The Republic of South Sudan became the world’s newest nation and Africa’s 55th country on July 9, 2011, following a peaceful secession from the Sudan through a referendum in January 2011. As a new nation, South Sudan has the dual challenge of dealing with the legacy of more than 50 years of conflict and continued instability, along with huge development needs. Formal institutions are being built from a very low base and the capacity of government to formulate policy and implement programs is limited, but growing. South Sudan also has significant oil wealth, which if effectively used to drive development, could provide the basis for progress in the coming years.
The renewed conflict, in South Sudan is undermining development gains achieved since independence and worsened the humanitarian situation. Without conflict resolution and a framework for peace and security, the country’s longer-term development and prosperity are threatened.
Although South Sudan has vast and largely untapped natural resources, beyond a few oil enclaves, it remains relatively undeveloped, characterized by a subsistence economy. South Sudan is the most oil-dependent country in the world, with oil accounting for almost the totality of exports, and around 60% of its gross domestic product (GDP). On current reserve estimates, oil production is expected to reduce steadily in future years and to become negligible by 2035.
The country’s growth domestic product (GDP) per capita in 2014 was $1,111. Outside the oil sector, livelihoods are concentrated in low productive, unpaid agriculture and pastoralists work, accounting for around 15% of GDP. In fact, 85% of the working population is engaged in non-wage work, chiefly in agriculture (78%).
The current conflict has had a significant financial impact on South Sudan with 2015/16 GDP contracting by 6.3%. With oil production disruptions and below-average agriculture production, the economy is expected to contract further in FY2016/02017, while fiscal and current account deficits will soar, spiraling domestic prices and the parallel market premium. Extreme poverty rate has increased to 65.9%. Avoiding protracted crisis requires recommitment to a political settlement and major fiscal adjustment.
Export revenues decreased due to declining oil prices and lower oil production. Oil production is expected to decrease to about 120,000 barrel per day this fiscal year down from 165,000 barrels per day in 2014 and a peak of 350,000 barrels per day before independence in 2011. The decline in oil revenue, has also had a negative impact on macro-budgetary indicators, requiring austere fiscal adjustments. The current account has deteriorated considerably leading to depreciation of the parallel exchange rate and fueling inflation. The South Sudanese Pound (SSP) depreciated on the parallel market from SSP 18.5 per dollar in December 2015 to reach almost SSP 80 per dollar by end September, 2016. South Sudan is now in hyperinflation. The annual inflation increased by 661.3% from July 2015 to July 2016 and by 730% from August 2015 to August 2016. Relative prices of food have increased and food shortages and hunger are the most alarming signal of the country's larger economic collapse. Rising food prices have put many households in both urban and rural areas in a very difficult position, as they are unable to afford the minimum food basket. According to the Ministry of Finance and Economic Planning (MOFEP), the Central Bank has no reserves and the limited oil and non-oil revenues are spent on defense and security loans. The incidence of poverty has also worsened, from 44.7% in 2011 to 65.9% in 2015, with a corresponding increase in the depth of poverty.
The country is very young with two-thirds of the population under the age of 30. The 2009 national Baseline Household Survey also reveals that the country faces several human development challenges. Only 27% of the population aged 15 years and above is literate, with significant gender disparities: the literacy rate for males is 40% compared to 16% for females. The infant mortality rate is 105 (per 1,000 live births), maternal mortality rate is 2,054 (per 100,000 live births), and only 17% of children are fully immunized. 55% of the population has access to improved sources of drinking water. Around 38% of the population has to walk for more than 30 minutes one way to collect drinking water, and some 80% of South Sudanese do not have access to any toilet facility.
The country had begun to post improved results, particularly in health and primary education in the years following the 2005 Comprehensive Peace Agreement, and the resumption of oil flows in 2013 was expected to boost economic growth significantly. However, the impact of the conflict on the population and the breakdown in services continue to have deep economic and social consequences for a country where human development is already among the worst in the world.
Last Updated: Oct 20, 2016