2017年-世界发展银行全球_South_Sudan_Economic_Update_2017___Taming_the_Tides_of_High_Inflation_78页_6mb

South Sudan Economic Update Summary

Core Content

South Sudan, the world's newest independent country, has faced severe economic challenges since its independence in 2011. The country remains highly conflict-affected and fragile, with macroeconomic collapse, soaring inflation, and widespread poverty and food insecurity. These issues have been exacerbated by ongoing war, oil production disruptions, and weak agricultural output. The economic situation has deteriorated significantly, with the 2016/17 fiscal year witnessing a 11 percent contraction in GDP, a 480 percent increase in the annual CPI, and a sharp rise in urban poverty, which increased from 49 percent to 70 percent between 2015 and 2016.

Key Economic Developments

• Inflation:

  • Annual CPI increased by 480% in 2016 and 155% between July 2016 and June 2017.
  • The South Sudanese Pound (SSP) depreciated significantly, reaching SSP 172 per USD by August 2017.
  • High inflation has made it difficult for households to afford the minimum food basket, especially the poorest.

• Poverty:

  • Urban poverty headcount increased from 49% to 70% between 2015 and 2016.
  • The urban poverty gap expanded from 22% to 36%, indicating a deeper poverty situation.
  • Poverty severity index doubled from 0.10 to 0.20 in 2016.

• Food Insecurity:

  • Food insecurity levels have risen dramatically, with nearly 6 million people food insecure by July 2017.
  • Over 3.6 million people were severely food insecure in October-December 2016.
  • Climate changes and ongoing conflict have worsened food security conditions.

• Labor Market:

  • Urban labor force participation rate dropped from 50% to 33% between 2015 and 2016.
  • Economic instability has led to a significant drop in labor force participation.

• Fiscal Deficit:

  • The fiscal deficit was estimated at 14% of GDP in FY2016/17.
  • About 42% of the budget was allocated to salaries, 19.5% to operating and capital expenditure, 19% to transfers to states and counties, and 14% to peace and security.

• Current Account Deficit:

  • Narrowed from 6.1% to 1.6% of GDP in FY2016/17.
  • Export revenues declined due to lower oil prices and production, while imports also dropped, contributing to the narrowing of the deficit.

Main Policy Options for Inflation Control

1. Exchange-Rate-Based Stabilization (ERBS)

• Effectiveness: ERBS is effective at reducing inflation quickly, often leading to an economic boom immediately after implementation.
• Drawbacks: It can lead to a recession over time, and the economic downturn may trigger the collapse of the stabilization plan.
• Duration: ERBS is typically short-lived, often lasting only 4–5 years before being abandoned.

2. Money-Based Stabilization (MBS)

• Effectiveness: MBS reduces inflation gradually and initially causes economic contraction.
• Drawbacks: It requires a long time to implement and may not be suitable for countries with weak institutions.
• Sustainability: MBS is more sustainable in the long run as it avoids the boom-bust cycle associated with ERBS.

Challenges in Implementing Stabilization Policies

• Institutional Weakness: South Sudan lacks a strong institutional framework for implementing either ERBS or MBS.
• Political Will: The government has shown limited commitment to stabilization, continuing to prioritize conflict-related policies over necessary reforms.
• Fiscal Discipline: Without fiscal discipline, the effectiveness of MBS is undermined, as expansionary monetary policies may lead to inflation resurgence.
• Exchange Rate Regime: The current managed floating exchange rate regime poses challenges in maintaining credibility and stability.
• Central Bank Independence: The Bank of South Sudan (BSS) lacks independence and faces credibility issues, making it difficult to implement effective monetary policy.
• Foreign Reserves: Low foreign reserves limit the government's ability to support the floating exchange rate regime effectively.

Outlook and Risks

• Economic Recovery: The FY17/18 National Budget aims to restore macroeconomic stability but lacks credibility.
• Poverty and Food Insecurity: Poverty is expected to rise further in 2019 due to population growth outpacing economic growth.
• Humanitarian Needs: The population is increasingly reliant on humanitarian aid and donor-funded projects.
• Coping Strategies: Informal and illegal activities may become more prevalent due to economic hardship.
• Long-Term Risks: Without effective reforms, South Sudan risks becoming a failed state.

Conclusion

South Sudan's path to economic stabilization is fraught with challenges, including political instability, weak institutions, and a lack of fiscal discipline. While both ERBS and MBS are viable policy options, their implementation is hindered by the current economic and political environment. A credible and consistent stabilization program, supported by external assistance and transparent governance, is essential for long-term economic recovery and poverty reduction.