docr- 538

21/10/2016
lisa monaghan

Implications of the Economic Crisis in South Sudan

South Sudan is in the midst of an economic crisis. The economic situation in the country is often overlooked in the context of the humanitarian emergency and the fragile political and conflict environment; yet the worsening economic conditions in the country hold widespread implications for further political instability as well as the operating conditions for humanitarian organisations working in the country.

At independence in 2011 the country was debt-free. In addition, a relatively small population and lucrative oil revenues meant the government’s per capita spending was considerably greater than many of its regional neighbours. Thus beyond the critical state-building and nation-building challenges that the country faced at independence, there was a sense among external observers that the country did have good economic prospects. It had inherited an established oil industry, which augmented by untapped oil reserves, mining and agricultural potential left the country well-placed to pay for the massive investments required in health, education and physical infrastructure. Yet five years later the country has the world’s highest rate of inflation, its currency has lost more than 90 percent of its value and the government’s budget deficit for 2016/2017 is projected to be more than US$ 1.1 billion.

In May 2016 a team from the International Monetary Fund (IMF) visited South Sudan and warned that the deteriorating economic situation threatened further human suffering and the peace process. Yet following the crisis in July, economic indicators have worsened and so too has the likelihood of greater hardship and political instability. And while high levels of dysfunctionality in South Sudan is not uncommon, the converging factors of hyper-inflation and a critical shortage of government revenue threatens to undermine the basis of the patronage network at the heart of the governance system in the country. Moreover, experience from recent years has shown that political instability often manifests as conflict, which in turn results in attacks against civilians and displacement.

For humanitarians the current economic environment holds a number of risks, both in terms of a general deterioration of the humanitarian context but also from increased criminality and the unpredictability of unpaid armed men on organisational operations.

This briefing note will therefore examine the context of the country’s economic crisis and explore some of the potential political and conflict implications as well as the impact on international organisations operating in South Sudan.

Category: Conflict, Economics and Livelihoods, Politics and Political Agreements

Sub-category: Armed Groups/Actors, National, Peace