economy

By Changkuoth Gem Panyuan,

International Monetary Fund Logo(Photo credit: courtesy image)
International Monetary Fund Logo(Photo credit: courtesy image)

April 06, 2021(Nyamilepedia) — In its own summary, the International Monetary Fund (IMF) describes South Sudan as a very fragile post-conflict country until today. The warring parties came to an agreement for power sharing in September 2018 and partially formed a unity government in February 2020. However, peace remains fragile in the face of difficult humanitarian and economic conditions. In the reports of all international partners including the United Nation Security Council, the main setback to South Sudan’s 2018-peace agreement has been a lack of political will to fully implement the agreement. This means, the fragility in South Sudan is not only about humanitarian or economic conditions, but also about the general structure of government institutions, which is neither set, nor in its reforms process including economic stability remedies. 

Citing IMF Staff Monitored Program (SMP), it is about track record of implementing a coherent set of economic and social policies that can facilitate a return to macroeconomic stability. ‘’Economic policies under the SMP emphasize the restoration of macroeconomic and financial sector stability through: implementing a large fiscal adjustment, the elimination of central bank financing of the fiscal deficit, and adoption of reforms to allow the effective functioning of market-based foreign exchange and debt markets. Structural reforms include steps to reform and privatize state owned enterprises, enhance governance including in procurement, revenue administration, and to improve the business environment. Coming to South Sudan, the case is far from reaching the program requirement. Talking about Macro-economic stability, we consider the important determinants such as stable prices, sustainable growth (local productivity) and balance payment and job creation. 

To meet the above determinants of macro-economic stability, there should be a need to have institutional reforms and economic sectoral division. The institutional reforms should include all the financial sectors and governing institutions within the country. The sectoral reform is important for the sack of economic health status and data tracking, this helps in realization of macro-economic stability. Considering the oil price drop down during the pandemic, South Sudan started embarking on a non-oil revenue reform agenda, yet there is no transparency, check and balance which could be used as a proof to an international monetary agency for provision of loan. 

Coming to reform within the main financial institutions in South Sudan-Ministry of Finance & Bank of South Sudan regarding Policies (Fiscal policy, Monetary Policy and Exchange rate policy), are yet to transform and advance into the expected reform agenda. Political wrangling has dominated the current Transitional Government; Public Financial Management is so closed, no transparency, no report for public consumption and no accountability at all, where do IMF prove South Sudan as an accessible partner in Rapid Credit Facility? 

The function of Rapid Credit Facility (RCF) is to provide rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need. 

‘’South Sudan is eligible to benefit from RCF because of capacity constraints or domestic fragilities’’ but RCF is accessible taking into account the country’s strength of its macroeconomic policies, capacity to repay the Fund and the member’s record of past use of Fund credit. By analyzing the accessibility criteria,

  • There is no strong macroeconomic policy in South Sudan and the country is operating without approved budget by the legislature with Growth Domestic Product (GDP) of -2.3 (IMF DataMaper, October 2020)
  • South Sudan has no capacity to pay back the fund until further circumstance. This country could not even pay its organized forces and civil servants up to one year. It’s a country projected with an economic contraction of 4.2% in financial year 2020/2021. Where is the payback capacity?
  • Coming to past records of fund credit, South Sudan has only the second chance this year to benefit from IMF funding. On November 11, 2020, the International Monetary Fund granted the Republic of South Sudan a $52 million emergency disbursement under the Rapid Credit Facility to help its economy weather the shock of the COVID-19 pandemic, yet there was no public knowledge on how this fund was managed. There was no economic stability after this fund until today and the health system in which COVID-19 threat shall come under control is totally messed up.

In the analysis, there is a proof that the Financial Sector Assessment Program (FSAP) of IMF is either paralyzed or the interest of IMF in fixing South Sudan economy is different from the people of South Sudan. The fact that Bank of South (BOSS) have fulfilled one criteria (recording oil transactions) should not be an aid for loan grant of $174.2m. The IMF statement which stated “The authorities have started addressing macroeconomic imbalances and governance vulnerabilities by taking measures to strengthen fiscal discipline, remove distortions in the foreign exchange market and improve transparency” have nowhere to be proven in South Sudan as a whole. 

  • Civil servants and organized forces in South Sudan are not being paid, which is also another source of criminal activities. 
  • Disparities between Bank exchange rates and the real market have nowhere to be seen closer.
  • No, prove of transparency and accountability in Public Institutions in the country. 

The only IMF demands and advice followed by the South Sudan government are devaluation of money and oil related transaction records.  Currency devaluation is not a permanent economic stabilization measure to be considered for wider and full financial reform. This measure results in exploitation of local currency capacity with some direct negative impacts in supplying capacity of the country.  We have seen it from our neighbor (Ethiopia and Sudan) recently; these countries are still struggling to fix their country’s economic status after devaluation two to three times. 

Coming to South Sudan, there has been no Macro-Economic stability rule based monetary policy in this country. The fact that oil price has been low during this time of pandemic, could not be a reason to compromise transparency and accountability which are not being guarded in South Sudan. There is no problem with South Sudan to benefit from international donors and financing institutions around the world but the people of South Sudan see financial isolation could be a pressing mechanism for the Transitional Government of National Unity (TGoNU) to implement the agreement in both paper and spirit. 

People of South are expecting the world to act as follow:

  • Prioritize peace agreement’s full implementation and financially assist the country after the proof of peace.
  • Consider security arrangements as vital that positively contribute to reform and the international partners should instead push for full implementation of security arrangement.
  •  The IMF should help in shaping the country’s GDP and ensure that productivity is the only main route to better shape the economic status of South Sudan.
  • The IMF should first empower investment activities in the country before provision of more financial loans.
  • Empowering TGoNU in institutional reforms would be a solution before injecting financial loan to partial government.

The author, Changkuoth Gem Panyuan, is a concerned South Sudanese. He can be reached through his email at cheagem@gmail.com.

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