Juba is grappling with economic challenges partly resulting from the consequences of the war in Sudan. Additionally, oil revenues are drying up as the pipeline that transports 70 % of South Sudan’s oil exports has been inoperative since February 2024. These challenges are negatively impacting the country’s economic and social outcomes.

Economic contraction of – 6 % for the first half of 2024

The ongoing conflict in Sudan, along with floods caused by extreme weather conditions, has plunged South Sudan’s economy into the red. Reports show that the country suffered a contraction of – 6% during the period ending in June 2024.

In an update shared by the International Monetary Fund (IMF), South Sudan is facing « several challenging macroeconomic issues », stifling the growth of Africa’s youngest country. The IMF stated that Juba’s authorities are struggling with economic difficulties « partly resulting from the repercussions of the war in Sudan and recurring floods ». The multilateral lender notes that this dual circumstance hurts the country’s economic and social outcomes.

Historically low economic revenues

The war is raging between rival factions of Sudan’s military government the Sudanese Armed Forces (SAF), led by Abdel Fattah al-Burhan, and the paramilitary Rapid Support Forces (RSF), led by Hemedti. The IMF reports that South Sudan’s pipeline system in the north has been left unattended, negatively affecting the country’s main source of revenue.

The pipeline that transports around 70 % of South Sudan’s oil exports has been unusable since February 2024, according to the Washington-based lender after it visited Juba from September 25 to October 2, 2024. The IMF notes that Juba’s authorities are finding it increasingly difficult to carry out necessary repairs on the pipeline, as it crosses a conflict-ridden Sudan.

Moreover, disruptions in the shipping lanes of the Red Sea are driving up insurance costs for oil cargoes transported through South Sudan’s other pipelines. « In this context, South Sudan experienced an economic downturn during the 2023/24 fiscal year (July 2023-June 2024), with real GDP growth close to -6 %, driven by the decline in oil exports in the first half of 2024 », explained Mame Astou Diouf, the IMF’s mission chief for South Sudan. The slowdown is expected to continue during the 2024/25 fiscal year as the shock to oil production persists.

Red Sea disruptions : South Sudan severely impacted

According to the IMF, Juba’s economy has also been severely affected by the ongoing disruption of the Red Sea shipping route, where escalating tensions in the Middle East have hurt business. As a result, South Sudan’s oil sector players are now forced to pay high insurance premiums for oil cargoes.

Additionally, the country’s foreign exchange market is in turmoil following the depreciation of South Sudan’s currency amid rampant inflation, which reached 107.3 % in July 2024. The parallel market exchange rate premium remains high (51 % as of September 26, 2024), despite a recent gradual depreciation of the official exchange rate. The combination of reduced foreign currency inflows and a resumption of monetary financing to cope with the shock has led to a sharp depreciation of the parallel market exchange rate over the nine months leading up to September.

Due to the decline in revenues caused by the halt in oil shipments, the implementation of the 2023/24 fiscal year budget has proven challenging. However, the IMF observed that Juba’s authorities have put in place measures to manage the declining revenues better. Oil revenues accounted for about 16% of the country’s revenues in December of last year.

IMF’s solutions to reverse the trend

According to the IMF, the South Sudanese authorities’ policy and reform program includes a general recalibration of macroeconomic policy to address the key challenges, notably :

• Prudent macroeconomic policies to maintain economic stability and debt sustainability.
• Short-term adjustments in fiscal, monetary, and exchange rate policies to address the oil production shock.
• Reforms to further improve governance and transparency.
• Given the humanitarian situation, the authorities must work with development partners to continue supporting vulnerable populations.

The IMF team also discussed the results achieved against the PMB’s quantitative targets at the end of June 2024 and the progress made in implementing structural benchmarks.