The Executive Board of the International Monetary Fund (IMF) on March 1 approved a disbursement of SDR 86.1 million (about US$114.8 million) under the Food Shock Window of the Rapid Credit Facility (RCF) to help South Sudan address urgent balance of payment needs arising from heightened food insecurity.
The RCF provides rapid concessional financial assistance to low-income countries facing an urgent balance of payments need with no ex-post conditionality where a full-fledged economic program is neither necessary nor feasible.
ALSO READ: South Sudan suspends use of US dollar
According to the international financial institution, four consecutive years of intense flooding and the fallout from Russia’s war in Ukraine, on the heels of the Covid-19 pandemic, have exacerbated an already-dire humanitarian situation in South Sudan.
Following the Executive Board’s discussion, Kenji Okamura, Deputy Managing Director and Acting Chair, issued a statement, saying: "Over the last three years, South Sudan has had to contend with overlapping economic shocks from Covid-19, historic flooding, and Russia’s war in Ukraine, which have compounded an already-difficult economic and humanitarian situation driven by weak economic management and institutions.
"Performance under the Staff-Monitored Program was mixed but recent corrective actions have been taken. Looking ahead, emergency financial assistance under the Rapid Credit Facility’s new food shock window will help address urgent balance-of-payments needs and mitigate the impact of elevated food prices. The authorities’ commitment to work with international partners to ensure that part of the disbursement will provide immediate humanitarian assistance to address food insecurity is welcome.”
A combination of flooding and the rising price of staples, it is noted, have exposed 8.3 million people – about two-thirds of the country’s population – to acute food insecurity. The disbursement is expected to provide South Sudan with fiscal space to address food insecurity while maintaining social and growth-enhancing spending as well as boosting reserves.
ALSO READ: South Sudan: Military involvement to boost food security
The IMF noted that authorities are committed to using resources transparently and intend to channel $20 million of the disbursement through the existing systems of trusted development partners to provide immediate humanitarian assistance that addresses food insecurity. Transparency in the use of the portion of the disbursement made available to the budget will be ensured through regular reports and an audit, which will be published.
Okamura added: "The authorities have taken determined steps since the recent months to restore fiscal discipline and rein in monetary growth. Ensuring macroeconomic stability and debt sustainability in the near term will require closing the large fiscal gap remaining in the current fiscal year and pursuing a prudent monetary policy, including sustainably bolstering international reserves.
"However, the needed fiscal adjustment should protect spending on health, education and social support, especially to the most vulnerable. Refraining from further monetary financing and non-concessional borrowing is important.”
According to Okamura, the proposed policy framework under the Staff-Monitored Program approved by Management is sufficiently robust to meet the authorities’ objectives, and its steadfast implementation could build a track record to pave the way toward a possible future Upper Credit Tranche (UCT) quality program supported by a Fund arrangement.
South Sudan’s new Staff-Monitored Program, he noted, will benefit from limited Board involvement given the significant support provided to the country by international donors, as well as the authorities’ stated intention to deepen relations with the international community by advancing macroeconomic and governance reforms.
"Continued progress on public financial management and governance reforms is essential to foster robust and inclusive growth and raise credibility with domestic and international stakeholders.”
This includes, he said, increased oil-sector transparency, strengthening the debt management framework and expenditure controls, regular reporting on debt and fiscal operations, and determined steps to operationalize the anti-money laundering and counter-terrorist financing framework.
He said that swiftly addressing the findings from the audits of the two previous RCF disbursements and decisively implementing the recommendations of the 2021 safeguards assessment remain important.
"Continued implementation of the peace process is a priority for South Sudan’s economic and social development. The authorities are highly encouraged to continue working with the international community and civil society to promote peace, stability, and national reconciliation,” Okamura said.