The Executive Board of the International Monetary Fund has concluded and released economic situation assessment of South Sudan, saying that financing the 2014/15 budget will pose a big challenge for the country.
The Executive Board of the International Monetary Fund has concluded and released economic situation assessment of South Sudan, saying that financing the 2014/15 budget will pose a big challenge for the country.
The assessment reveals that South Sudan is a fragile state with acute challenges. Since it became an independent state in 2011, institution building and development have been hindered by volatile relations with Sudan, a 15-month shutdown of oil production, and more recently, a civil conflict. It adds that although rich in natural resources, the economy is centered on oil production and subsistence agriculture, with almost all consumer goods being imported.
As a result, financing the budget for 2014/15 is challenging and will likely require policy decisions, given the otherwise potentially adverse impact on economic stability and inflation, warns IMF.
The IMF assessment underscored the need to unify the exchange rate and adopt a market-based system for allocating foreign exchange. Exchange rate unification would significantly reduce the fiscal imbalance, remove incentives for corruption, and improve price signals to favour private investment and non-oil economic activities.
The report encouraged the authorities to enact the Petroleum Revenue Management Act, and called for the implementation of recommendations from the 2012 audit of the central bank and the wide dissemination of oil, fiscal, and financial data.
These tasks will require strong leadership and cooperation from the international community, including continued technical assistance, said the IMF.
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