The International Monetary Fund said on Wednesday that South Sudan was experiencing an economic collapse that could cause more humanitarian suffering and potentially threaten the country’s peace deal.
Jan Mikkelsen, the IMF Mission Chief for South Sudan said that if the country’s economic policies don’t change, the “situation will deteriorate further, resulting in more humanitarian suffering and potentially threatening the still-fragile peace process”
Mikkelsen said that inflation approaches 300 percent, and next year’s budget could approach$1.1 billion US or 25 percent of GDP.
The country’s economic crisis has led to a near-total shutdown of essential services. Hospitals have been without power due to a lack of fuel. Some doctors, teachers, and soldiers have gone without pay for months due to a lack of government funds.
To recover from the country’s economic state, Mikkelsen said the country should focus on raising money from non-oil sources, cutting expenditures, current operations, travel, and investment.
The South Sudanese government is expecting a financial assistance plan backed by the IMF, but Mikkelsen said on Wednesday that South Sudan needed to demonstrate unity, stabilize the economy, and strengthen public financial management to receive funds.
Mikkelsen said that economic stability “would require collaborative efforts from South Sudan and its development partners”.
The IMF official also called on South Sudan’s central bank to control inflation, saying it should reign in lending to the government, a policy that essentially amounts to money printing, which continues to put downward pressure on the exchange rate, making dollars more expensive in South Sudan’s forex market.