The Executive Board of the International Monetary Fund (IMF) on Tuesday approved a disbursement of $174.2 million to South Sudan under the Rapid Credit Facility (RCF) arrangement to respond to the coronavirus pandemic.
It is the second IMF financial assistance to South Sudan since it joined the IMF in 2012, the IMF said, adding that the disbursement will “help finance South Sudan’s urgent balance of payments needs and provide critical fiscal space to maintain poverty-reducing and growth-enhancing spending.”
The Fund said a sharp decline in international oil prices triggered by the pandemic and devastating floods have eroded economic gains of the peace process.
“The economy is slated to contract by 4.2 percent in FY20/21. The economic downturn widened the fiscal and the balance of payments deficits, opening large financing gaps in the absence of concessional financing,” IMF said. “In the past, the monetization of the fiscal deficit resulted in high inflation and significant exchange rate depreciation. A modest economic recovery is projected in FY21/22 on the heels of oil price recovery.”
It added that South Sudanese authorities have embarked on reforms to restore macroeconomic stability.
“Since October 2020, the authorities have stopped monetary financing of the deficit which, along with the forex auctions, have helped stabilize the exchange rate. Revenue mobilization measures, including phasing out some tax exemptions, have bolstered domestic non-oil revenue in recent months. A Staff Monitored Program (SMP) will help in creating the conditions for strong and inclusive growth by restoring fiscal discipline, implementing a rules-based monetary policy framework, and addressing distortions in the foreign exchange market.
“The authorities are committed to strengthening governance and accountability through public financial management reforms. The transparency of the use of the RCF resources will be achieved through regular reports and audits. The SMP will foster greater transparency of government operations while strengthening governance and reducing vulnerabilities,” IMF wrote in a statement.