Board of Directors

Operating Environment: South Sudan

Operating Environment: South Sudan

The Republic of South Sudan steadily recovered from years of civil conflict, with the country’s economic conditions improving following the signing of the peace agreement late last year.

This comes at the back of a combination of internal conflict, weak global oil prices, the closure of oil fields and poor rains that resulted in economic activity contracting, between 2016-18. These events led to the declaration of the hyper inflationary economy.

GDP growth improved by 2% from -8.20% in 2017 to -6.30% in 2018 due to improved security and the signing of the comprehensive peace agreement. Annual GDP is expected to grow by 5.40% in 2019 due to the anticipated tailwinds.

Oil accounted for over 99% of South Sudan’s export revenues during 2014-2018, with sesame seeds the only other export commodity of some significance. However, the country’s oil production was on an upward trend in 2018 with on-and-off conflict disrupting output and transport processes.

However, output is expected to recover in 2019 going forward to a tune of 350,000 barrels a day.

Monetary Policy

The country is still facing a severe shortage of foreign currency, with little reason to believe that the weakening trend would stop heading into 2019, especially due to the oil-dependent economy. The sharp depreciation in the currency placed significant pressure on imported consumer prices.

Headline inflation peaked at 831% y-o-y in Oct 2016 and has subsequently been on a broadly downward trajectory to stop at 32% in Dec 2018.The IMF expects inflation to moderate at an average 45% in 2019. However, this is premised on some key assumptions, including the state implementing proposed fiscal adjustments.

Should the peace agreement bring resolution to the conflict, a fiscal deficit no larger than 3% of GDP is estimated by the IMF with exchange rate stability and a recovery in both oil production and non-oil GDP to follow.

Economic prospects remain promising in 2019 and beyond after signing the peace agreement late last year. Oil production is expected to hit an all-time after the signed agreement with China to develop the dilapidated infrastructure in exchange of crude oil. This will in return increase the country’s non-oil revenue collection.

However, given the country’s over-dependence on crude oil exports, slight changes in oil production, prices, and demand can quickly translate into massive economic shocks.

The country has one of the most constrained business and investment climates in the world but is expected to improve with the introduction of large infrastructural projects.