S O U T H SU DA N M U LT I-D O N O R T R A N SI T I O N T R UST F U N D SOUTH SUDAN ECONOMIC MONITOR, 7TH EDITION A PATHWAY TO OVERCOME THE CRISIS MARCH 2025 © 2025 The World Bank  1818 H Street NW, Washington DC 20433  Telephone: 202-473-1000; Internet: www.worldbank.org    Some rights reserved.    This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.    Rights and Permissions  The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given.    Attribution Please cite the work as follows: “World Bank (2025) South Sudan Economic Monitor.: A Pathway to Overcome the Crisis. © World Bank.”    All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@ worldbank.org.  SOUTH SUDAN ECONOMIC MONITOR, 7TH EDITION A PATHWAY TO OVERCOME THE CRISIS MARCH 2025 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis ACKNOWLEDGEMENTS The South Sudan Economic Monitor (SSEM) is the seventh issue of a World Bank report series that assesses key economic developments, prospects, and policies in South Sudan. The current Monitor is intended for a wide audience including policymakers, business leaders, the community of analysts, and development partners engaged in economic debate around macroeconomic and structural reform priorities in South Sudan, as well as the general public. The SSEM was prepared under the overall guidance and supervision of Maryam Salim (Country Director), Charles Undeland (Country Manager), Hassan Zaman (Regional Director), Marco Hernandez (Practice Manager) and Rinku Murgai (Practice Manager). The SSEM was prepared by Cristina Savescu (Lead Economist), Kamer Karakurum Ozdemir (Senior Economist), Zerihun Getachew (Economist), Laura Olivera Garrido (Economist), Tom Bundervoet (Lead Economist), and Franck Adoho (Senior Economist). The team is thankful for comments and support from Tehmina Khan (Lead Economist and Program Leader). The team is grateful for the inputs provided by Henok Fasil Telila (Consultant),Solomon Tsehay Feleke (Consultant), and Reja Glady Joseph Waiwai (Consultant). The team would like to thank the South Sudan Multi-Donor Transitional Trust Fund (MDTTF) for providing resources to support dialogue and analytical diagnostics on macroeconomic developments by the World Bank that have been used as inputs into the SSEM. The team is also grateful to colleagues in South Sudan for their peer review and feedback. The team thanks Zewditu Banteyehun Haile (Operations Officer), Lomoro Abdalla John Sindani (Consultant), and Gelila Woodeneh (Senior External Affairs Officer) for their support and guidance on publication and outreach. The team thanks Lindrio Christine Cirilo Opeli for administrative support. The report was edited by Angela Takats and designed by Lucy Victoria Davis. Cover photo credit: Mayak Akuot. SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis TABLE OF CONTENTS SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis TABLE OF CONTENTS List of Acronyms.............................................................................................................................................. vi List of Tables..................................................................................................................................................... vi List of Figures...................................................................................................................................................vii Executive Summary........................................................................................................................................ ix Part 1: The State of the Economy and Medium-term Outlook...................................................1 1.1. Recent Economic Developments.................................................................................................................... 1 1.1.1. The Global Economy: A Challenging External Environment............................................................................................ 1 1.1.2. Economic Growth: Depressed Economic Activity..................................................................................................................3 1.1.3. Prices: Double Digit Monthly Inflation Worsens Food Insecurity............................................................................... 6 1.1.4. External Sector: The Oil Shock and Limited Buffers are Straining the Balance of Payments............. 9 1.1.5. Financial Sector: Limited Financial Intermediation and High Risks to Financial Stability....................10 1.1.6. Monetary Policy: Excess Liquidity Has Put Pressure on the Exchange Rate....................................................11 1.1.7. Fiscal Policy: Disorderly Adjustment has Squeezed Social and Pro-growth Capital Spending............ 14 1.2. Medium-term Outlook and Policy Options............................................................................................ 18 1.2.1. Business-as-usual Pathway: A Sluggish Recovery with Significant Downside Risks.................................18 Reform Pathway: Key Policies for Macroeconomic Stability.....................................................................................22 1.2.2 . PART 2. Special Focus: Poverty Trends and Features................................................................ 27 Poverty in South Sudan: A Grim Picture...............................................................................................28 2.1 . Proximate Drivers of the Increase in Poverty Between 2016 and 2022..............................32 2.2 . 2.3. Summary and Additional Policy Options..............................................................................................33 References......................................................................................................................................................... 37 Annex 1. Data Limitations in South Sudan...................................................................................... 39 Annex 2. Fiscal Year 2024/25 Budget...............................................................................................40 Annex 3. Micro-simulation methodology for poverty rates...................................................... 43 v SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis LIST OF ACRONYMS BAPCO Bashayer Pipeline Company BoSS Bank of South Sudan bpd Barrels per day COVID Coronavirus disease CPI Consumer Price Index DPOC Dar Petroleum Operating Company FAO Food and Agriculture Organization FX Foreign exchange FY Fiscal year GDP Gross domestic product HBS Household Budget Survey HFS High Frequency Survey IMF International Monetary Fund MoFP Ministry of Finance and Planning PFM Public financial management PIT Personal income tax R-ARCSS Revitalized Agreement on the Resolution of Conflict SSA Sub-Saharan Africa SSBS South Sudan Bureau of Statistics SSEM South Sudan Economic Monitor SSP South Sudanese Pound TDF Term Deposit Facility US$ US dollar WB World Bank LIST OF TABLES Table 1. Key economic indicators 2023–2027........................................................................................................................................ 5 Table 2. Dynamics of severe food insecurity in South Sudan....................................................................................................... 8 Table 3. Vulnerability of South Sudan and other east and central African countries to natural hazards..... 9 Table 4. Financial stability indicators..........................................................................................................................................................11 Table 5. Budget outturns FY23/24.............................................................................................................................................................. 16 Table 6. Outlook for key indicators in alternative pathways......................................................................................................22 Table 7. Policy options...........................................................................................................................................................................................24 vi SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis LIST OF FIGURES Figure ES.1. South Sudan annual oil production.....................................................................................................................................x Figure ES.2. South Sudan inflation vs. regional peers…......................................................................................................................x Figure ES.3. Number of people in acute food security: South Sudan vs. regional peers...............................................x Figure ES.4. Policy options for the next 6 months.............................................................................................................................. xii Figure 1. Contributions to global growth......................................................................................................................................................2 Figure 2. Annual changes in oil demand.......................................................................................................................................................2 Figure 3. Headline consumer price inflation...............................................................................................................................................2 Figure 4. Commodity price projections.........................................................................................................................................................2 Figure 5. South Sudan GDP growth................................................................................................................................................................4 Figure 6. Oil production and revenues...........................................................................................................................................................4 Figure 7. Cereal production...................................................................................................................................................................................4 Figure 8. Frequency of conflict events (number)....................................................................................................................................4 Figure 9. Overall and food inflation ............................................................................................................................................................... 6 Figure 10. Crop prices ............................................................................................................................................................................................. 6 Figure 11. Number of severely food insecure people.............................................................................................................................7 Figure 12. Percentage of the population by food security status, 2022................................................................................ 8 Figure 13. Current account balance and oil exports.........................................................................................................................10 Figure 14. Gross international reserves......................................................................................................................................................10 Figure 15. Debt service, % of GDP..................................................................................................................................................................10 Figure 16. South Sudan’s imports and exports with selected neighbors, million US$................................................10 Figure 17. South Sudan exchange rate, SSP/US$.............................................................................................................................. 13 Figure 18. Growth of broad money and inflation................................................................................................................................ 13 Figure 19. Overdraft vs. exchange rate..................................................................................................................................................... 13 Figure 20. Fiscal aggregates, billion SSP...................................................................................................................................................18 Figure 21. South Sudan non-oil revenue....................................................................................................................................................18 Figure 22. FY24 Q2 budget execution and quarterly threshold.................................................................................................18 Figure 23. Real GDP growth.............................................................................................................................................................................. 19 Figure 24. Oil production by Joint Operating Company................................................................................................................ 20 Figure 25. Long-term pathways of real GDP per capita................................................................................................................ 21 Figure 26. Poverty by geographic unit, 2016–2022.......................................................................................................................... 28 Figure 27. Annual mean household consumption growth by percentile, 2016–2022.................................................. 29 Figure 28. Poverty rates..................................................................................................................................................................................... 30 Figure 29. Distribution of the poor.............................................................................................................................................................. 30 Figure 30. The Gini index of inequality in household consumption, 2016 and 2022.................................................... 31 Figure 31. Share of adults 18 years and plus that never attended school......................................................................... 31 Figure 32. Contribution of different factors to the change in poverty 2016–2022, percentage points........32 vii SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis EXECUTIVE SUMMARY SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis EXECUTIVE SUMMARY South Sudan’s socio-economic outcomes have worsened over the past decade due to recurrent conflicts, fragility, and macroeconomic mismanagement compounded by global economic and climate shocks. Even prior to the oil shock of early 2024, per capita gross domestic product had dropped by 18 percent relative to its 2015 level; with prices rising 93-fold over this period. The erosion in living standards has left three in four people living in poverty as of 2022. This dire situation is the result of: (i) nascent institutions and weak governance; (ii) persistent mismanagement of the country’s abundant natural capital, namely, oil; and (iii) recurrent community-level conflicts and violence that led to nationwide armed conflict in 2016 and localized ongoing conflict after the 2018 peace agreement. Overlapping exogenous shocks such as the COVID-19 pandemic and historic flooding have also impeded economic recovery. Macroeconomic policy challenges, characterized by the need for stronger monetary and fiscal policy frameworks and improved policy coordination, have contributed to economic imbalances and increased vulnerability to shocks. The Bank of South Sudan (BoSS) faces difficulties in achieving policy objectives due to an underdeveloped financial sector and money market. The ability to target monetary aggregate is further complicated by substantial cash holdings outside banks. Additionally, the BoSS has limited capacity for timely, high-quality data production, which affects transparency and regulatory capabilities. The recent oil shock has further impacted the BoSS’s ability to calibrate monetary policy and manage exchange rate flexibility. The shock has necessitated a resumption in monetary financing of the central government deficit and given the central bank’s limited capacity to manage liquidity by sterilizing its interventions, the monetization contributed to higher depreciation and inflation. At the same time, the lack of fiscal space and buffers, and overdependence on volatile oil revenues to fund the budget has constrained the government’s capacity to respond effectively to external shocks, resulting in a procyclical fiscal policy. Despite improvements in non-oil revenue collection in FY24, the lack of fiscal buffers and limited availability of non-monetary financing has led to disorderly adjustments, resulting in further accumulation of salary arrears and cuts to expenditures. Both social spending and capital budget execution have consistently fallen short of budget allocations in recent years. The FY24/25 budget, approved with delays, projects a fiscal deficit of 11.7 percent of GDP. The country is now facing a severe crisis, following the collapse of oil production since February 2024. The conflict in neighboring Sudan has disrupted the flow of goods and services, including oil exports which account for almost all the country’s exports. The conflict has also triggered a massive influx of refugees and returnees. The rupture of the main Dar Blend oil export pipeline in February 2024 affected oil production (Figure ES.1), leading to a sharp decline in export revenues with losses estimated at around US$7 million per day. As of mid-March 2025, the Dar Blend pipeline was still not operational. The oil shock strained public finances, leading to the build-up of public salary arrears and further pressure on the already inadequate levels of spending on essential public services like health and education1. The economy is projected to contract by 30 percent in FY24/25, marking the fifth consecutive year of negative growth. In FY25, GDP per capita is estimated to decline to around half of the FY20 levels. 1The preliminary FY24 budget outturn shows a significant underfunding of social sectors. Education and health sector outturns were at 39 percent and 25 percent of allocated budget, respectively, highlighting slow execution and funding issues. ix SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure ES.1 South Sudan annual oil production Figure ES.2 South Sudan inflation vs regional peers 80 120 70 100 60 % annual average 80 50 Million barrels 40 60 30 40 20 20 10 0 0 ETH KENR WA SSD TZA UGA 2019/20 2020/21 2021/22 2022/23 2023/24 22024/25e SSA Avrg. Source: Ministry of Petroleum and WB calculations. Source: World Economic Outlook and WB calculations. Figure ES.3 Number of people in acute food insecurity: South Sudan vs regional peers 10 60 Population i n millions % of food insecure 40 5 20 0 0 SSD UGA KENT AZ No. of people in acute food insecurity % of analyzed population (RHS) Source: IPC. Rampant inflation has created a cost-of-living crisis, pushing households deeper into poverty. With an estimated annual inflation rate of 105 percent in 2024, South Sudan is an outlier in the region (Figure ES.2). Driven by currency depreciation, supply disruptions, and the monetization of fiscal deficits, inflation has continued to increase, with the monthly inflation rate reaching 22 percent in November 2024. The government’s inability to control inflation has led to widespread economic hardship with households finding it increasingly difficult to afford even necessities. Extremely high and rising food insecurity poses a significant threat to the well-being of millions of people (Figure ES.3). Nearly half the population faces the risk of acute food insecurity, with over two million children at risk of malnutrition. Catastrophic and recurrent flooding has led to crop destruction, food supply disruptions, disease outbreaks, and the displacement of 330,000 people in 2024 alone. The ongoing conflict in Sudan has also affected agricultural production and supply chains. These factors have led to widespread hunger and malnutrition, with severe consequences for public health and social stability. Poverty affects almost all South Sudanese.2 More than three-quarters of the South Sudanese population (76 percent) lived below the national poverty line in 2022. This represents a 7-percentage point increase since 2015, affecting all states. Extreme deprivation, defined as the share of households that cannot even afford basic food, rose 4 percentage points to 70 percent in 2022. Since then, the poverty rate is estimated to have further increased to 84 percent in 2023 and to a high of 92 percent in 2024 as GDP collapsed due to the oil pipeline closure and as prices soared. This represents potentially close to an additional four million people falling into poverty. 2 The poverty line amounts to SSP 358,724 per person per year in 2022 prices, which corresponds to approximately US$1.5 per adult per day using the average official exchange rate for 2022. x SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Fiscal challenges are being compounded by weak governance and a lack of transparency in the management of oil revenues, which are undermining fiscal sustainability and public financial management (PFM). Weak domestic revenue mobilization, notwithstanding a notable increase in non-oil revenue in recent years, and continued spending pressures have led to a growing fiscal deficit, increasing the already high risk of debt distress and economic instability. Meanwhile, basic public services, such as health and education – which are crucial for social cohesion and livelihoods – remain grossly underfunded and their provision is mostly dependent on international donors. A complex global economic outlook presents heightened risks for South Sudan and underscores the need for immediate action. Escalating conflicts and geopolitical tensions, increased inflation, slower economic growth in world’s major economies pose substantial risks to the global outlook. Additionally, potential reductions in global aid and humanitarian support may have material consequences, as South Sudan is a large recipient of aid amounting to an estimated annual average of 23.8 percent of GDP during 2020-24.3 Against this challenging background, South Sudan is at a critical juncture in its development trajectory and the government has a decision to make about the economic path it chooses as the country moves forward. The outcomes of a business-as-usual economic pathway with limited reforms will drastically fall short of meeting the basic needs of the South Sudanese. Such a path is likely to result in limited recovery – driven by the gradual resumption of oil production – followed by a protracted and fragile development path. This path is likely to be characterized by continued macroeconomic instability, exceptionally high and chronic poverty, and limited progress in public service delivery. In this case, economic activity would bounce back in FY26, with a GDP growth rate of 53.7 percent driven by oil production, while dropping to a mere 0.6 percent in FY27. Inflation would decline to single digit levels in FY 27, as the economy slows. Fiscal deficit will ease with the help of the recovery in oil revenues but remain elevated throughout the projection period; at an average of 1.9 percent in FY2026-27. , An extrapolation to the long-term, using the average real GDP growth rate of the five years prior to the Dar oil shutdown, suggests real GDP per capita would continue its declining trend and the economy would remain highly vulnerable to external shocks and internal disruptions, with no improvement in living standards for most of the population. The persistence of high inflation, fiscal imbalances, and food insecurity would continue to fuel social tensions and undermine development prospects. Conversely, implementing key reforms could place the country on a new pathway by helping to introduce economic stability and laying the foundations for a strong recovery. This alternative pathway would involve urgent and full implementation of the government’s policy and institutional reform commitments in the Revitalized Agreement on the Resolution of Conflict (R-ARCSS) in South Sudan and close collaboration with all stakeholders, including international partners and the private sector. It would entail a strengthened macroeconomic framework, transparent fiscal policy, and implementation of structural reforms. Increasing exchange rate flexibility and curtailing monetary financing of the deficit would contribute to macroeconomic stabilization. While some of these measures may entail short-term costs, their medium- to long-term benefits are expected to greatly surpass these initial costs. For instance, increased exchange rate flexibility may lead to short-term inflation, however, as the economy adjusts more effectively to shocks and investor sentiment improves, it will ultimately result in stronger growth momentum. Strengthening fiscal management would involve improving oil revenue management, boosting non-oil revenues, fostering growth in the agriculture sector, prioritizing social spending, and implementing a credible strategy to clear arrears on government salaries. The government’s declared policy priorities of clearing arrears, funding social sectors, and supporting economic diversification are crucial in this respect. Figure ES.4 below presents the policy options for the next 3-6 months. At the same time, addressing pervasive poverty would entail more specific interventions to enhance other drivers of growth, particularly agriculture production where three in four working age adults are involved, create opportunities for young people, and establish an effective social protection system in the country. 3 The aid estimate is based on OCHA financial tracking service. xi SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure ES.4 Policy options for the next 6 months POLICY OPTIONS FOR THE NEXT 3-6 MONTHS REDUCING INFLATION 1 2 FEES 3 fees for food imports TAX 4 5 BANK xii SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis POLICY OPTIONS FOR THE NEXT 3-6 MONTHS ADDRESSING FISCAL PRESSURES Improve oil revenue 1 5 use of oil revenues Nilepet profit Continue to 2 to boost non-oil revenues 6 Invest in pipeline 3 to recover oil production to FY23 OIL production levels (139,000 bpd) 4 xiii SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis PART 1 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis PART 1: THE STATE OF THE ECONOMY AND MEDIUM- TERM OUTLOOK 1.1 Recent Economic Developments 1.1.1 The Global Economy: A Challenging External Environment The global economic outlook for 2025–2027 remains complex with subdued growth supported by gradual disinflation and monetary easing subject to renewed risks. Both advanced and emerging economies are expected to experience disinflation, along with moderate improvements in trade and investment, contributing to a global economic growth rate of 2.7 percent annually over the 2025–2026 period. However, trade and investment are projected to expand at a slower pace compared to the pre-pandemic decade, with overall output unlikely to return to its pre-pandemic trajectory due to the lasting effects of recent overlapping shocks which have disproportionately impacted the most vulnerable nations (World Bank, 2025). Global inflation is steadily declining, driven in part by lower commodity prices, including for energy, and the delayed effects of monetary tightening, but the disinflation process remains uneven across countries. Monetary policy rates are expected to be reduced further, though they are likely to remain significantly higher than the low levels of the 2010s in advanced economies. Economic performance is expected to diverge among both advanced and emerging economies, with Sub Saharan Africa being one of the regions where growth is projected to strengthen. While Europe is likely to see sluggish growth, the outlook for the United States has been revised upward (World Bank, 2025). A modest recovery is projected in China driven by weak domestic demand. Meanwhile, growth in Sub-Saharan Africa is expected to average 4.2 percent in 2025–2026, driven by stronger growth in industrial commodity-exporting countries and supported by declining inflation and easing financial conditions. (Figure 1). The growth outlook for South Sudan’s key economic partners in the region is positive, with growth in Uganda projected to accelerate mainly driven by an oil-related infrastructure boom ahead of the start of oil, while growth in Kenya is benefiting from a more dynamism in the private sector as a result of reforms and more accommodative monetary policy (World Bank 2025). In Ethiopia, growth is expected to strengthen gradually, benefiting from last year’s macroeconomic reforms. Persistent conflict in Sudan, however, and country-specific challenges continue to weigh on the region’s overall economic prospects. Moreover, per capita income growth remains insufficient to significantly reduce poverty levels across SSA. The price of oil, a critical resource for South Sudan’s economy, is gradually easing as global demand for oil is moderating and remains subject to significant risks. After rebounding from pandemic-induced lows, oil demand growth is moderating, and the market is expected to remain well-supplied. Oil prices are projected to decline to US$72 in 2025 and further to US$71 in 2026, even as most of the 2.2 million barrels per day in OPEC voluntary cuts are anticipated to be extended (IEA, 2024a). Weak economic 1 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis growth, sluggish demand in China, and a reduced perception of risks to oil infrastructure in the Middle East are weighing on short-term oil prices (World Bank, 2024a). Gradual shifts towards clean energy and reduced global demand could cause volatility (IMF, 2024a), and could present significant challenges for oil-dependent economies over the long-term as it is projected to lower oil demand (IEA, 2024b). As a major oil exporter, South Sudan must navigate these shifts while diversifying its economy to mitigate potential shocks (IMF, 2024b). Escalating conflicts and geopolitical tensions, higher inflation, slower growth in major economies, and extreme weather events linked to climate change present significant downside risks to the global outlook. Emerging markets face external challenges stemming from shifting global dynamics, including a stronger risk appetite in the United States, a firmer US dollar, and rising US bond yields. Export-dependent nations, such as South Sudan, are particularly vulnerable as global trade growth is projected to remain below the 2010–2019 average. Insufficient policy action in China could lead to economic stagnation and reduce demand and prices for minerals and metals, as well as curtail Chinese investments in the SSA region. Figure 1. Contributions to global growth Figure 2. Annual changes in oil demand 4 United States China 4 3 Other EMDEs Euro area China India Other AEs World (RHS) AEs Rest of world Percentage points 3 3 2010-14 avg. 2015-19 avg. Million barrels per day 2 Percent 2 2 1 1 1 0 0 0 2023 2024 2025 2010-19 average 2024e 2025f 2026f Figure 3. Headline consumer price inflation Figure 4. Commodity price projections World Advanced economies EMDEs 250 Energy 12 Index, 100 = 2015 -19 average Metals and minerals 10 200 8 Percent 6 150 4 100 2 0 50 Jul-24 Nov-24 Nov-20 Nov-22 Mar-23 Jul-23 Nov-23 Mar-24 Jul-20 Mar-22 Jul-22 Nov-21 Nov-19 Mar-20 Jul-21 Mar-21 2025 2023 2026 2024 2022 2019 2020 2021 (Chen, Fornino, and Rawlings, 2024). Source: World Bank; International Energy Agency (IEA); Haver Analytics; Bloomberg; Global Economic Prospectus January 2025. Note: AEs = advanced economies; e = estimate; EMDEs = emerging market and developing economies; f = forecast; RHS = right-hand scale. Aggregates are calculated using real US dollar GDP weights at average 2010–19 prices and market exchange rates. 2 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Conflicts and instability – particularly the war in Sudan and ongoing unrest in the Sahel – pose significant challenges to the Sub-Saharan Africa region. For South Sudan, the conflict in Sudan has disrupted trade, exacerbated food insecurity, and increased refugee inflows, further delaying economic recovery efforts (IMF/WB, 2024). Moreover, fiscal risks in SSA remain elevated, with high debt service costs limiting the ability of many countries to invest in growth-enhancing sectors (World Bank, 2024b). These constraints underscore the importance of addressing vulnerabilities to support sustainable growth and regional stability. 1.1.2 Economic Growth: Depressed Economic Activity South Sudan’s heavy reliance on oil for economic activity, exports, and fiscal revenues makes it highly vulnerable to fluctuations in oil output and prices. The oil sector is the primary driver of the country’s economy, contributing about 50–60 percent of GDP, while oil-related revenues account between 80–90 percent of government revenue, underscoring the tight link between fiscal sustainability and oil prices. Despite possessing significant proven oil reserves, the country faces challenges in leveraging this resource for its development due to insufficient investment and infrastructure damage caused by conflict and climate shocks. Moving forward, the country could face a less favorable external environment due to the global energy transition. Moreover, one of South Sudan’s key oil sector operators, the Petronas International Corporation, announced its official exit from the country in August 2024 creating uncertainty regarding the management of its assets. Petronas has been a key partner in the Joint Operating Companies, with interests in Blocks 3/7, 1/2/4, and 5A, through partnerships with China’s CNPC and Sinopec, India’s ONGC and Nilepet, in assets producing 155,900 barrels per day (bpd) in FY22. South Sudan’s economy contracted for a fourth consecutive year, afflicted by spillovers from the conflict which affected critical oil export infrastructure, economic mismanagement, and floods. The rupture of an oil pipeline in Sudan, through which two-thirds of South Sudanese oil was being transported to Port Sudan, plunged the economy deeper into recession. Even prior to this shock the South Sudanese economy had been under stress due to consecutive years of severe flooding, the spillover effects of the Russian invasion of Ukraine, and the impacts of COVID-19, which have exacted a toll on the standard of living of the South Sudanese. The conflict in Sudan led to a disruption in the flow of oil exports, which account for almost all of country’s exports, while triggering a massive influx of refugees and returnees, and exacerbating existing economic challenges. The pipeline shutdown has resulted in substantial losses in export and government revenues, with oil export revenues declining by around an estimated US$6.8 million per day. More than half of South Sudan’s government revenues were derived from Dar Blend in 2023. The pipeline rupture in February 2024 was caused by diesel shortages at pump stations used to power heaters that prevent crude oil gelling. Gelling led to increased pressure and ultimately the pipeline’s failure. Sudan declared force majeure, halting oil transportation through the pipeline to the Bashayer Oil Terminal on the Red Sea. The Bashayer Pipeline Company (BAPCO) oil pipeline, which spans 1,368 kilometers from the Upper Nile State in South Sudan to Port Sudan, had previously transported around 95,000 barrels per day (bpd) of Dar crude oil from Blocks 3 and 7, operated by the Dar Petroleum Operating Company (DPOC), accounting for 65 percent of South Sudan’s oil production prior to the disruption.4 4 The Dar Petroleum Operating Company (DPOC) is a consortium that includes Nilepet, China’s CNPC and Sinopec, and Malaysia’s Petronas. 3 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 5. South Sudan GDP growth Figure 6. Oil production and revenues 30 70 92 25 60 90 20 50 Million barrels 15 88 40 Percent Percent 10 30 86 5 0 20 84 -5 10 -10 0 82 -15 2019/20 2020/21 2021/22 2022/23 2023/24 2019/20 2020/21 2021/22 2022/23 2023/24 Oil production DPOC GPOC SPOC Aggregate GDP Oil GDP Non-Oil GDP Oil revenue, % of total revenue (RHS) Source: World Bank, SSBS. Source: MoFP. Figure 7. Cereal production Figure 8. Frequency of conflict events (number) 120 1400 1300 1200 100 1200 1100 1000 80 Thousands 1000 900 800 800 60 700 600 600 40 500 400 400 20 2020 2018 2019 2015 2023 2016 2013 2022 2014 2012 2021 2017 0 Oct-24 Jan-24 Jul-22 Jan-18 Apr-23 Oct-18 Jul-19 Jan-21 Production, tonnes Area harvested, ha Apr-20 Oct-21 Yield, kg/ha Source: FAO, 2024a. Source: ACLED. 2024 data covers January to October. Conflict events representå number of political violence events. The oil infrastructure shock caused a sharp deterioration in the macroeconomic situation, plunging South Sudan further into a deep recession, depressing economic activity and exports, and putting pressure on the balance of payments. Since the BAPCO pipeline is the only export route through Port Sudan and given limited storage capacity, this has caused South Sudan’s oil production to plunge to around 60,000 barrels per day (bpd) from an average of 144,000 bpd in the first half of FY24 (Figure 6). Annual oil production dropped by 12 percent in FY24 and, due to the large share of the oil sector in South Sudan’s GDP (64 percent), this contributed to an estimated 7.2 percent GDP contraction in FY24 (Table 1), with negative spillovers for poverty and food security. Better outcomes in the agriculture sector, which is the main source of livelihood for nearly 80 percent of households, have prevented an even sharper decline. Improvements in security have facilitated some of the returning displaced households to engage in farming. Coupled with less extensive flooding in 2023, this has resulted in a 6.2 percent increase in area harvested and 8.3 percent increase in crop production in FY24 compared to FY23 and 20.3 percent above the five-year average (Figure 7). Yet the output gap in the agricultural sector, with respect to its potential remains significant, due in large part to still ongoing and widespread fragility, recurrent flooding, and high input costs, including for seed and hand tools, as well as disruptions in input distribution. Torrential rains in August 2024 and the overflow of the River Nile and its tributaries caused flooding and crop losses, with the most affected states being Unity, Warrap, Lakes, and Jonglei (FAO, 2024a, b). 4 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table 1. Key economic indicators 2023–2027 FY23 FY24 FY25 FY26 FY27   Annual percent change unless indicated otherwise       Real GDP growth, at constant market prices -1.3 -7.2 -30.2 53.7 0.6 Agriculture -1.7 8.0 0.5 1.0 2.0 Industry -4.3 -11.6 -43.4 96.1 0.0 Services 3.6 2.3 -2.9 1.1 2.0       Inflation (Consumer Price Index) 18.0 35.0 177.9 29.9 4.9       Current account balance (% of GDP) 5.1 4.0 -5.2 3.6 3.7 Net foreign direct investment, inflow (% of 0.8 1.7 4.4 2.7 3.2 GDP)       Fiscal balance (% of GDP) 3.3 -6.5 -3.0 -2.1 -1.7 Revenues (% of GDP) 32.7 26.7 21.4 29.1 29.6 Debt (% of GDP) 39.5 46.0 50.9 48.1 49.0 Primary balance (% of GDP) 3.7 -6.5 -1.0 -0.4 0.0 GDP nominal in US$ (millions) 7287 6496 4082 5668 5636       Memo items:       Oil production (thousands of bpd) 139 122 66 139 139 Nominal GDP, LCU billions 5485 7985 15481 30908 32629 Source: World Bank estimates, Government of South Sudan. The dire macroeconomic situation has upended the recovery in the private sector that was underway in FY22 and FY23. Depressed economic activity, accelerated depreciation of the exchange rate, and spiraling inflation that eroded purchasing power and likely pushed more people into poverty, have discouraged private economic activities and investment, and likely affected job creation and labor incomes. Domestic credit to the non-governmental sector grew at a much lower pace in FY24 to an estimated 3.4 percent of GDP, up from 2.4 percent of GDP the previous fiscal year. Despite diminishing levels of conflict and violence (Figure 8), supply chain disruptions, increased check points, and multiple taxes continue to impact private sector economic activities and agricultural production. Supply constraints have been further exacerbated by the recent protest of importers against the revised customs valuations following the FY25 Finance Act and applying the daily prevailing exchange rate instead of the previous fixed SSP 300 per one dollar worth of imports. Domestic demand was negatively affected by further accumulation of public wage arrears and the marked slowdown in public capital spending in the second half of FY24. Public wage arrears, for both domestic and foreign workers, increased to nearly 11 months, affected by the ongoing process of vetting the public workers and the sharp decline in government oil revenues since February 2024 following the oil pipeline disruptions.5 The build-up in arrears, in conjunction with high inflation, undermined household consumption and contributed to increased economic hardship. Meanwhile capital spending as a share of GDP declined by 4.3 percentage points to 5.0 percent of GDP in FY24. 5The vetting of local government employees is underway, while the vetting of civil servants which started in August 2023 was completed in early 2024 (IMF, 2024b). 5 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis 1.1.3 Prices: Double Digit Monthly Inflation Worsens Food Insecurity Inflation had been relatively subdued but began to rise six months into the Sudan conflict. Following the 2021 exchange rate unification, inflation had been subdued, supported by easing supply constraints, receding floods, and reductions in localized violence. Subsequently, fiscal mismanagement, the monetization of fiscal deficits, and exchange rate volatility linked to oil price fluctuations have contributed to inflationary pressures and the oil shock amplified these challenges. Inflation began to rise significantly from the 5.7 percent low recorded in October 2023, reflecting the spillover effects of regional instability and the disruption of economic activities and subsequently the oil shock. Headline inflation, which had been rising steadily since November 2023, increased sharply after the oil shock. The sharp decline in oil exports caused a sharp depreciation of the South Sudanese pound, fueling inflation. High passthrough of the South Sudanese pound depreciation, especially for food and fuel prices, has contributed to a sharp increase in inflation. Consumer price inflation reached 139 percent in August 2024, with the surge in inflation primarily fueled by food inflation, which climbed to 121.8 percent (Figure 9). Inflation pressures stemmed also from supply constraints and higher transportation costs following the increases in fuel prices – 220 percent for diesel and 216 percent for petrol between January and October 2024. Prices of cereals in Juba were up by 130 percent year-on-year for maize, 110 percent for sorghum, and 317 percent for wheat flour by October 2024 (Figure 10). Figure 9. Overall and food inflation Figure 10. Crop prices 350 Maize 160 300 Sorghum 140 Overall % change, year-on-year 120 250 Food % change, year-on-year 100 200 80 150 60 40 100 20 50 0 -20 0 -40 -50 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24 May-24 Jul-24 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24 May-24 Jul-24 Sep-24 Source: South Sudan Bureau of Statistics. Source: WFP. Inflation remains elevated with dire consequences for households that have almost no buffers to respond to the inflation shock. A new Consumer Price Index (CPI) series introduced by the South Sudan Bureau of Statistics (SSBS) shows that monthly inflation spiked to 22 percent in November 2024, up from 6.6 percent the previous month, before easing somewhat to 13.2 percent in December 2024.6 The biggest contribution to inflation came from higher food and non-alcoholic beverage prices, which have a 48.2 weight in the household consumption basket, which shot up to 35 percent month-on-month in November 2024, nearly three times the rate recorded in the previous month. Housing, water, and utility prices, which represent 44.4 percent of the household consumption basket, rose by 8.1 percent that month. Inflation in December 2024 diverged significantly across the states, ranging from 6.9 percent in Juba to 106 percent in Kuajok. The disruption in cross-border trade of basic food has significantly impacted food supply in South Sudan. During the third quarter of 2024, maize shipments from Uganda plummeted – falling 30 percent compared to the previous quarter, 87 percent compared to the same quarter in 2023, and 96 percent below the five-year average. Sorghum shipments also dropped sharply, declining 52 percent from the previous quarter, 87 percent from 2023 levels, and 98 percent below the five-year average. Reduced 6 According to the latest inflation publication from the SSBS. Since August 2024, the CPI coverage was expanded to include the seven remaining state capitals in addition to Wau, Juba, and Malakal, causing a structural break in the inflation series. 6 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis production in Uganda and the ongoing conflict in Sudan are expected to continue constraining the sorghum supply in South Sudan. Inflation in Sudan rose to 145 percent in January 2025, according to official figures. Recently South Sudan has signed a memorandum of understanding with Djibouti, Uganda and Ethiopia to create a land corridor for strengthening regional trade ties which could help alleviate pressures over the medium term. Additional factors, such as losses in purchasing power, elevated border fees, increased transport costs, and unofficial taxation at multiple checkpoints along trade routes, have likely negatively affected grain trade. These challenges have diverted regional grain trade to markets with higher margins, such as the Democratic Republic of Congo, Kenya, and Rwanda, following the reopening of Uganda’s border with Rwanda in early 2022.7 These shifts are expected to further disrupt food supplies, intensify inflationary pressures, and elevate the already high risk of food insecurity in South Sudan.8 Recurrent flooding, insecurity, and high food prices have exacerbated food insecurity, affecting nine million people (78 percent of the total population).9 The inflow of more than one million returnees and refugees as of January 2025, of which 76 percent are South Sudanese returnees, worsened the food security situation.10 The cost of the minimum expenditure basket in January 2025 reached SSP 449,640, up 281 percent with respect to a year earlier (REACH, 2025). High prices coupled with supply disruptions due to flooding, together with lower humanitarian aid, are putting additional pressure on a population already struggling with high levels of food insecurity.11 Flooding has impacted 1.4 million people and displaced nearly 330,000, with the areas most affected by flooding being Unity, Jonglei, Western Bahr el Ghazal, Lakes States, and the Abyei Administrative Area. Furthermore, flooding in Renk, the main entry point for people displaced by the conflict in Sudan, has contributed to a cholera outbreak. During the 2024 lean season (April–July 2024), 56 percent of the population (7.1 million) suffered from food insecurity; and this is projected to increase to 7.7 million people in the April–July 2025 lean season (Figure 11). Figure 11. Number of severely food insecure people 8 No. of people in millions 6 4 2 - May-July April-July April-July Oct-Nov Dec 2022 April-July April-July April-July 2020 2021 2022 2022 -Mar 2023 2023 2024 2025 Source: IPC. The severity of food insecurity varies across the regions (Figure 12). The states affected by frequent climate-related shocks and returnees/refugees experienced a high incidence of food insecurity (Table 2). The incidence of food insecurity was slightly below 50 percent in the Western Bahr el Ghazal and Eastern Equatorial states, while it was lowest in the Western Equatorial state in April–June 2024. Its incidence is most severe in Jonglei, at 88 percent, closely followed by Western Equatoria, at 82 percent, which may be primarily attributed to persistent conflict and security challenges affecting these states. Conflict is disrupting agricultural activities and breaking food supply chains, leading to inadequate access to reliable food sources. These challenges likewise represent major obstacles to the effective delivery of humanitarian assistance (HRW, 2023). 7 Multiple unauthorized checkpoints along trade routes resulted in increased transportation costs and hence increased prices of goods. Checkpoints are numerous, and there was one check point for each 16 km along major trade routes. For instance, there were 15 check points along 192 km long Juba-Nimule Road, which is South Sudan’s main trade gateway. In early December 2024, the government ordered removal of all illegal checkpoints along trade routes in South Sudan. However, previous experience shows that after the authorities order closure of illegal checkpoints, they often continue, or close and then reemerge. 8 FEWSNET (2024). 9 UNOCHA (2024). 10 IOM (2025). 11 REACH (2025). 7 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 12. Percentage of the population by food security status, 2022 20 13 20 14 19 11 16 20 30 29 25 of individuals Percentage 55 46 44 53 69 61 52 41 59 50 58 29 30 30 31 23 11 15 17 20 21 25 4 1 3 4 2 5 4 6 5 9 5 South Jonglei Western Western Lakes Central Upper Nile Unity Northern Eastern Warrap Sudan Equatoria Bahr el Equatoria Bahr el Equatoria Ghazal Ghazal Food secure Marginally food secure Moderately food insecure Severely food insecure Source: Estimates based on 2022 HBS; 2021 data of FSNMS (Food Security and Nutrition Monitoring System) (dashboard), Food Security Indicators Data, CLiMIS, Juba, South Sudan, https://climis-southsudan.org/fsi/data. Table 2. Dynamics of severe food insecurity in South Sudan Feb 2023- Sep 2023- Dec 2023- Apr 2024- Apr 2025- Mar 2022 Nov 2023 Mar 2024 June 2024 June 2025 National 0.55 0.46 0.46 0.56 0.57 Central Equatoria 0.52 0.47 0.33 0.52 0.52 Eastern Equatoria 0.44 0.37 0.32 0.46 0.45 Jonglei 0.72 0.61 0.59 0.68 0.62 Lakes 0.52 0.53 0.48 0.60 0.57 Northern Bahr el Ghazal 0.57 0.46 0.51 0.59 0.62 Unity 0.68 0.58 0.61 0.66 0.72 Upper Nile 0.54 0.56 0.57 0.67 0.65 Warrap 0.63 0.37 0.44 0.55 0.59 Western Bahr el Ghazal 0.30 0.49 0.33 0.49 0.40 Western Equatoria 0.35 0.18 0.19 0.26 0.26 Returnees 0.60 0.70 0.75 0.85 Source: IPC (2022, 2024). Note: The red color shows states with more than a 50 percent food insecure population. More areas are being affected by severe food insecurity. Parts of the country which were at stressed level (Phase 2) of food insecurity in 2022, have since moved to either crisis level (Phase 3) or emergency level (Phase 4). When comparing 2024 to 2022, the area of South Sudan that was experiencing Phase 2 and 3 levels of food insecurity has been expanding as several counties shifted from Phase 2 level to either Phase 3, 4, or 5 (catastrophe). Yambio, Ezo, and Nazra counties remain under Phase 2 level of food insecurity while the rest of South Sudan became either crisis or emergency level of food insecurity in 2024. Climate-related shocks, conflict, and violence put pressure on the food security status of households. South Sudan, with the highest natural hazards vulnerability index, has the lowest coping capacity in the world to mitigate the negative impacts of natural hazards, ranking first in the world in terms of lacking coping capacity (Table 3). 8 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table 3. Vulnerability of South Sudan and other east and central African countries to natural hazards Lack of coping Hazard exposure Vulnerability Overall risk capacity Index Rank Index Rank Index Rank Index Rank South Sudan 6.9 39 8.9 2 9.3 1 8.3 2 DRC 8.3 8 7.7 7 8 5 8 4 Sudan 8.3 8 7.4 9 6.7 22 7.4 8 Ethiopia 8 15 6.6 16 6.7 22 7.1 13 Uganda 5.8 38 6.8 14 6.9 19 6.5 18 Kenya 6.7 32 5.1 30 5.7 47 6.2 22 Burundi 5 46 6.4 20 6.7 22 6 23 Rwanda 1.6 145 5.7 38 4.7 72 3.5 89 Source: INFORMRISK (2024). 1.1.4 External Sector: The Oil Shock and Limited Buffers are Straining the Balance of Payments South Sudan’s external position has worsened in the wake of the oil production shock. The high volatility of external accounts demonstrates how vulnerable the mono commodity exporter is to oil revenue fluctuations. The current account surplus contracted in FY24, dropping by more than 2 percentage points of GDP. Oil exports, which typically account for nearly 98 percent of South Sudan’s exports and are the country’s main source of foreign exchange, collapsed following the shutdown in the BAPCO oil pipeline that usually carries nearly 70 percent of the country’s oil production to Port Sudan (Figure 13). External buffers have been historically very low and inadequate, with gross international reserves averaging 0.5 months of import over the past four years, and have declined further to 0.3 months in FY24 – well below the 4.5 months of import coverage targeted by the government (Figure 14). The sharp drop in oil production caused exports to collapse. Oil exports are estimated to have declined by 16 percent in FY24 to US$3.7 billion, as output has averaged around 122,000 bpd in FY24, down from 139,000 bpd in FY23. Oil production averaged only around 60,000 bpd since February 2024, resulting in forgone export revenues of US$6.8 million per day. South Sudan is also heavily dependent on imports to meet its domestic demand, including for staple food, fuel, medicine, as well as intermediate and capital goods. Imports of goods and services amount to nearly two-thirds of GDP. Despite its large agriculture potential, South Sudan relies on imports to meet domestic food demand, with the food needs exceeding domestic cereal production by nearly 20 percent. Food imports averaged nearly 64 percent of total merchandise imports over the 2020–2022 period (FAO, 2024b). The war in Sudan has significantly impacted trade through both the large influx of refugees, disruption to trade routes, and higher costs. The conflict in Sudan has disrupted trade with Sudan and diverted it to other Eastern African countries, albeit at a much higher cost due to poor connectivity. The large inflow of refugees and South Sudanese returnees in the wake of the start of the conflict in Sudan, exceeding one million people, has increased demand for food, and the security situation in Sudan has disrupted the supply of staple goods, mostly food and fuel. The sharp exchange rate depreciation has increased the costs of imports significantly, but imports of many staples are cost inelastic. Furthermore, the war in Sudan has increased insurance and freight costs for oil exports. With weak trade facilitation and heavy export concentration on oil, South Sudan runs a large trade deficit with its neighbors. South Sudan has large trade deficits with neighboring Uganda12 and Kenya as it is dependent on imports while its non-oil exports are negligible (Figure 15). 12 Most imports are from Uganda through the Nimule border that transits 90 percent of cargo into South Sudan. 9 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis South Sudan has almost no external buffers in a context of structurally high external financing needs that reflect large external imbalances. Sizeable development spending needs and external debt-service obligations on a large stock of non-concessional debt over the medium term, amounting to nearly 6.8 percent of GDP in FY24 and projected to reach 9.7 percent in FY25 (Figure 16), including for oil-backed loans, will continue to put pressure on the balance of payments. This is compounded by structurally lower oil export revenues and the expected decline in international aid following a temporary hike in the post-COVID period. Russia’s invasion of Ukraine, the Sudan conflict, and the US administration policy on foreign aid will continue to weigh on international aid. Figure 13. Current account balance and oil exports Figure 14. Gross international reserves 5,0 25 250 0.6 20 Months of imports 200 0.5 4,0 Millions of US$ 15 (Percent of GDP) 0.4 10 150 Billion US$ 3,0 0.3 5 100 0.2 2,0 0 50 0.1 -5 1,0 0 0.0 -10 FY20 FY21 FY22 FY23 FY24 0,0 -15 FY20 FY21 FY22 FY23 FY24 Gross reserves, months of import (RHS) Gross reserves, in million US$ Current account balance (RHS) Oil revenue, billion US$ Source: IMF, MOP, WB staff calculations. Source: BoSS. Figure 15. Debt service, % of GDP Figure 16. South Sudan’s imports and exports with selected neighbors, million US$ 12 600 9.7 10 Percent of GDP 500 8 6.8 400 Million US$ 6 3.7 300 4 2 200 0 100 FY22/23F Y23/24F Y24/25 0 Import Export Import Export Multilateral Bilateral Commercial Domestic Uganda Kenya Total 2020 2021 2022 2023 Source: IMF DOTS; Bank of Uganda. Source: IMF/WB Joint DSA, June 2024. 1.1.5 Financial Sector: Limited Financial Intermediation and High Risks to Financial Stability Financial intermediation by South Sudan’s banking system remains limited, representing an important barrier to economic diversification. More than two-thirds of commercial banks’ income is generated from foreign exchange transactions rather than interest income, and the lack of financial intermediation and access to credit for the non-oil economy acts as one of the barriers to economic diversification. Domestic credit to the private sector remains among the lowest in Sub-Saharan Africa, standing at an estimated 3.4 percent of GDP at the end of June 2024, while claims on the central government nearly doubled to 49.5 percent of GDP by June 2024 – crowding out the private sector further. Deteriorating macroeconomic conditions have disrupted the recovery in the private sector observed over the previous 10 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis two fiscal years and likely affected demand for credit. By end June 2024, credit to the non-government sector rose by 109.8 percent to 3.4 percent of GDP, after more than doubling to 2.4 percent of GDP as of June 2023 (increasing 263.7 percent). The growth in domestic credit was driven by increased credit to manufacturing (221 percent); domestic trade, restaurants and hotels (155 percent); and financial services (122 percent), while credit to other sectors grew at a slower pace: real estate (88 percent) and household services (85 percent). However, private sector credit to foreign trade dropped by 75 percent, while credit to building and construction slowed to 64 percent. The large oil shock has likely affected the incomes of commercial banks and has heightened financial stability risks. The sharp decline in the supply of foreign exchange has likely negatively affected the banks’ income. While the banking system’s average capital adequacy ratio stood at 10.1 percent at the end of FY24, some of the domestic commercial banks have much lower capital adequacy ratios. Furthermore, for some commercial banks, the large exposure to foreign exchange denominated liabilities, likely exceeding 80 percent, exposes these banks to FX risks if not matched by the composition of their assets. Non- performing loans remain low at 1.9 percent. Table 4. Financing stability indicators    2020  2021  2022  2023  Sept 2024  FX denominated assets to total assets   68.5  76.7  78.6  84.9  82.0  FX denominated liabilities to total liabilities  68.5  76.7  78.6  84.9  82.3  FX denominated loans to total loans  93.4  103.6  96.7  96.2  99.0  Non-performing loans net of provisions to capital  4.3  0.0  8.6  6.9  4.4  Non-performing loans to total gross loans  2.7  2.7  2.4  1.2  0.8  Liquid assets to total assets          26.5  Regulatory capital to risk-weighted assets  15.0  10.8  8.3  8.5  6.8  Source: Bank of South Sudan. The BoSS has been continuing its effort to address the undercapitalization of the domestic banking sector. Several licensed commercial banks, while not systemically large, remain undercapitalized. The licenses of two inactive domestic banks were revoked in December 2022 as a first step towards resolving the issue. Following the revocation, the BoSS established a dedicated liquidation team, but limited legal expertise on treatment of assets and liabilities has hindered the wind-down process. The BoSS sought Cabinet approval for its recently adopted action plan on banking sector reform to ensure that it enjoys broad political support. 1.1.6 Monetary Policy: Excess Liquidity Has Put Pressure on the Exchange Rate Weaknesses in South Sudan’s monetary policy framework, despite recent efforts to improve it, combined with poor coordination of fiscal policy, have contributed to a challenging macroeconomic environment. The monetary aggregate targeting framework, with broad money as the nominal anchor and reserve money as the operational target, was ineffective in addressing worsening macroeconomic imbalances, particularly in the context of a significant oil production shock.13 Large cash holdings outside the banking system have also affected the effectiveness of monetary policy. The introduction of daily cash withdrawal limits on September 16, 2024, has further discouraged deposits, however, the limit was lifted in December 2024. The monetary and banking policy objectives for 2025 include achieving inflation of 61.5 percent, supporting growth of 6.8 percent, encouraging commercial banks to increase lending to the private sector to 40 percent of their total deposits, and rebuilding international reserves to the equivalent of 4.5 months of imports. 13 Monetary policy targets a 10 percent annual reserve growth. 14 Empiricalevidence shows that a one percent change in reserve money typically leads to a roughly one percent depreciation of the South Sudanese Pound (SSP) against the dollar (IMF, 2023). 11 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis The large oil shock has further affected the BoSS’ ability to conduct monetary policy and manage exchange rate flexibility, putting pressure on the foreign exchange rate market. The large decline in the inflows of foreign exchange linked to the plunge in oil exports contributed to the sharp decline in BoSS international reserves to an estimated US$64 million (equivalent to 0.3 months of imports) at the end of June 2024 from an already low of US$267 million (0.7 months of imports) at the end of March 2024. The BoSS resumed monetary financing of the central government deficit in FY24 and was not able to fully sterilize the intervention, contributing to higher depreciation and inflation. The sharp drop in fiscal revenues and lack of financing options prompted a resumption in monetary financing in the first half of 2024. BoSS claims on the central government increased by an estimated 5.4 percentage points of GDP between FY23 and FY24 and the central bank was not able to sterilize this, contributing to higher demand for foreign exchange. BoSS overdrafts increased by 74.4 percent between January and October 2024, leading to reserve money growth far exceeding the target (Figure 19). During the same period, money supply expanded by 182 percent, driving annual growth in broad money (M2) from 107 percent in FY23 to 116 percent in FY24, and further to 178 percent by October 2024 (Figure 18). These developments exerted significant pressure on the exchange rate, and while the BoSS initially delayed the exchange rate adjustment, it reversed course and allowed a gradual depreciation once it became clear that the shock was persisting.14 The BoSS intensified the use of open market operations to manage liquidity, but with limited impact. The BoSS issued a Term Deposit Facility (TDF) in the second half of FY23/24 to absorb excess liquidity stemming from monetary financing, complementing the declining foreign exchange (FX) auction volumes. As a result, outstanding credit under the TDF rose to SSP 70 billion in August 2024, up from SSP 34 billion in August 2023; and issued a TDF worth SSP 120 billion between September 2024 and January 15, 2025. Although the BoSS introduced a 336-day tenor TDF in August 2023, demand has been predominantly concentrated in shorter maturities. While the longer tenor has played a supportive role in strengthening the monetary policy framework, its impact on liquidity management has been limited. Foreign exchange auctions, which were the BoSS’ main liquidity management tool, were affected by the drop in oil export revenues and depletion of foreign exchange reserves. South Sudan successfully unified the official and parallel foreign exchange markets in 2021, transitioned to a market-based auction system, and implemented a flexible exchange rate policy prior to the oil shock. As the parallel market exchange rate depreciated markedly in the wake of the shock, FX auctions rules were modified, contributing to the widening premium. Foreign exchange auctions were suspended between mid-December 2023 and mid- January 2024 and resumed in mid-January 2024 with a reduced FX auction volume. Weekly forex auction volume declined from US$5 million in April 2023 (US$3 million for commercial banks and US$2 million for forex bureaus) to US$2 million as of October 2024, with commercial banks and forex bureaus earmarked at US$1 million each. The BoSS struggled to settle the auctioned forex since October 2024, and the forex auctions were again suspended until mid-January 2025. A term deposit from the Abu Dhabi National Bank has been obtained to boost BoSS foreign assets, which raised gross reserve levels to US$344 million as of end October 2024. The parallel market exchange rate premium widened significantly due to substantial loss of international reserves, limited forex auction volumes, continued monetary financing of fiscal deficits, and an inability to mop up excess liquidity. Despite the BoSS’ efforts to regulate parallel market operators to stabilize the foreign exchange market, the premium in the parallel market rose from less than 5 percent (average) following the 2021 exchange rate unification to 179 percent in late-July 2024, before narrowing to 46 percent in October 2024 and to 29 percent as of end January 2025. This occurred as the official rate depreciated gradually, once it was clear that the shock would persist, and was helped by the recent appreciation of the parallel market exchange rate (Figure 17). Changes in trade patterns in the wake of the Sudan war have also affected the demand for US dollars. Trade with Sudan is reportedly conducted in SSP while that with other countries is transacted in US$ (IMF, 2024b). Since the beginning of 2024, exchange rate depreciation accelerated, with the official exchange rate depreciating by 259 percent and the parallel rate by 343 percent as of December 2024. 12 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 17. South Sudan exchange rate, SSP/US$ Figure 18. Growth of broad money and inflation 6000 300 120.0 200 5000 250 100.0 150 Annual change, % Annual change, % 80.0 Exchange rate, Premium,% 4000 200 SSP/US$ 60.0 100 3000 150 40.0 2000 100 20.0 50 0.0 1000 50 -20.0 0 0 0 Jan-23 Jan-24 Jul-23 Jan-22 Jul-24 Jan-21 Jul-22 Jul-21 Apr-21 Jul-21 Oct-21 Apr-22 Jul-22 Oct-22 Apr-23 Jul-23 Oct-23 Apr-24 Jul-24 Oct-24 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Broad Money (M2) (right) Premium Parallel EXR Source: Bank of South Sudan. Source: Bank of South Sudan. Figure 19. Overdraft vs. exchange rate 3500 3.000 3000 2.500 2500 SSP per USD 2.000 SSP, in billion Overdraft (right) 2000 1.500 1500 1.000 1000 500 500 0 0 Mar-21 May-21 Jul-21 Mar-22 May-22 Jul-22 Mar-23 May-23 Jul-23 Mar-24 May-24 Jul-24 Jan-21 Sep-21 Nov-22 Jan-22 Sep-22 Nov-22 Jan-23 Sep-23 Nov-23 Jan-24 Sep-24 Source: Bank of South Sudan. 13 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Box 1. Monetary, Inflation, and Exchange Rate Challenges in South Sudan: Insights from Country Experiences South Sudan, heavily dependent on oil for 98 percent of its total goods exports and 90 percent of government revenues, is deeply vulnerable to external shocks due to its reliance on a single commodity. This situation exhibits characteristics of the ‘resource curse,’ where resource wealth can lead to volatile economic cycles, inflationary pressures, and exchange rate instability. Historically, South Sudan adopted a fixed exchange rate regime following its independence in 2011 to stabilize the South Sudanese Pound (SSP). However, this approach led to significant distortions, particularly during periods of falling global oil prices. In 2015, the country moved toward a more flexible regime, officially adopting a managed float in response to market pressures. Despite this, challenges remain, as misalignments between the official and parallel market rates continue to create economic instability. Between 2017 and 2020, the exchange rate saw some stabilization, but the COVID-19 pandemic and a decline in oil revenues caused further depreciation and inflation. As part of the IMF Staff Monitored Program (SMP) approved on March 30, 2021, foreign exchange reforms were introduced to liberalize FX markets and eliminate distortions between parallel and official exchange rates. The reforms included opening FX auctions to banks, allowing commercial banks to trade FX at market rates, and aligning the official exchange rate with market rates. By mid-August, these changes led to the convergence of exchange rates and the adoption of a market-based reference rate instead of the official rate. This resulted in a significant appreciation of the parallel market exchange rate and narrowing of the premium, helping reduce inflation by December 2023. The government committed to a market-determined exchange rate and stopping fiscal deficit monetization. The BoSS improved the FX auction system, aligned bank reference rates with market rates, and introduced the Term Deposit Facility (TDF) for commercial banks, extending tenors up to 336 days by September 2023. Several resource-rich, fragile countries have faced similar dilemmas and offer valuable lessons for South Sudan. Angola, for instance, initially adopted a fixed exchange rate to stabilize its currency amid volatile oil prices. However, this approach eventually led to economic distortions, pushing the country to shift toward a more flexible regime. Similarly, Botswana’s experience with a managed float exchange rate system demonstrates how flexibility, combined with strong institutional frameworks, can help buffer external shocks and promote economic resilience. Timor-Leste’s focus on strengthening institutions further highlights the importance of governance in ensuring successful exchange rate management. These international experiences suggest that South Sudan could benefit from transitioning to a managed float exchange rate regime, allowing the currency to adjust naturally to market forces while maintaining some central bank intervention to curb excessive volatility. Managing these dynamics is crucial to South Sudan’s economic stability, but weak governance and institutional capacity exacerbate the challenges. South Sudan is ranked at the bottom of Transparency International’s 2024 Corruption Perceptions Index; placed 180th out of 180 countries ranked. Without broader institutional reforms even the most effective monetary policies are unlikely to achieve lasting stability, which reflects a pressing need for governance reforms to reduce corruption and improve public financial management. 1.1.7 Fiscal Policy: Disorderly Adjustment has Squeezed Social and Pro-growth Capital Spending Fiscal policy remains highly procyclical, with no buffers against oil revenue volatility. Oil revenues have historically accounted for nearly 90 percent of government revenues and contribute to the volatility in public finances. Despite a legal fiscal framework that provides for both a stabilization and future generations fund, these have not been fully operationalized. Weak coordination between monetary and fiscal policy has historically underpinned macroeconomic imbalances and macroeconomic stability risks. While there were substantive improvements under the IMF program that lasted from February 2023 to November 2024, these challenges have come to the fore with the recent oil production shock. The budget deficit expanded significantly in FY24, driven by the loss in oil revenues in the second half of the year. Spending on security and infrastructure continues to absorb about one-third of overall spending, amounting to nearly 10 percent of GDP. The FY23/24 budget planned to increase civil service salaries by 400 percent, raise capital expenditure to 21 percent of the total expenditures, and reduce the deficit to 4.6 percent of GDP (Table 5). Oil revenues had already declined by 5 percentage points of GDP in FY23/24 despite performing well in the first half of the fiscal year, plunging since the shutdown of the BAPCO oil pipeline in February 2024. In nominal terms, both expenditures and revenues exceeded the 14 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis budgeted amounts due to high inflation and exchange rate depreciation. The preliminary outturn suggests the deficit widened, estimated at 6.5 percent of GDP. Non-oil revenues performed relatively well, supported by reforms in tax administration and the significant adjustment in the customs valuation exchange rate. The government continued its efforts to strengthen non-oil revenue mobilization by broadening the tax base, reducing tax exemptions, and increasing the customs valuation exchange rate from SSP 90 to SSP 300 per US$ in November 2023. It also continued PFM reforms and efforts to digitalize – modernizing the tax collection system using scanners. Nevertheless, non-oil revenues increased slightly as a share of the estimated GDP in FY24 compared to FY23, partly due to a rise in customs revenue following the change in the exchange rate applicable. Meanwhile, the share of personal income tax (PIT) collections decreased, linked to a significant build-up in salary arrears. The South Sudan Revenue Administration (SSRA) has implemented reforms within the SSRA that have notably increased non-oil revenue collection from 2.6 percent in FY21/22 to 4.4 percent of GDP in FY23/24. However, further reforms are necessary for continued progress. The tax administration system in South Sudan has traditionally been manual, creating significant compliance challenges for taxpayers. The SSRA launched an eTax portal in June 2021. This platform allows taxpayers to file returns, remit payments, and access various tax services, including applying for tax compliance certificates and registering Taxpayer Identification Numbers (TINs). Despite these advancements, there are concerns about the long-term sustainability of the information system, which is currently managed by an external vendor. The lack of fiscal buffers and alternative financing sources has forced a disorderly fiscal adjustment. Spending has been further exacerbated by spillovers from the conflict in Sudan and the large refugee inflows. The liquidity squeeze resulted in large salary arrears and cuts to both operating expenditures and capital spending. Salary arrears currently exceed 10 months, or close to 6 percent of GDP as of January 2025. Operating and capital expenditures have almost halved as a share of GDP in FY24, with the latter dropping by more than 4 percentage points of GDP. Priority was given to the Oil for Roads infrastructure scheme which accounted for a quarter of the total budget envelope and an estimated 4.7 percent of GDP. While the execution rate of the scheme reached 87 percent, there has been limited progress in construction of roads which raised questions by limited audits conducted. Transfers to Sudan – which include transit, transportation, and processing fees – declined markedly, providing some respite. There is however a large amount of unallocated expenditure which can still significantly change the composition of spending once allocated. The authorities have committed to stay current on salary payments starting in October 2024, and, once oil production resumes, to pay every month an additional month of salary arrears to move towards clearing these. While debt remains sustainable, the large oil production shock has further increased the risks to debt distress for both external and overall public debt. The oil production shock has heightened the urgency of improving debt management, which has several shortcomings. South Sudan’s debt position remains assessed as sustainable but with a high risk of debt distress for both external and overall public debt. Due to lack of transparency on debt statistics and reliance on oil backed loans, it is difficult to estimate the overall amount of debt in South Sudan. The latest joint IMF-World Bank Debt Sustainability Analysis update (June 2024) estimated total public debt at US$3,722.9 million (51.2 percent of GDP) as of June 2023, with external public debt accounting for two-thirds of the total (34.8 percent of GDP).15 More than 40 percent of the external debt has been contracted at a high cost from commercial creditors (US$1,090 million), with a short maturity. External debt service is significant, amounting to 6.7 percent of GDP in FY23/24. 15 Domestic debt is mostly owed to the Central Bank. 15 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table 5. Budget outturns FY23/24 2022/23 2023/24 2023/24 Billions SSP Actuals Budget Preliminary Total revenue and grants 1,796 1,782 2133.4 Oil revenue 1578.1 1536.5 1894.9 Tax and non-tax revenue 217.6 245.3 238.5 Grants 0 0 0.0 Total expenditure 1,612.4 1,783.9 2656.4 Ministries, Departments, Agencies recurrent 551.3 1,062.5 511.8 expenditure Wages and salaries 166.1 426.9 211.7 Operating expenses 300.2 489.0 203.0 Transfers and grants 62.0 141.9 95.2 Other expenses 23.0 4.6 1.9 Mandatory recurrent expenditure 557.7 179.6 337.9 Transfer to Sudan (tariff, transportation and 445.5 228.2 processing) Transfer to oil prod. States (2%) 17.6 30.8 27.4 Transfer to oil prod. Comm. (3%) 25.4 46.2 41.2 Payment to future gen. fund 8.6 Transfer to Ministry of Petroleum (3%) 25.4 46.2 41.2 Interest payments 18.1 56.6 0.0 10% National Revenue Authority Gross non-oil revenue 17.1 0.0 Capital expenditure 503.4 541.8 402.5 Oil for Roads projects 462 435.7 377.9 Other projects (Capital) 41.4 106.2 24.6 Unallocated payments     1404.2 Source: MoFP. Note: Unallocated payments include transactions not yet classified and pending verification. Limited debt transparency, weak debt management, and recourse to oil-backed loans remain significant sources of risk. The oil production shock coupled with the country’s weak debt-carrying capacity, weak debt management, and deteriorating global conditions escalated the downside risks for debt sustainability. Additionally, the conflicts in Ukraine and the Middle East adversely impacted the flow of international aid as donors reallocated funds, while the risks of lower US aid flows have intensified. Lower risk appetite and tighter financing conditions could make more difficult the closing of the external financing gap, even on non-concessional terms. 16 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Box 2. Fiscal Consolidation Under Uncertainty – South Sudan’s Budget for FY24/25 The FY2024/25 budget was formulated under a period of heightened uncertainty regarding the resumption in oil production. The budget was approved with a very large financing gap of 11.7 percent of GDP, expected to be partly filled once the DPOC oil production resumes. Oil revenues are 40 percent less than the FY23/24 preliminary execution, while non-oil revenues are expected to increase to nearly 6.8 percent of GDP, supported by strengthened tax administration and collection efforts, an increased tax base, and higher customs valuation exchange rates. The budget assumes a real GDP growth of 6.8 percent, average inflation rate of 58 percent, exchange rate of SSP 2527 per US$, and crude oil prices averaging at US$79. Once the Dar Blend oil production resumes, the government projects it can generate SSP 1.7 trillion (45,000 bpd). The remaining balance is planned to be covered by the gains from realigning the exchange rate to the market rate. To rebuild fiscal space, the approved budget seeks to rationalize expenditures, eliminate off-budget expenditure, and prioritize essential spending. Recurrent expenditures account for 74 percent of the spending envelope, up from the FY2023/24 budget allocation of 59 percent, with wages and salaries representing 36 percent of total spending, up from 24 percent in FY23/24 (Table A.4). Expenditures are restrained to allow for salary arrears clearance. Meanwhile capital expenditures represent only 11.8 percent, less than half of the FY23/24 allocation. Mandatory expenditures – including payments to oil transit and pipeline fees to Sudan, transfers to oil producing states and communities, and debt service payments – constitute 14 percent of the spending envelope. There is no allocation for oil for roads program. The newly established Public Procurement and Disposal Assets Authority (PPDAA) is considered as one of the mechanisms to ensure fiscal discipline and curb illicit contracts from all spending agencies that constitute the large share in the off-budget expenditures and weaken the budget execution performance. Already inadequately low, critical social spending continues to be squeezed. Education was allocated 5.4 percent of total budget, down from 7.8 percent in FY2023/24 while the health sector is allocated 1.3 percent, lower than the 1.9 percent allocation in FY2023/24 (Table A.3). The education and health sector allocations were cut by half to 1.4 percent and 0.3 percent of GDP, respectively. The social and humanitarian affairs budget has increased to 4.5 percent of the total budget (US$63 million) from less than 0.5 percent (US$9 million) in FY2023/24, due to the newly added allocation to the humanitarian and emergency fund that received SSP 173 billion (US$58.9 million). Security, rule of law, and public administration account for 25 percent of the total budget. Non-oil revenue mobilization efforts continue in FY24/25 benefiting from previous reforms and additional policy measures. Non-oil revenues will be supported by the reforms introduced in FY2023/24, with FY2024/25 being the first year of full implementation of these measures. The FY2024/25 Financial Act introduces changes to the Business Profit Tax, the withholding tax, excise tax, and customs duties among others. The budget envisions a ten-fold increase in customs duties, as the valuation exchange rate is adjusted from SSP 300 to the Bank of South Sudan daily reference rate. The budget reintroduces an advance payment of business profit tax (BPT) of 4 percent and a 30 percent tax on income from real estate rental incomes, while also doubling the advance BPT on most sole proprietors with no audited financial statements. Withholding taxes on ancillary services to rent have been introduced, as well as a 10 percent withholding tax on mobile money commissions, while the withholding tax for government contract payments have been increased by 15 percentage points. While the government has taken some steps to improve transparency, debt reporting remains weak. The government completed an external debt stocktaking exercise in 2022 and has introduced some institutional changes in debt management, elevating the debt management unit to a department. However, considerable challenges linked to governance, macro policy coordination, the development of a debt strategy, and borrowing discipline remain. The World Bank’s assessment of debt transparency shows that South Sudan debt reporting remains weak in all aspects, including the availability, completeness, and timeliness of public debt statistics and debt management documents posted on national authorities’ websites.16 16 https://www.worldbank.org/en/topic/debt/brief/debt-transparency-report/2023 17 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 20. Fiscal aggregates, billion SSP Figure 21. South Sudan non-oil revenue 5000 300 5 4000 Revenues Spending 250 Billon SSP 4 Percent of GDP 3000 200 Billon SSP 3 2000 150 2 1000 100 0 50 1 2023/24 2024/25 2022/23 2021/22 2019/20 2020/21 0 0 Budget 2019/20 2020/21 2021/22 2022/23 2023/24 Non-Oil Revenue Non-Oil Revenue to GDP (%) Source: MoFP. Source: MoFP. Figure 22. FY24 Q2 budget execution and quarterly threshold 100 80 60 40 20 0 Source: MoFP. 1.2 Medium-term Outlook and Policy Options The economy has been hit hard by the DPOC oil pipeline shutdown, yet establishing macroeconomic stability and laying the foundations for growth will require more than a mere resumption of oil production, given the longer-term declining trend in peak oil production levels. A business-as-usual or baseline pathway suggests the losses in real GDP in FY24/25 will barely be recovered by the end of FY27, and the country will continue to struggle in delivering public services for its people and reducing vulnerability. In contrast, under a reform pathway, South Sudan can position itself on a sustainable growth path by a full commitment to policy and institutional reforms. Under both pathways constructed for the purposes of this Economic Update, the two common underlying assumptions are: (i) the DPOC oil pipeline starts flowing by the end of FY25; and (ii) there are no further disruptions to oil production on the forecast horizon. This section discusses these two pathways, as well as the downside risks to the baseline, where oil resumption is further delayed. 1.2.1 Business-as-usual Pathway: A Sluggish Recovery with Significant Downside Risks In the business-as-usual or baseline scenario, policy credibility is not established, monetary policy continues to fall short of stabilizing the economy, and fiscal policy remains unsupportive of growth and poverty reduction. Moreover, uncertainty due to the stalled political transition since the 2018 peace agreement and repeated postponement of elections continues to weigh on investor sentiment. In the medium to long term, domestic vulnerabilities arising from persistent weak governance around the management of oil revenues and limited public sector capacity will continue to constrain South Sudan’s growth potential.17 17 An example of lack of transparency in oil revenue management relates to the construction of the Juba-Bor Malakal highway in the context of the Oil for Roads scheme. ARC Resources received upfront financing for the project that has not been reflected in the Ministry of Finance and Planning budget figures for part of the three-year US$1.04 billion project for the construction of the highway. This was a single sourced bidding that was not publicized. Similarly in February 2022 a separate oil-backed contract was awarded without a competitive tender. 18 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 23. Real GDP growth 60.0 53.7 54.5 50.0 40.0 30.0 20.0 10.0 0.6 2.3 0.0 -10.0 -1.3 -7.2 -20.0 -30.0 -40.0 -30.2 FY2023 FY2024 FY2025 FY2026 FY2027 Baseline Business Unusual Source: World Bank staff estimates. The sharp decline in oil production caused by the shutdown of the DPOC oil pipeline is expected to deepen South Sudan’s economic crisis in FY24/25, with the economy projected to contract by 30 percent. The FY24/25 recession will mark the fifth consecutive year of negative growth, with a cumulative loss in economic activity of nearly 41 percent. As a result, in FY25, GDP per capita is projected to decline to approximately half of its level in FY20. Even with the recently announced lifting of the force majeure on oil transportation, the expectations are that resumption in oil flows through the main DPOC oil export pipeline will take time and will be slow. Accordingly, although the Ministry of Petroleum has called for a swift resumption of the DPOC oil production to bring output to 90,000 bpd within six months following the lifting of the force majeure on the BAPCO oil pipeline, the baseline projection in the SSEM is for oil production to average 66,000 bpd this fiscal year, less than 50 percent of the level recorded in 2023. Much-needed investment and maintenance of oil assets are expected to remain depressed, affected by the prolonged conflict in Sudan and the exit of Petronas International Corporation. Legal uncertainties stemming from Petronas’ request for arbitration to International Centre for Settlement of Investment Disputes (ICSID) against the Government of South Sudan regarding the takeover of its assets by the state- owned Nilepet are expected to further delay the recovery in oil production, due to the additional uncertainty regarding the future of oil asset management that may dissuade potential investors. Moreover, with several oil block agreements scheduled to expire in 2027, uncertainties surrounding oil asset management will continue and are expected to weigh on investment in the sector. The non-oil economy is expected to contract by 5.7 percent in FY24/25, affected by spillovers from the oil sector and heightened macroeconomic uncertainty, as well as recurring floods and continued localized conflict. Recurrent floods are expected to continue to impact crop production, damage infrastructure, and affect over one million people in multiple regions of the country, including through displacement. Food insecurity, conflict disruptions, and deteriorating health conditions combined will likely continue to reduce productivity and growth in non-oil sectors. More broadly, private investment is likely to remain subdued in the absence of a concerted shift in the policy stance. The overall security situation is expected to remain volatile and will continue to act as an important deterrent of private investment, both domestic and foreign. The extension of the transitional period for an additional two years until February 2027, and postponement of elections to December 2026, has created further uncertainty about the timely and full implementation of the 2018 peace agreement. 19 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Figure 24. Oil production by Joint Operating Company Thousand barrels per day 400 350 300 250 200 150 100 50 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 GPOC SPOC DPOC Source: Ministry of Petroleum, WB staff estimates Unless macroeconomic management improves to effectively control inflation and the fiscal deficit, economic recovery will be muted under a business-as-usual approach, leading to further increases in poverty. For the purposes of projections in this section, it is assumed that DPOC oil production resumes in March 2025 and increases gradually to reach 90,000 bpd by the end of the FY25. Accordingly, growth is projected to rebound strongly in FY26, due to the first full year of DPOC oil production. GDP is expected to stabilize as oil production flattens. However, this is insufficient to close the gap with 2020 GDP levels. Oil output is anticipated to remain below 140,000 bpd, reflecting the structural decline in oil production since 2012 (Figure 24) linked to the maturing of some oil fields and lack of adequate maintenance and investments. Poverty rate would continue to increase under a business as usual path. It is projected that poverty will reach a striking 99.8 percent in 2025 from an estimated 92 percent in 2024. A partial recovery in non-oil industries and services, such as agriculture, could modestly support growth. Non-oil economic activity is projected to contribute a modest 1.9 percentage points to growth over FY26 and FY27. This will be supported by increased agriculture output – notwithstanding continued disruption from floods and conflict, as well as inadequate infrastructure and market access – as many returnees and migrants are expected to boost labor supply in the agriculture sector. While torrential rains in August 2024 and the overflow of the Nile River and its tributaries caused widespread flooding and substantial crop losses in Unity, Warrap, Lakes, and Jonglei states, above average rainfall in October and December 2024 in southern bimodal production areas is expected to benefit yields of second season crops, to be harvested in early 2025 (FAO, 2024b). At the same time, the services sector will support growth, benefitting from the oil sector’s recovery. Easing inflation and increased public spending, including the gradual clearance of public wage arrears, are also expected to support a recovery in domestic demand. Fiscal pressures are expected to remain high in the near term and public financing needs are large. Public finances continue to rely heavily on oil revenues, which collapsed in FY24/25 due to the halt in DPOC oil production resulting in an estimated fiscal deficit of 3 percent of GDP. While the government committed to clearing public wage bill arrears, the limited fiscal space will make this challenging in the very short term. Beyond this recent exogenous shock, weaknesses in the governance of the oil sector, with a lack of transparency and accountability, and reports of corruption and misuse of revenue,18 severely undermine fiscal sustainability and public financial management. While the legal framework for the Oil Stabilization Fund and the Future Generation Fund is in place, they are not operational, limiting the ability of the government to implement counter-cyclical fiscal policies and ensure intergenerational equity. 18 South Sudan ranks consistently low across international governance indicators such as Transparency International’s CPI (180/180 in 2024) and Ibrahim Index of African Governance (54/54 in 2023). The World Bank’s 2022 Country Economic Memorandum states “In the past, nontransparent oil advances, oil-backed loans, and off-budget transactions have often undermined the country’s fiscal discipline and budgetary integrity, and have led to extensive corruption, and to loss of credibility with the international community.” 19 IMF estimates show a 1-to-1 passthrough from the parallel exchange rate variations to food and fuel inflation within six months (IMF Country Report No. 24/160, Annex II). 20 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Moreover, historically, the use of oil revenues for diversification has been limited. In the medium term, fiscal pressures are expected to remain substantial given sizable debt-service obligations on debt that has been contracted on mostly non-concessional terms, and the need to clear legacy arrears and increase social and humanitarian expenditures. Inflation is expected to remain elevated, albeit easing from the triple-digit rate expected in FY25, as the monetization of the budget deficit is expected to continue and as supply constraints persist. The recent oil supply shock which led to high levels of monetization of the deficit – coupled with supply constraints due to declining imports from Uganda, disruptions from flooding, and conflict and insecurity – continues to generate inflationary pressures. Lower currency depreciation, due to increased oil-related supply of foreign currency starting with the second half of FY25, will help the disinflation process, given the high passthrough from the parallel exchange rate to inflation. Despite this, inflation is expected to remain in double-digits in FY25/26, before easing as the fiscal situation improves and the monetization of fiscal deficits declines further.19 Higher agricultural production and improved security along trade routes is expected to support the disinflation process, although high inflation, insufficient food supplies, and the lingering impact of consecutive years of widespread floods and episodes of intercommunal violence will continue to fuel inflation pressures. The collapse in oil exports and their slow recovery will continue to exacerbate external imbalances. The disruption in the main oil pipeline, which accounts for 70 percent of export capacity, is expected to cause a sharp deterioration in external balances in FY25, with the current account expected to deteriorate by nearly 10 percentage points of GDP to a 5.4 percent of GDP deficit. Low export revenues will continue to affect the supply of foreign exchange, contributing to depreciation and inflation given the high passthrough, especially to food and fuel prices. External imbalances are projected to remain very large even as oil production recovers, given dependency on external aid representing between a fifth and a quarter of its GDP. Debt sustainability risks remain high. South Sudan’s total public debt was estimated at US$3.72 billion (51.2 percent of GDP) as of June 2023, with external public debt representing about two-thirds of the total (IMF/WB, 2024). Its debt position remains assessed as sustainable but with a high risk of debt distress for both external and overall public debt. Downside risks are substantial because of the country’s weak debt-carrying capacity and debt management, combined with formidable macroeconomic challenges since February 2024. With the tightening of global financial conditions, and declining international aid, external financing challenges remain significant. Yet, obtaining external non-concessional financing would further burden debt dynamics, particularly if not channeled to growth-enhancing sectors and investments. This highlights the urgent need to strengthen debt management and transparency, and put in place a regulatory framework to limit the contracting new oil-backed loans. Figure 25. Long-term pathways of real GDP per capita 1500 1400 1300 Millions SSP of 2009 1200 1100 1000 900 800 700 600 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 FY2031 FY2032 FY2033 FY2024 FY2035 Gradual Return to FY2020 GDP per capita Business as Usual Source: WB staff estimates. There are significant downside risks to the baseline. A major risk stems from a delayed and slower- 21 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis than-anticipated recovery in DPOC oil production. Oil production potential after the 2012 shutdown has almost halved, and without proper maintenance the current restart in DPOC operations could entail another significant reduction in its potential. In a downside scenario simulation it is assumed that the maximum capacity for DPOC oil production is half of the pre-shutdown level and oil production resumption is delayed to January 2026. This would substantially impact GDP growth, with a deeper contraction in FY25 of 38 percent and only a modest recovery in FY26 (9.4 percent). Prolonged loss of oil proceeds would put pressure on the budget and external balances. Moreover, a delay in the end to the conflict in neighboring Sudan would also lead to additional refugees crossing the border to South Sudan, further worsening food insecurity and putting pressure on already weak public services. Additionally, a global economic shock that depresses global oil prices would constrain recovery and add to fiscal pressures. Climate shocks, such as flooding, could undermine agricultural output and drive inflation. Furthermore, escalating conflict would disrupt economic activities, hinder transportation and commerce, and impact growth. Finally, potential reductions in US Government development and humanitarian support globally may have material consequences, as South Sudan is a large recipient of aid. 1.2.2 Reform Pathway: Key Policies for Macroeconomic Stability A reform pathway entailing bold measures in the short-term to reduce inflation and address fiscal pressures, aligned with the government’s policy commitments in the R-ARCSS, would lead to improved macroeconomic policy framework, more transparent fiscal policy, and a commitment to sustained structural reform efforts. Managing the macroeconomic crisis requires urgent action by the authorities to address severe macroeconomic imbalances. Addressing the economic crisis and jump-starting the economy requires strong and well-coordinated monetary and fiscal policies. A reform pathway, which includes structural and sectoral policy measures, would provide for a much greater likelihood that the country moves towards a sustainable and inclusive development path (Table 6). In the long-term, assuming a growth rate of 5 percent under a reform pathway, real GDP per capita would return to its 2020 level by 2035. Under the assumption of a 0.7 percent growth, the average of the five years prior to the oil pipeline shutdown, or business-as-usual, with stalling reforms, real GDP per capita is set to decline by 30 percent with respect to FY20. For illustrative purposes, Figure 25 presents these two hypothetical long-term growth pathways. Table 6. Outlook for key indicators in alternative pathways Business-as-usual   Reform Key economic indicators FY25  FY26 FY27 FY25 FY26 FY27 Real GDP growth -30.2 53.7 0.6 -30.2 54.5 2.3 Inflation 177.9 29.9 4.9 177.9 27.3 4.5 Fiscal balance (% of GDP) -3.0 -2.1 -1.7 -3.0 -1.9 0.6 Current account balance (% of GDP) -5.2 3.6 3.7   -5.2 -1.3 -1.5 Source: World Bank staff estimations.Note: Unallocated payments include transactions not yet classified and pending verification. The reform pathway illustrates the potential gains of macroeconomic stability. Such a reform program comprises robust macroeconomic and fiscal measures, policy and institutional reforms, collaboration among stakeholders, and targeted interventions to address the underlying causes of economic instability and poverty. The transition to the ‘reform’ pathway will require balancing fiscal and external pressures with stabilization measures. It is worth noting that the government’s policy priorities include clearing arrears, funding social sectors, and supporting economic diversification. 22 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis For the purposes of this report, policy options for the short to medium term cover those that are critical for establishing macroeconomic stability and jump-starting growth. These are grouped under two pillars and are presented in detail in Table 7: 1. Reducing inflation: Macroeconomic and price stabilization are key steps in breaking the cycle of economic decline and spiraling poverty in South Sudan. This requires enhanced exchange rate flexibility and the phasing out of monetary financing of fiscal deficits. These will mitigate inflationary pressures, which have been intensified by currency depreciation and supply chain disruptions. 2. Addressing fiscal pressures: There is an urgent need to improve the management of oil revenues, by improving transparency, including the Oil for Roads scheme. Recovery in oil revenues will provide an opportunity to phase out monetization of the deficit and support more inclusive and sustainable growth by channeling these funds into high return investments and the provision of key public services. In the medium term, operationalizing legal frameworks and using the Oil Stabilization Fund to facilitate counter-cyclical fiscal policy is crucial. Measures to boost non-oil revenues should continue, alongside investments in pipeline maintenance to recover oil production to FY23 levels. Expenditure for social sectors and food security should be prioritized, as well as clearing the salary arrears. Additionally, refraining from contracting non-concessional debt and introducing clear regulations on contracting and limiting oil-backed loans will help maintain fiscal stability. In the medium to long term, key structural and sectoral policies need to complement these macroeconomic and fiscal policies for South Sudan to realize its full development potential. Controlling inflation through macroeconomic stabilization will start alleviating the burden on people, facilitating the move to a sustainable and inclusive growth path, which would require a strong multi-pronged reform agenda consisting of strengthening institutions, economic diversification, investing in human capital, and building resilience. The stakes for South Sudan have never been higher. The path to recovery is fraught with challenges, but the opportunity to transform the nation’s future is within reach. It is imperative that the authorities act decisively and swiftly to implement the necessary reforms. This requires urgent follow through on reform commitments under the R-ARCSS to stabilize the economy, ensure inclusive growth, and lift millions out of poverty. The next section provides a detailed discussion on the trends and features of poverty in South Sudan and offers policy options to address the high and rising levels of poverty. 23 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table 7. Policy options Policy options for the next 6 months Policy options for the next 6–18 months Reducing inflation • Increase exchange rate flexibility and curtail • Undertake supply side reforms to improve business monetary financing of the deficit to alleviate environment, increase agricultural productivity, and pressure on the exchange rate and unify expand supply capacity of the economy (for a more official and parallel rates extensive discussion, see World Bank Country Economic Memorandum, 2022) • Resume and implement a transparent policy of foreign exchange auctions to mop up excess liquidity in the market and to allocate FX to the highest bidders • Streamline import taxes and entry fees for food imports • Remove checkpoints and multiple taxes along trade routes that escalate price of goods • Strengthen supervision of commercial banks and their use of foreign exchange Addressing fiscal pressures  • Increase exchange rate flexibility and curtail • Improve oil revenue management and transparency: monetary financing of the deficit to alleviate pressure on the exchange rate and unify - Operationalize the existing legal framework by official and parallel rates implementing policies and guidelines for developing and managing the petroleum and gas sector • Resume and implement a transparent policy of foreign exchange auctions to mop up - Fulfill audit requirements of Nilepet, consistent with excess liquidity in the market and to allocate the R-ARCSS provision on the audit of the petroleum FX to the highest bidders sector • Streamline import taxes and entry fees for - Projects should follow the Public Procurement and food imports Disposal of Assets Act to ensure value for money through open and transparent, competitive bidding • Remove checkpoints and multiple taxes along trade routes that escalate price of goods - Operationalize the use of the Future Generations Fund and the Oil Stabilization Fund • Strengthen supervision of commercial banks and their use of foreign exchange - Regulate the downstream sector (refining, exporting, and product pricing) - Publicly disclose all commitments involving crude oil and information on contracts and invoices for oil for roads scheme - Ensure that licensees, contractors, and subcontractors disclose information on all payments, monetary or in kind, in connection with petroleum activities annually - Carry out rigorous cost-benefit analyses for future contracts • Further strengthen non-oil revenue collection. Build on the last two years’ efforts to improve tax administration and modernization of tax collections, broaden the tax base, improve customs administration, align the customs valuation rate with the market- determined exchange rate, rationalize exemptions, increase capacity and coordination of revenue management, and integrate eTax portal with IFMIS 24 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Addressing fiscal pressures • Strengthen public investment management to ensure a clear prioritization of spending away from capital investments without clear economic returns towards productive sectors • Rationalize the wage bill and simplify the payroll. Complete the review of the workforce and identify ‘ghost’ workers in the government payroll • Improve fiscal discipline and adopt counter-cyclical fiscal policy to contain expenditures within the revenue envelope: - Ensure budget credibility and discipline, executing the budget as approved by the National Legislative Assembly and avoiding discretionary overspending - Contain oil driven expenditures through fiscal rules that limit procyclical spending - Use supplementary budgets, subject to approval by the assembly, to finance any unbudgeted extra expenditure needs that emerge over the budget period • Fully implement the revised PFM Act through completing consolidation of government accounts into a Single Treasury Account, improved comprehensiveness of the annual budget, clarifying the role of the internal audit, and constraining overspending 25 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis PART 2 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis PART 2: SPECIAL FOCUS: POVERTY TRENDS AND FEATURES Since gaining independence in 2011, South Sudan has faced a severe economic downturn and widespread poverty, exacerbated by the recent oil shock and floods. Over the 2011–2022 period, South Sudan’s economic output has declined by 7.2 percent annually on a per capita basis, while household living standards have sharply deteriorated. Sustained conflict, natural disasters, and macroeconomic shocks linked to the overwhelming dependence on oil revenues have depleted the coping capacity and incomes of the population. The latest poverty estimates indicate that in 2022, poverty was endemic with nearly 8 in 10 South Sudanese living in poverty, and 7 in 10 living in extreme poverty.20 In the near absence of public service delivery, multidimensional poverty is exceptionally high, with 93 percent of the population experiencing deprivation in education, access to services, asset ownership, and quality housing. The sharp reduction in oil revenues and an influx of refugees and returnees due to the war in Sudan led to an economic and humanitarian crisis, as described in Part I. In addition, 2024 saw the biggest floods in South Sudan’s post-independence history, affecting over one million people and displacing over one- third of those affected.22 Against this backdrop, it is estimated that poverty has further increased to 92 percent in 2024.23 In tandem with the increase in poverty, food insecurity in South Sudan has worsened significantly. Nearly three-quarters of the population experienced moderate or severe food insecurity in 2022 (Section 1.2.2). The alarmingly high and increasing poverty rates warrant a deeper understanding of its defining features and root causes. As a result, Part II of this South Sudan Economic Monitor focuses on poverty. It draws on the 2022 Household Budget Survey (HBS) – the most recent survey of living conditions of the South Sudanese population – to estimate the extent, depth, and profile of poverty and deprivation in the country, and compares this with the situation in 2016, when the preceding survey was conducted. While this analysis is largely backward-looking, focusing on the main trends between 2016 and 2022, its findings can inform policy priorities to effectively support living conditions of the population in the current turbulent times and beyond. 20 In2022, 67.3 percent of the population is living on less than SSP 298,478 a year, the national food poverty line. 21 The multidimensional poverty index consists of a composite index constructed by weighing several poverty indicators characterizing a range of deprivation in four dimensions, namely, monetary poverty, health, education, and living conditions. 22 OCHA November 8 situation update. https://www.unocha.org/publications/report/south-sudan/south-sudan-floods-snapshot-8-november-2024 23 The 2024 poverty estimate is based on micro-simulation. See Annex 3 for methodological details. 27 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis 2.1 Poverty in South Sudan: A Grim Picture In 2022, over three-quarters of the South Sudanese population (76 percent) lived below the national poverty line. This represents an increase of seven percentage points since 2016, reflecting continued economic contraction and instability and pervasive insecurity. Per capita GDP growth averaged -5.5 percent between 2016 and 2022, reducing household incomes and economic opportunities, while average consumer prices were 60 times higher in 2022 as compared to 2016, eroding households’ purchasing power. Conflict and insecurity continued to adversely affect households through high rates of displacement and the prioritization of low-risk low-return economic activities. As a result – next to being ubiquitous – poverty in South Sudan is severe; the poverty gap stood at 43 percent in 2022, meaning that the average consumption level of poor households is 43 percent below the poverty line. Box 3. Measuring and Comparing Poverty in South Sudan Measuring poverty requires two ingredients: (i) a welfare indicator; and (ii) a poverty line to which the welfare indicator is compared to gauge whether an individual or a household is deemed poor or non-poor. For South Sudan, the 2022 poverty numbers are computed using the 2022 household survey data, the most recent comprehensive data on household living standards. In a first step, total household consumption expenditures per capita were calculated, including all expenditures on food (including own-consumption and gifts) and non- food (education, health, clothing, housing, etc.). In a second step, the poverty line was estimated using the cost- of-basic-needs (CBN) approach developed by Ravallion (1998). This approach measures the cost of meeting basic food and non-food needs. The CBN approach has two poverty lines: (i) the food poverty line, and (ii) the non-food poverty line. Overall, the national poverty line (combining food and non-food needs) was estimated to be SSP 358,724 per person per year in 2022 prices, which corresponds to approximately US$1.5 per adult per day using the average official exchange rate for 2022. Households with total per capita expenditures below the poverty line are deemed poor. Households with total per capita expenditures below the food poverty line are deemed extreme poor. Tracking poverty over time in South Sudan is complicated by the lack of successive nationally representative household budget surveys. Before the South Sudan Household Budget Survey of 2022, the only household survey since independence was the High-Frequency Survey (HFS) series, which collected four waves of data between 2016 and 2017. Wave 3 of the HFS has the most complete data but covers only seven out of ten states. As a result, when poverty is compared over time in this report, the focus is on the seven states for which there is data both in 2016/17 and 2022. For further details on the construction of the consumption aggregate, poverty lines, and poverty trends analysis, see the South Sudan Poverty Assessment (World Bank, 2024). Figure 26. Poverty by geographic unit, 2016–2022 80.8 82.7 74.1 75.4 70.2 72.6 64.9 66 66.1 67.8 54.7 51.6 All Urban Rural All Urban Rural (7 states) (7 states) Poverty Extreme Poverty 2016/17 2022 Source: WB staff estimates based on 2022 HBS and 2016/17 HFS. The increase in poverty between 2016 and 2022 was widespread. All seven states that were covered in the 2016 survey experienced an increase in poverty. Overall, average household consumption expenditures decreased by 15 percent during the considered period (2016–2022). The poverty increase was driven by rural areas, where the poverty rates increased from 75 percent in 2016 to 83 percent by 2022 (Figure 26). Poverty among urban households, in contrast, remained largely flat at around 65 percent. The 28 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis incidence of extreme deprivation rose too, with the extreme poverty rate (defined as households whose total expenditures do not cover basic food needs) increasing four percentage points to 70 percent in 2022. Extreme poverty however slightly decreased in urban areas. At the national level, household welfare declined across the income distribution, suggesting that impoverishment was widespread among South Sudanese households. Skyrocketing inflation, combined with conflict and multiple other shocks, contributed to a significant erosion in households’ purchasing power during the 2016–2022 period. Figure 27 shows the ‘growth incidence curve’, which displays growth in household consumption for every percentile of the income distribution between 2016 and 2022. Overall, in the seven states, the curves are below the zero line and trending downward, indicating that household consumption fell across the welfare distribution and more for households that are somewhat better-off. Urban areas provided a rare bright spot, experiencing mostly positive growth in household consumption between 2016 and 2022, and especially for low-income urban households. Refugees living in South Sudan, whose numbers have sharply increased following the start of the war in Sudan, generally share the low standards of living of their hosts (Box 4). Figure 27. Annual mean household consumption growth by percentile, 2016–2022 Growth Incidence Curves 10 Annual growth rates 5 0 -5 -10 0 .2 .4 .6 .8 1 Percentiles National Urban Rural Source: WB staff estimates based on 2022 HBS and 2016/17 HFS. Box 4. Refugees and Hosts: A Tale of Shared Struggle South Sudan has hosted refugees ever since it established itself as a sovereign nation in 2011. Most of these refugees come from Sudan, where people have been forced to flee due to local conflicts that escalated dramatically in April 2023. The number of refugees hosted by South Sudan increased from 275,000 in early 2023, prior to the war in Sudan, to over one million as of January 2025, of which 76 percent are South Sudanese returnees, spread across 30 locations in the country. The refugee influx has added to the already challenging situation in South Sudan, marked by disrupted supply routes and oil exports due to the crisis in Sudan, sharp currency depreciation, and a general weakening of the economy. Prices of essentials including food have skyrocketed, limiting available resources in host communities and making it extremely challenging to integrate new arrivals. In a heavily resource-constrained environment, both refugees and host communities struggle to make ends meet. A survey of refugees and host communities conducted by UNHCR in the early days of the Sudan war shows severe food insecurity, with 75 percent of refugees and host communities in the north of South Sudan being highly food insecure (measured by a low food consumption score), while refugees in the south of the country fare somewhat better with a severe food insecurity prevalence of 50 percent. A general lack of economic opportunities is reflected in low rates of labor force participation, ranging from 24 percent of host communities in the north to 46 percent among refugees in the south. The survey reveals that while shocks are frequent, coping capacity is weak, both among hosts and refugees, leading to eroding welfare levels over time. Against this backdrop, satisfaction with life is low: on a scale from 0 to 10, representing the worst to the best, refugees evaluated their life as 2.7 out of 10, while host communities rated theirs even lower at 1.9 (UNHCR, 2024). 29 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis In line with patterns from many other countries, education and occupation are strongly correlated with poverty in South Sudan. In 2022, 83 percent of households headed by a person without education lived below the poverty line, compared to 56 percent of households that are headed by a person with secondary education. Unlike other countries however, poverty rates remain high even for households with university- educated heads (42 percent). This likely reflects the dearth of jobs and nominal wages that do not keep up with incessant inflation. Occupation is also an important marker of living standards. Despite South Sudan’s enormous agricultural potential, over 80 percent of households that earn a livelihood in agriculture are poor. Poverty is lowest among wage earners, which constitute less than 5 percent of households, but even for this group poverty remains high at 63 percent. Spatial variation in poverty in South Sudan is limited. Even in the states with the lowest poverty rates, such as Central Equatoria and Western Bahr el Ghazal, more than 70 percent of the population live under the national poverty line. In Jonglei, Lakes, Northern Bahr el Ghazal, Upper Nile, and Warrap, the poverty rates are close to or above 80 percent. The three states of Jonglei, Northern Bahr el Ghazal, and Warrap together account for more than 40 percent of the total poor. Variation in poverty at the county level is somewhat larger, with poverty rates varying from 52 percent in Magwi County to 95 percent in Fangak County. Poverty and extreme poverty display similar geographic patterns across counties. Those with high poverty incidence also record high extreme poverty. Figure 28. Poverty rates Figure 29. Distribution of the poor Vulnerability to poverty is almost universal. Applying the methodology described in Box 5, virtually all South Sudanese households (99.7 percent) face a significant likelihood of remaining poor or falling into poverty. This almost universal level of vulnerability is mainly explained by exceptionally low levels of human capital development and low ownership of assets (that is, vulnerability is poverty-induced). In the current context of South Sudan, even high levels of education are not an insurance against vulnerability, as 95 percent of households headed by a secondary or tertiary educated person are vulnerable to future poverty. Female- and male-headed households are equally vulnerable. Given the larger contraction in welfare for slightly better-off households, inequality narrowed between 2016 and 2022. The Gini coefficient – an indicator of inequality ranging from 0 to 1 with higher values indicating more inequality – decreased from 0.45 in 2016 to 0.41 in 2022 at the national level and declined in urban areas and rural areas alike (Figure 29). In urban areas, inequality narrowed because poor households experienced greater consumption growth than the rest of the distribution. In rural areas, inequality declined because wealthier households were more severely affected by the widespread reduction in consumption. Despite the decrease, inequality in South Sudan remains relatively high compared to the Sub-Saharan Africa average of 0.35. 30 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Box 5. Measuring Vulnerability While poverty is a static snapshot of the living standards of a population, vulnerability is forward-looking and integrates the concepts of risk and variability. While a household may not be poor now, it may have a high risk of falling into poverty in the future if a negative shock were to materialize. Traditionally, vulnerability has been measured using longitudinal data – following households over time to capture income fluctuations that may push the household below the poverty line. Longitudinal data is however quite rare, especially in low- income countries and countries with weaker statistical capacity. As a result, methods have been developed to estimate vulnerability based on cross-sectional data. In this report, we estimate vulnerability to poverty using the method developed by Günther and Harttgen (2009). The two key features of the method are: (i) the error term in the consumption regression (which is the unexplained variance in the consumption of otherwise identical households) is decomposed into household- specific and community-specific shocks to household consumption; and (ii) the variance of these two types of shocks is then modeled as a function of observable household and community characteristics. A household is vulnerable to poverty if, based on the model, it has a 50 percent chance of falling into poverty. Vulnerability can be further decomposed into a part that is ‘poverty-induced’ and a part that is ‘risk-induced’. Vulnerability is said to be poverty-induced if it is primarily determined by the household’s low endowments of physical assets and human capital, that is, low productive capacity at the household level. Vulnerability is risk-induced if it is mainly a result of consumption volatility resulting from different kinds of shocks. Figure 30. The Gini index of inequality in Figure 31. Share of adults 18 years and plus that household consumption, 2016 and 2022 never attended school 32.4 0.45 0.45 30.8 29.9 23.9 0.41 0.41 18.8 0.40 17.3 0.38 10.8 10.7 All (7 states) Urban Rural National Urban Rural Camp 2016/17 2022 Male Female Source: WB staff estimates based on HBS 2022; HFS (High Frequency Survey 2016, wave 3, South Sudan, 2016–2017) (dashboard) https://microdata.worldbank.org/index.php/catalog/2914 Women face serious disadvantages on several socioeconomic outcomes in South Sudan. Restrictive gender and social norms limit the choices and opportunities available to women and girls in South Sudan. There are strong cultural biases against girls’ education across all states. School attendance is much lower for girls than for boys. The 2022 survey highlights that only 14 percent of children aged 6 to 13 attend school, with a notable difference between girls (12 percent) and males (15 percent). Nearly a quarter (24.3 percent) of South Sudanese adults aged 18 years and above never attended school, with a higher percentage of females (30.8 percent) compared to males (17.3 percent). Additionally, rural areas have a higher number of adults who have never attended school compared to urban areas (Figure 30). Moreover, women bear a disproportionately heavy burden of familial responsibility24 and are less likely than men to be employed as waged workers. The country ranks in the bottom third for women’s empowerment.25 Widespread gender-based violence, such as domestic violence, sexual assault, and early marriage, marginalizes and disempowers women. 24 Women and girls often must walk long distances to fetch water. This increases the risk of sexual and gender-based violence. 25 World Bank (2023a). 31 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis 2.2 Proximate Drivers of the Increase in Poverty Between 2016 and 2022 Figure 32. Contribution of different factors to the change in poverty 2016–2022, percentage points Estimated increase in poverty rate between 2017-22 6.71 Change in poverty rate explained by the model 4.00 Change in poverty unexplained by the model 2.72 3.52 Population growth 1.66 Education attainment by households' head 1.00 0.98 Change in women's occupations 0.48 Urbanization (urban residency) 0.12 Women's access to education -0.03 Change in households heads' occupations -0.54 Change in access to basic infrastructure -0.90 Phisycal capital accumulation -2.30 -3.00- 2.00 -1.000 .001 .002 .003 .004 .005 .006 .007 .008 .00 Source: WB staff estimates based on HBS 2022; HFS (High Frequency Survey 2016, wave 3, South Sudan, 2016–2017) https://microdata. worldbank.org/index.php/catalog/2914 The contraction of household consumption in line with sharply declining GDP levels explains most of the increase in poverty between 2016 and 2022. In an accounting sense, a change in poverty between two periods can be decomposed into a part that can be explained by growth in household consumption (holding inequality constant) and another part that can be explained by a change in the distribution of household consumption (holding average consumption constant). Overall, poverty increased by 6.7 percentage points between 2016 and 2022. If inequality had not narrowed, poverty would have increased slightly more (6.9 percentage points) on account of the sharp decline in average household consumption. The reduction in inequality counteracted the poverty-increasing effect of welfare contraction, though the effect is marginal (0.2 percentage points). The decline in household consumption has caused the increase in poverty. The analysis for this report decomposed the increase in poverty between 2016 and 2022 into parts that can be explained by changes at the household level (such as changes in occupation or asset holdings between 2016 and 2022, changes in educational attainment of household members, etc.) and changes in the household’s environment (such as changes in exposure to conflict, climate shocks, etc.). About 60 percent of the observed increase in poverty of 6.7 percentage points can be explained by the variables in the decomposition model. As shown in Figure 32, certain developments during the 2016–2022 period had a poverty-increasing effect (the red bars in Figure 32) while others had in theory a poverty-reducing effect (green bars in Figure 32). Overall, though, the factors that increased poverty were more common than the factors that tended to reduce it, leading to an increase in poverty. Exposure to conflict was the main driver of the increase in poverty, explaining over half of the total increase over the 2016–2022 period (3.5 percentage points out of 6.7 percentage points). This finding highlights the key point that repeated conflicts and violence have taken a devastating toll on the welfare of South Sudanese families. While the intensity of conflict and violence was lower in the 2016–2022 period than before, households living in areas that recorded a higher occurrence of conflicts and violence witnessed a stronger decline in consumption, and a stronger increase in poverty. Demographic trends between 2016 and 2022 also pushed up the poverty rate. Heads of households were slightly less educated in 2022 than in 2016, further explaining the rise in poverty. Between 2016 and 2022, the share of household heads with secondary education or more slightly decreased, while the share with primary education or less slightly increased. Given the strong correlation between educational attainment and welfare, the trend to less-educated household heads increased the poverty rate. South Sudan is highly vulnerable to climate shocks, including droughts and catastrophic flooding, and these events have contributed to rising poverty levels between 2016–2022. South Sudan suffered 32 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis severe droughts in 2011 and 2015, and since 2014 major flooding has occurred every 2–3 years resulting in casualties, displacement, and the loss of livestock – severely impacting people’s livelihoods. Recent floods had profound impacts on agriculture, destroying crops, seeds, and soil, further reducing food availability. Climate shocks have contributed to an increase in the poverty rate by one percentage point between 2016 and 2022 (Figure 31). Displacement caused by climate shocks adds to conflict-induced displacement, further complicating education and health service delivery. The shift of labor from agriculture to non-agricultural sectors had contrasting impacts on poverty levels between 2016 and 2022. The share of household heads (overwhelmingly male) working in agriculture dropped by 12 percentage points, while those running non-agricultural family businesses increased by six percentage points. This shift reduced the poverty rate by 0.5 percentage points (Figure 31). The share of female spouses working in agriculture also decreased, but in contrast to the male pattern, this shift tended to increase the poverty rate (Figure 32). Though hypothetical, it is possible that women’s return to employment in informal non-farm activities is lower than their return to agricultural activities, especially in a context of high food inflation. And as displacement induced by conflicts and climatic disasters has pushed women off the farm, this has resulted in less food production at the household level and a higher dependence on market purchases in an inflationary environment. Over the 2017–2022 period, South Sudanese households recorded some improvements in access to physical assets and basic infrastructure, though these have been too small to limit the increase in poverty. The percentage of households where at least one member has a mobile phone significantly increased from 23 percent in 2016–2017 to 50 percent in 2022, while the proportion of households with at least one means of transportation (a car, truck, or motorcycle) rose from 4 percent to 7.3 percent. Regarding access to basic infrastructure, the proportion of households with access to electricity (used for lighting) increased by 1.2 percentage points, while the average time spent by households to reach a drinking water source reduced by 5.4 minutes between 2016–2022. Access to basic infrastructure and services will need to improve significantly going forward to make a dent in poverty rates. 2.3 Summary and Additional Policy Options Poverty in South Sudan is at alarmingly high levels. Between 2016 and 2022, poverty in South Sudan increased by 6.7 percentage points, primarily due to declining household consumption linked to decreasing GDP levels. Key factors contributing to this rise include exposure to conflicts, which accounted for over half of the increase, and climate shocks, which added one percentage point. Demographic trends also played a role, with lower educational attainment among household heads. Although there were some improvements in access to physical assets and basic infrastructure, these were insufficient to reduce poverty. More recently, with the 2024 oil infrastructure shock, poverty is estimated to have since increased further to unacceptably high levels of 92 percent and may be further impacted on account of potential disruptions to US humanitarian aid. A fundamental shift in South Sudan’s policy and institutional framework is needed to reduce poverty and enhance shared prosperity. Many of the essential actions to addressing the root causes of poverty in the country and for providing the basis for lasting peace by addressing conflicts are long-standing government policy and institutional reform commitments that have been included in the Revitalized Agreement on the Resolution of the Conflict in the Republic of South Sudan (R-ARCSS). Given the strong correlation between poverty, jobs, and wages, a growth model that creates more and better jobs will be key to poverty alleviation. An overarching priority is to invest in building state capacity, as well as the capacity of local institutions and civil society. There is a need to improve security, justice, basic services, and infrastructure, and accountability mechanisms. Additionally, investing in human capital is crucial for long-term growth and this in turn entails increasing public expenditure on education and healthcare, training professionals, and removing barriers to women’s education. Economic diversification and job creation would require several enabling conditions for the emergence of a dynamic private sector, including 33 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis improving infrastructure and access to finance, and promoting small and medium enterprises and informal businesses, especially those owned by women. Moreover, achieving sustainable and inclusive growth requires social services provision and investments in infrastructure and human capital, as well as advancing gender equality by promoting women’s empowerment and addressing gender-based violence in the fiscal space. This in turn calls for a rebalancing of spending by ensuring increased efficiency in the security sector. Sustainable and inclusive growth also requires addressing vulnerability to climate change and natural disasters by improving disaster preparedness, building resilient infrastructure, and investing in climate- resilient agriculture. In addition, there are specific policy areas which would help directly address poverty, including enhancing agricultural production, creating opportunities for young people and establishing an effective social protection system. In the short to medium term, interventions to boost agricultural production can provide a key pathway out of poverty. South Sudan has enormous agricultural potential given its favorable soil, water, and climatic conditions. Leveraging its vast agricultural potential could help address the food security challenge while also increasing incomes. Currently, more than three in four working age adults are involved in agriculture, but productivity is low, in large part due to pervasive conflict and insecurity. Even though cereal production has increased in recent years,26 the country remains in a cereal deficit and the bulk of households depend on markets for food purchases, fueling food insecurity in an environment of low incomes and high inflation.27 Conditional on attaining a basic level of peace, higher rural connectivity and market accessibility would lower costs for farmers and traders, allowing food to flow from surplus to deficit areas, and incentivize farmers to produce marketable surplus, reducing cost for consumers and improving food security. Given that only a small fraction of available arable land is currently cultivated, there is ample room to increase food production merely through extensification. As South Sudan’s food is mostly imported, improved agricultural production would also promote price stability by decoupling the link between exchange rates and food prices. Generating job opportunities for young people will not only help to address poverty but also contribute to sustaining peace. Wage work is uncommon in South Sudan, in particular among youth. Job creation is not sufficiently rapid to absorb emerging cohorts of potential young workers. While prioritization is challenging in a fiscally constrained space where everything is a priority, designing interventions to provide opportunities for at-risk youth will be important to prevent a relapse into violence. Although research is limited in fragile countries in relation to incentives to draw youth away from crime and mercenary work, there are indications that additional income in the form of grants and training programs has the potential to reduce youth engagement in violent and non-productive activities. These programs are often linked to investment in productive assets, agricultural inputs, and livestock, which in the context of South Sudan could generate a substantial multiplier effect on local economies and boost poverty reduction. Finally, a functioning social protection system will be key to support the most vulnerable. The Systematic Country Diagnostic28 highlighted the need for a national social protection system, emphasizing wealth- sharing mechanisms to efficiently transfer resources at the grassroots level. Social protection efforts are largely donor-funded, with government financing remaining a challenge. The National Social Protection Policy Framework mandates allocating 1 percent of the national budget to social protection, but this has not been realized despite advocacy. Most interventions focus on humanitarian aid, particularly food, which is essential but unpredictable and insufficient for human capital development. Recently, significant progress has been made in the social protection sector, including the launch of the government-led safety net program, ‘Shabaka Meisha’, which provides cash transfers to over 1.1 million beneficiaries across 20 counties. The Ministry of Gender, Child, and Social Welfare lacks the capacity to effectively manage these programs. Developing a national social protection system, including wealth-sharing transfers, remains a key priority for supporting households during adverse shocks. There is an ongoing national initiative to establish a national social registry, which will help improve the efficiency and effectiveness of social assistance delivery. 26 2023 FAO/WFP crop and food security assessment mission to the Republic of South Sudan. https://reliefweb.int/report/south-sudan/special- report-2020-faowfp-crop-and-food-security-assessment-mission-cfsam-republic-south-sudan-16-may-2024 27 Market purchases accounted for more than half of the household food consumption of cereals in 2023, while own production accounted for only 21 percent (FAO, 2024). 28 World Bank (2015). 34 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis 35 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis REFERENCES SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis REFERENCES • Blattman, C. and L. Ralston. 2015. Generating Employment in Poor and Fragile States: Evidence from Labor Market and Entrepreneurship Programs. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2622220 • Chen, W., M. Fornino, and H. Rawlings. 2024. Navigating the Evolving Landscape of China and Africa’s Economic Engagements. IMF Working Paper 24/37. Washington, DC: IMF. • FAO. 2024a. Special Report – 2023 FAO/WFP Crop and Food Security Assessment Mission (CFSAM) to the Republic of South Sudan. 16 May 2024. CFSAMs Special Reports, 02/2024. Rome. https://doi.org/10.4060/cd0533en • FAO. 2024b. Crop Prospects and Food Situation – Triannual Global Report. No. 3, November 2024. Rome. https://doi.org/10.4060/cd3168en • FEWSNET. 2024. East Africa Cross Border Trade Bulletin, October issue. • Günther, I. and K. Harttgen. 2009. Estimating Households Vulnerability to Idiosyncratic and Covariate Shocks: A Novel Method Applied in Madagascar. World Development. • Human Rights Watch. 2024. World Report. HRW. • IMF. 2021. 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Since gaining independence, South Sudan has not conducted a population census; the most recent census was in 2008, prior to secession. Additionally, the country has not carried out comprehensive nationally representative household budget surveys, agricultural censuses, or business censuses. There has also been no national labor force survey conducted. The lack of data in key areas such as population, agriculture, and business, impairs the overall statistical system, affecting GDP estimation and social statistics, and hindering effective development planning and management. The South Sudan Bureau of Statistics (SSBS) and the Bank of South Sudan produce a limited range of data. The SSBS publishes monthly Consumer Price Index (CPI) data, while the latest GDP data were produced up to 2021. However, both the Government and partners avoid using these GDP figures due to significant quality issues that undermine their reliability. The Bank of South Sudan maintains a monthly database of key indicators, though critical data such as the balance of payments are not fully developed. Fiscal data are compromised by a lack of transparency regarding revenues, expenditures, arrears, and debt. Although National Budget data are published upon approval, budget outturns are either limited or released with significant delays. The South Sudan Bureau of Statistics recognizes the importance of data for economic monitoring and development planning. It is working on its first national household budget survey, population census, and improving price data collection to produce a consumer price index (CPI) and inflation reports across all states and administrative areas. Until August 2024, CPI data were collected monthly from just three towns: Juba, Malakal, and Wau, reflecting the former Southern Sudan region. This limited coverage and outdated item weights render the current CPI less nationally representative, hindering its policy application. The World Bank and other UN agencies are assisting in enhancing data generation and reporting capacity. 39 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Annex 2. Fiscal Year 2024/25 Budget Table A1. FY24/25 budget key figures (In % of GDP, unless otherwise indicated) Revenue 13.7 Expenditure 25.4 Oil Revenue 6.9 Recurrent Expenditure 18.8 Non-Oil Revenue 6.8 Capital Expenditure 3.0 Other Sources (Grant) 0.0 Debt Service 1.7 Budget Deficit 11.7 GDP growth, % annual change 6.8 Key budget assumptions • Inflation rate is expected to reach 58 percent on average by the end of the fiscal year • Oil production assumed to remain at around 50 thousand barrels per day • Oil price is projected at US$79 over the fiscal year • Exchange rate is estimated to average SSP 2527 per US$, while the exchange rate crossed SSP 3000 during the as of October 2024 • Real GDP growth is projected at 6.8 percent • Fiscal deficit is projected at 49.5 percent of total expenditure, or 11.7 percent of GDP Table A2. FY24/25 Budget revenue projection   FY23/24 FY24/25   FY23/24 FY24/25   FY23/24 FY24/25   Prel. Budget Prel. Budget Prel. Budget billion SSP Percent of Total % of GDP Total revenue and grants 2,261.4 2,257.6 100.0 100.0 28.3 15.3 Oil rev. 1,894.9 1,138.4 83.8 50.4 23.7 7.7 DPOC   -   - -   - - GPOC 943.6 - 41.8 - 6.4 SPOC 194.8 - 8.6 - 1.3 Non-oil rev. 366.5 1,119.2 16.2 49.6 4.6 7.6 Personal income tax (PIT) 188.5 385.3 8.3 17.1 2.6 2.4 PIT (private) - 380.5 - 16.9 - 2.6 PIT (public) - 4.8 - 0.2 - 0.0 Sales tax 2.7 11.2 0.1 0.5 0.0 0.1 Excise duty 4.0 14.4 0.2 0.6 0.1 0.1 Business profit tax 2.7 9.0 0.1 0.4 0.0 0.1 Customs duty 57.2 552.3   2.5 24.5   0.7 3.7 Excise import 13.8 3.7 - 0.2 - 0.0 Sales import 48.7 7.7 - 0.3 - 0.1 Other non-oil revenues 47.6 12.7 2.1 0.6 0.6 0.1 Advance income tax 0.3 85.4 - 3.8 - 0.6 Miscellaneous 1.1 37.5   - 1.7   - 0.3 Source: MoFP Budget Book FY24/25 and FY23/24 preliminary fiscal outturn data. 40 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table A3. FY24/25 expenditure plans FY23/24 FY24/25 FY23/24 FY24/25 FY23/24 FY24/25 (Percent of total (in SSP billion) (Percent of GDP)   budget) Accountability 3.7 7.4 0.2 0.2 0.1 0.0 Economic functions 45.8 197.4 2.1 4.7 0.8 1.2 Education 172.2 225.1 7.8 5.4 3.0 1.4 Health 42.3 54.7 1.9 1.3 0.7 0.3 Infrastructure 445.4 13.3 20.2 0.3 7.6 0.1 Natural resources & rural 65.4 351.6 3.0 8.4 1.1 2.1 development Public administration 237.5 290.3 10.8 7.0 4.1 1.8 Rule of law 92.9 302.5 4.2 7.3 1.6 1.8 Security 222.8 440.9 10.1 10.6 3.8 2.7 Social & humanitarian affairs 9.2 186.4 0.4 4.5 0.2 1.1 Sectoral spending total 1337.2 2069.7 60.6 49.6 22.9 12.6 Other payments 868.1 2102.5 39.4 50.4 14.9 12.8 Transfers to states 41.6 206.0 6.4 4.9 2.4 1.3 Peace budget 50.0 93.8 2.3 2.2 0.9 0.6 Foreign mission arears (wages & 32.6 96.0 1.5 2.3 0.6 0.6 salaries) Other arrears/domestic salary 50.0 642.3 2.3 15.4 0.9 3.9 Mandatory expenditures 320.6 303.1 14.5 7.3 5.5 1.8 Election related exp. - 257.5 - 6.2 - 1.6 Agriculture Bank of South Sudan 3.0 8.6 0.1 0.2 0.1 0.1 Amortization, Interest and 186.3 286.6 8.4 6.9 3.2 1.7 Transfers to int. treaties - 108.5 - 2.6 - 0.7 Carried forward arrears 35.7 0.0 0.9 0.0 0.2 South Sudan Pension Fund 15.0 - - - 0.3 - Contingency/emergency funds 20.9 - 0.9 0.4 - Litigation - 34.3 - 0.8 - 0.2 Constituency Development Fund 47.9 30.0 2.2 0.7 0.8 0.2 (CDF) Total budget 100.0 0.7 37.8 25.4 2,105.0 4,172.2 Source: MoFP Budget Book FY24/25. Table A4. Budget allocations by economic function   FY23/24 FY24/25 FY23/24 FY24/25   FY23/24 FY24/25 (Percent of total   (in SSP billion) (Percent of GDP) budget) Wages and salaries 457.1 1512.1 21.7 36.2 7.8 9.2 Use of goods and services 270.4 834.7 12.8 20.0 4.6 5.1 Capital expenditure 540.3 493.5 25.7 11.8 9.3 3.0 Transfers 141.9 589.7 6.7 14.1 2.4 3.6 Subsidies - 10.8 - 0.3 - 0.1 Other expenditure 695.3 731.5 33.0 17.5 11.9 4.4 Total 2105.0 4172.2 100.0 100.0 36.1 25.4 Source: MoFP Budget Book FY24/25. 41 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Table A5. Sectoral allocation, % of total sectoral spending FY23/24 FY24/25 FY23/24 FY24/25 (SSP billion) % sectoral spending Accountability 3.7 7.4 0.3 0.4 Economic functions 45.8 197.4 3.4 9.5 Education 172.2 225.1 12.9 10.9 Health 42.3 54.7 3.2 2.6 Infrastructure 445.4 13.3 33.3 0.6 Natural res. & rural dev. 65.4 351.6 4.9 17.0 Public administration 237.5 290.3 17.8 14.0 Rule of law 92.9 302.5 6.9 14.6 Security 222.8 440.9 16.7 21.3 Social & humanitarian affairs 9.2 186.4 0.7 9.0 Sectoral spending total 1337.2 2069.7 1000.0 100.0 Source: MoFP Budget Book FY24/25. 42 SOUTH SUDAN ECONOMIC MONITOR - ISSUE 7 - A pathway to overcome the crisis Annex 3. Micro-simulation methodology for poverty rates Step 1: Identification of source of consumption (proxy for income). For each household, identify the sector (agriculture, industry/manufacture, services) in which the household head is employed. Note that there is no information available on the employment status of other household members. The entire household’s consumption is attributed to the sector of employment of the household head. In cases where the household head is unemployed, the household’s consumption is derived from unknown (non- labor) sources. All information was collected in 2022. Step 2: Projection of household consumption. For years after 2022, we assume that households’ employment and demographic composition remain unchanged from 2022. Households’ nominal consumption (used as a proxy for income) is assumed to grow at the same rate as the nominal GDP growth of the sector in which the household head is employed. For households with an unemployed head, the overall nominal GDP growth rate is used. For example, if the GDP in the agricultural sector grows by g percent between 2022 and 2023, the consumption of households with heads employed in agriculture increases by g percent. Similarly, if the overall GDP grows by x percent, then the consumption of households with unemployed heads grows by x percent. Step 3: Poverty Line Adjustment. Assuming that the prices faced by households grow at the rate of inflation, the 2022 poverty line is adjusted for inflation, as measured by changes in the consumer price index. In 2022, the national poverty line (combining food and non-food needs) was estimated at SSP 358,724. For any years after 2022, the nominal household consumption estimated in Step 2 is compared to the adjusted national poverty line to determine the household’s poverty status. 43 www.worldbank.org