International Monetary Fund (IMF) Reaches Staff-Level Agreement with the Republic of South Sudan on the Third Review of the Staff-Monitored Program, a Rapid Credit Facility through the Food Shock Window and Program Monitoring with Board Involvement
IMF staff and the South Sudanese authorities have reached a staff-level agreement for about US$112.7 million in emergency financing through the IMF’s new Food Shock Window of the Rapid Credit Facility combined with a Program Monitoring with Board Involvement; This emergency financing under the new Food Shock Window will help South Sudan address food insecurity, support social spending, and boost international reserves.
The Program Monitoring with Board Involvement will support economic policies aimed at maintaining macroeconomic stability and debt sustainability; South Sudan’s request for emergency support is subject to approval by IMF management and the Executive Board in the coming weeks.
Ahead of the Executive Board consideration of this request, the authorities will implement several reforms to strengthen governance and transparency.
An International Monetary Fund (IMF) staff team, led by Mr. Niko Hobdari, visited South Sudan from November 7 to November 17, 2022.
The team held discussions with the authorities on an existing Staff-Monitored Program (SMP) and on the authorities’ request for access to emergency financing through the new Food Shock Window of the Rapid Credit Facility (RCF) to address urgent balance of payments needs.
The IMF team also discussed South Sudan’s request for a 9-month Program Monitoring with Board Involvement (PMB).
At the end of the visit, Mr. Hobdari issued the following statement:
“The IMF staff team and the South Sudanese authorities have reached staff-level agreement for completing the third and final review of the SMP and on economic policies for a disbursement under the IMF’s new Food Shock Window of the RCF that would be combined with a 9-month PMB.
The disbursement is subject to approval by the IMF’s Executive Board, which will discuss it in the coming weeks.
Upon approval by the Executive Board, South Sudan would have access to about US$112.7 million (SDR 86.1 million).
These resources will be used predominantly to help address food insecurity, support social spending, and boost international reserves.
This disbursement will bring total outstanding Fund credit under emergency financing instruments to South Sudan to SDR 246.0 million, or 100 percent of its quota at the IMF.
“Ahead of the Executive Board consideration of the Food Shock Window request, the authorities will implement several reforms to strengthen governance and transparency.
These include publishing budget execution reports; publishing the results of a stock take of South Sudan’s external debt; publishing the Auditor General’s report on the second RCF disbursement and starting to address its findings and recommendations; as well as strengthening the process for contracting external debt and issuing sovereign guarantees.
“The combination of continued localized conflict, four consecutive years of severe flooding, and the rising price of staple commodities from Russia’s war in Ukraine has increased the number of people experiencing severe food insecurity to an estimated 8.3 million in 2022 (over two-thirds of the population).
For this reason, the authorities have committed to collaborate with trusted development partners to channel US$20 million of the RCF disbursement to make use of their existing systems to provide immediate humanitarian assistance to help address food insecurity.
“Significant reforms have been introduced since the start of the Staff-Monitored Program in March 2021, such for example the unification of the official and parallel exchange rates.
Fiscal pressures, however, led to the temporary resumption of overdrafts from the central bank and a return to the use of oil advances to finance the budget during the final quarter of FY2021/22.
The rise in the money supply due to monetary financing triggered a significant depreciation of the exchange rate, which has compounded external price pressures in an economy that is heavily reliant on imported goods.
“The IMF mission is encouraged by the actions taken by the Ministry of Finance and Planning and the Bank of South Sudan since August 2022 to restore fiscal discipline and rein in money growth, which has stabilized the exchange rate in recent months.
Going forward, it will be critical for the authorities to continue prudent fiscal and monetary policies and to consolidate and build on the first steps taken under the SMP to improve public financial management.
“The IMF mission met with the Minister of Finance and Planning Mr. Dier Tong Ngor, Minister of Petroleum Mr. Puot Kang Chol, Governor of the Bank of South Sudan Mr. Johnny Ohisa Damian, Commissioner General of the National Revenue Authority Mr. Patrick Mugoya, Auditor General Mr. Steven Wondu, and other high-level government officials, and representatives of the diplomatic community, private sector, and civil society.
The IMF team thanks the authorities for their hospitality and the productive discussions.