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The Economy of South Sudan

South Sudan is located in East- Central Africa, and it borders a total of six countries. It has a population of about 13 million inhabitants, which is expected to increase by roughly 3.5 million until 2022. Juba, the capital of the country, is the most populated city in South Sudan, and is home to approximately 320,000 people.  

The Republic of South Sudan became the world’s youngest nation and Africa’s 54th country on July 9, 2011. However, outbreaks of civil war in 2013 and 2016, persistent subnational violence, and political contestation have undermined post-independence development gains and intensified existing humanitarian needs. More than a decade after independence, South Sudan remains impacted by fragility, economic stagnation, and instability. Poverty is ubiquitous, exacerbated by conflict, displacement, and external shocks.

Long based on subsistence agriculture, South Sudan’s economy is now highly oil dependent. While an estimated 75% of all the former Sudan’s oil reserves are in South Sudan, the refineries and the pipeline to the Red Sea are in Sudan. Long based on subsistence agriculture, South Sudan’s economy is now highly oil dependent. While an estimated 75% of all the former Sudan’s oil reserves are in South Sudan, the refineries and the pipeline to the Red Sea are in Sudan.

Read Also: How South Sudan’s Oil Industry is Destroying the Environment

Meanwhile, under the 2005 accord, South Sudan received 50% of the former united Sudan’s oil proceeds, which provide the vast bulk of the country’s budget. But that arrangement was set to expire with independence. In January 2012, the breakdown of talks on the sharing of oil revenues led South Sudan to halt oil production and halve public spending on all but salaries. A deal in March 2013 provided for Sudan to resume pumping South Sudanese oil in May and created a demilitarised border zone.

Real GDP contracted an estimated 2.9% in 2021/22, after contracting 4.9% in 2020/21, driven by the oil sector. Oil production declined to 156,000 barrels a day in 2021/22 from 169,000 in 2020/21 after several oilfields were damaged by floods. The sector was the leading contributor on the supply side (–0.6 percentage point) to the real GDP contraction in 2021/22. Agriculture, which contributed –0.1 percentage point, was affected by floods and drought. On the demand side, the contraction was driven by net exports (–1.3 percentage points). Tight monetary policy and reduced monetization of the fiscal deficit reduced inflation to an estimated 0.9% in 2021/22 from 43.5% in 2020/21. High lending rates (averaging 12% in 2022) remain a challenge for capital investment.

The fiscal deficit widened to 6.6% of GDP in 2021/22 from 3.7% in 2020/21, owing to higher public spending. The fiscal deficit was financed by domestic and external borrowing. Overall and external public debt remains sustainable but with a high risk of debt distress. The current account deficit narrowed to 1.4% of GDP in 2021/22 from 4.9% in 2020/21 due to reduced financial transfers to Sudan under the Transitional Financial Arrangement for oil transit fees. The Special Drawing Rights allocation (3.8% of GDP) boosted international reserves. Poverty remains high, with an estimated 7.7 million people requiring emergency food assistance in 2022.

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