The Executive Board of the International Monetary Fund (IMF) has approved disbursement of 114.8 million U.S dollars under the Rapid Credit Facility (RCF) to help South Sudan address urgent balance of payment needs arising from heightened food insecurity.
This was revealed on Thursday by the Minister of Finance and Planning Dier Tong Ngor during press conference held in Juba
“The Executive Board of the International Monetary Fund has yesterday, March 1st, 2023 approved the disbursement of $114.8 million to South Sudan under the ‘Food Shock Window” of the Rapid Financing Instrument,” Ngor said.
Ngor said that this disbursement equivalent to 35% percent of South Sudan’s quota in the IMF will help meet the urgent balance of payment needs, supporting food security, and also health and education financing.
“Following the Executive Board decision, the Ministry of Finance and Planning, acknowledges that years of heavy floods, COVID -19 and the impact of war in Ukraine have enormously impacted economic activity in the country,” he said.
Ngor disclosed that real gross domestic product (GDP) has severely contracted amid inflation, adding that the exchange rate of the South Sudanese Pound against other currencies has deteriorated, thus widening the fiscal deficit.
He said that with this new financing, South Sudan has enhanced its foreign exchange reserve position, and that it will enable the Bank of South Sudan to intervene in the market to meet any gaps in the foreign exchange market.
“To counteract these new realities, South Sudanese authorities have worked to maintain macro -financial stability in these highly challenging circumstances. Key macro-economic policies have been geared toward avoiding monetary financing, safe guarding priority expenditures, easing pressure on international reserves, and preserving financial stability,” he said.
Ngor said that South Sudan will remain closely engaged with the IMF, and discussions will continue with the Fund staff on implementing the Program Monitoring with Board involvement (PMB).
“The PMB aims to provide a strong anchor for macro-economic policies, further catalyze donor support, and help pave the way toward the Extended Credit Facility (ECF) arrangement with the IMF soon,” he said.
The ECF is the Fund’s main tool for providing medium-term support to low income countries (LICs). The ECF supports countries’ economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth.
Ngor revealed that they have been engaging with IMF since September last year.
“This amount will have short and longer- term impact on our economy, in short -term impact we are going to use this fund we are receiving to boost our foreign exchange reserve, will help to bring down the dollar, the exchange will be stable, in the longer- run the support the IMF giving us will advance the cooperation with IMF and we plan that from five months from now we scale this support upward,” he said.
Kenji Okamura, Deputy Managing Director of the IMF, said in a statement saying that over the last three years, South Sudan has had to contend with overlapping economic shocks from COVID-19, historic flooding, and Russia’s war in Ukraine, which have compounded an already-difficult economic and humanitarian situation driven by weak economic management and institutions.
“Performance under the Staff-Monitored Program was mixed but recent corrective actions have been taken. Looking ahead, emergency financial assistance under the Rapid Credit Facility’s new food shock window will help address urgent balance-of-payments needs and mitigate the impact of elevated food prices. The authorities’ commitment to work with international partners to ensure that part of the disbursement will provide immediate humanitarian assistance to address food insecurity is welcome,” he said.
Kenji added that continued implementation of the peace process is a priority for South Sudan’s economic and social development.
“The authorities are highly encouraged to continue working with the international community and civil society to promote peace, stability, and national reconciliation,” he said.