The Economic crisis in South Sudan 

Manavi Luthra

Abstract

This paper attempts to look into the ongoing economic crisis in the Republic of South Sudan, formed on 9th July, 2011. The country that should rather be peaceful, has been hemmed in conflict since independence. This has caused major economic shocks, resulting in a total economic lapse of the country. Republic of South Sudan is the most oil dependent country in the world, therefore, it was the most affected when there was a global fall in oil prices. About 90 percent of government’s revenue was primarily sourced from oil exports. The economic crisis further deepened with the onset of civil war that started in 2013 leading to soaring high inflation rates, unemployment, and food scarcity in the country. The newest country in the world is on the brink of genocide much similar to the one that happened in Rwanda. This issue, and it causes along with consequences are shed light upon. Some policy suggestions are further made in an attempt to help the situation to some extent. 

Keywords:  South Sudan, Crisis, Causes, Consequences, Suggestions.

Republic of South Sudan, being the most oil dependent country in the world, exhibits almost all exports and around sixty percent of its Gross Domestic Product dominated by oil. The per capita GDP of the country in 2014 was $1,111 and dwindled drastically to $200 in 2017. In the year 2016, inflation was at a soaring high of 300% while the currency slumped by 90%. The oil sector basically provides for the entire county. Livelihoods outside of it are either dependent on pastoralists work or underpaid/unpaid agriculture with mere yield (World Bank, 2018).

Source: www.worldbank.org

The current scenario is no brighter than its past, the economic collapse in South Sudan continues to date with inflation soaring, and output contracting. 

Expenditures on security witnessed an increase whereas, government revenue continued to decline. The fiscal deficit in 2018 was projected to be 4.4% of Sudan’s GDP. public expenditures remain neglected and thus, poverty is widening by the day. Rule of law, public administration, and security expenditures have comprised over 70% of the country’s budget in the past fiscal years. On the other hand, education and health sector have been allocated a combined share of only 6% in the budget (Mercy Corps, 2019). Borrowings by the government from the bank of South Sudan have been limited recently. Monetisation of the fiscal deficit has led to high inflation and subsequent money growth in the country. 

On September 12, 2018. the government, along with the opposition, and civil society signed The Revitalized Agreement on the Resolution of the Conflict in South Sudan (R-ARCISS), in Addis Abba. This agreement is seen as a new ray of light for The Republic of South Sudan in the midst of all that’s been happening, to build peace in the nation, yet again (World Bank, 2018).

According to the agreement, the government aims at resuming oil production of 350,000 barrels per day by mid-2019. The production, that was stumped due to the civil war that began in December 2013, has now been resurrected. 

On a brighter note, Sudan and South Sudan have agreed on a new deal regarding oil transit fees. According to this deal, Sudan will pay $4 per barrel, down from $9.1 per barrel under the terms of an agreement signed in September 2012 when international oil prices were very high.

Source: www.worldbank.org

Background

The world’s newest country, Republic of South Sudan came into being on July 9, 2011 following its January referendum, with nearly 99% of the population voting in favour of secession, six years after the second Sudanese civil war ended in 2005 with the Comprehensive Peace Agreement. However, the hard-won victory was temporary. The then ruling political party, The Sudan People’s Liberation Movement led by the first president, Salva Kiir Mayardit, accused the former vice president, Riek Machar, of forming a military coup as the two belonged to different ethnicities. Reik Machar, hence, fled and formed his own party, Sudan People’s Liberation Movement-In Opposition (SPLM-IO). The civil war erupted again in December 2013, just two years after the country came into being. Forces loyal to their respective parties, caused unrest in the entire country. The mass killings spread like wildfire, causing great political, social, and economic unrest in the country. The war, in its first month of conflict, displaced 413,000 civilians. But this was not only it, more than fifty thousand people were killed, more than 2.3 million others forced to flee and yet other six million at risk of malnutrition, while seventy percent of schools have been shut forcefully due to worsening conditions. In the beginning of 2017, the Republic of South Sudan was declared a victim of famine.(Ballantine, C., Elmusharraf, K., Scriver, S., and Duvvury, N., 2017). 

 It was followed by inadequate rainfall in the successive year of 2018, that further exacerbated the issue. Crop output was only sufficient for half the population and harvest proved barely sufficient for seven months.

What is the crisis? Causes and consequences.

The crux of the Sudanese crisis lies in the fact that it is the most oil dependent country in the world, thus, most of the government’s revenue comes from oil exports. This boon turned into a bane in no time. With the verdict of the referendum that passed on July 9th, 2011; Sudan was divided into two independent nation with separate states, viz., South Sudan and Sudan. After independence, it was realised that majority of oil reserves, about three quarters, were in South Sudan making it oil dependent. However, due to the civil war that erupted two years after south Sudan’s independence, in 2011, oil reserves were shut. This was a catastrophic error. It accounted for a loss of about 98% of the government’s revenue (De Wall, 2016). The reason behind the shut-down of oil reserves was basically failure to reach an agreement between the two countries regarding the fees to use pipelines. Upon agreement, the production resumed, but was again disrupted in 2013.  The civil war of 2013, that took place in South Sudan impacted both sides of the border. Oil production halved in some oilfields and ceased in the rest. Expenditures made by the government focused more on military rather than public health. Famines struck, inflation levels reached an all-time high, unemployment widened, poverty prevailed. Extremely poor conditions of health, education ensure low levels of human capital in Sudan, this also means that whatever economically viable opportunities are available in the country, are exploited by international businesses and/or enterprising people. International aid was disallowed till 2015. 

Solutions

The economy of South Sudan is expected to recover in financial year 2019 if and only The Revitalized Agreement on the Resolution of the Conflict in South Sudan (R-ARCISS), is respected and followed duly by both the signatories (World Bank, 2018). The oil production is targeted to match the same levels as the country had during independence. The major client for oil exports of South Sudan is China. However, poverty, food insecurity, and debt distress is still likely to prevail in the country. International aid workers were prohibited in the country through a bill passed in the parliament, until war subsided. 

Here are a few solutions that could help better the largest ever growing humanitarian crisis in the Republic of South Sudan:

• International aid workers like Mercy Corps, Red Cross, etc. should provide more efficient access to better healthcare, food, and shelter for the people the country. They should locate target areas and better the worsening conditions in the country. With proper access to education, healthcare, and shelter in the country, the quality of life and human capital can be helped to a certain extent, providing people with livelihoods and sense of security. This would increase the GDP of the country in turn, proving beneficial for the country. 

• Dialogues to form new allies and improving relations with existing ones and help South Sudan get much needed international aid. International relations of South Sudan have worsened with the Donald trump regime in the US of America. Now is no time to put egos before humanitarian crisis. Foreign aid and peace incentives should go hand in hand. 

• South Sudan should consider transitional international administration. With the support of all the other African countries, the sovereign license of South Sudan can be suspended and it can be monitored by a third party. This would prevent the country’s self-destruction capacities. 

• Efforts need to be taken to ensure that the agreement signed in September is duly followed and peace is maintainedbetween Sudan and South Sudan, with rapid oil production taking place to generate revenue for the government. This will be the primary factor that will contribute to the country’s prosperity. Oil prices should be pegged, to prevent further losses in trading. 

Conclusion

 In a nutshell, the fastest growing humanitarian crisis in the world- in The Republic of South Sudan can be helped, after-all. The country needs to take drastic steps to prove itself and get out this deep-rooted crisis. Easier said than done, the country will be on the brink of genocide, if the civil war continues. The much hard-earned independence should be embraced. After all these years and two civil wars, more wars are the last thing the country needs. Peace agreements should be focused upon and the ever-worsening conditions of the country need immediate attention. The self-destructive powers of the country need to be taken away, and third-party intervention is necessary. Famines, inflation, food scarcity, and dry banks need to be controlled. Oil production, the most important asset of the country has to be in focus and drastic measures need to be adhered to increase production of the same to match pre-existing levels, while maintaining peace with Sudan. While South Sudan is now, one of the most freed countries in the world, it can prove to be a better place in the future, provided it is given due focus by the other countries, especially the United States of America.   

References

 Ballantine, C., Elmusharraf, K., Scriver, S., and Duvvury, N., (2017). Working Paper No.4 – South Sudan: The Economic and Social Impact of Violence Against Women and Girls (VAWG).WhatWorks., Retrieved from:

https://www.whatworks.co.za/documents/publications/167-south-sudan-working-paper-final/file

De Wall, Alex,(2016). Understanding the roots of conflict in South Sudan. Retrieved from: https://www.cfr.org/interview/understanding-roots-conflict-south-sudan

Gallant, Skinner, Legassicke, Caparini, Crocker, Coghlan. Melanie, Sara, Michelle, Marina, Chester, Nick,(2016). Six urgent ways to give peace a better chance in South Sudan.

Retrieved from: https://www.opencanada.org/features/six-urgent-ways-give-peace-better-chance-south-sudan/

Williams, Jennifer. (2017). The Conflict in South Sudan, explained. Retrieved from:

https://www.vox.com/world/2016/12/8/13817072/south-sudan-crisis-explained-ethnic-cleansing-genocide

Wilson, Tom. (2019). South Sudan pledges to raise oil production to prewar levels. Retrieved from: https://www.ft.com/content/d2230352-369d-11e9-bd3a-8b2a211d90d5

N.A. (2019). Mercy Corps.Retrieved from:

https://www.mercycorps.org/articles/south-sudan/south-sudan-crisis#crisis-south-sudan-start

N.A. The World Bank in South Sudan. Retrieved from: 

https://www.worldbank.org/en/country/southsudan/overview