Meanwhile, the Board also projected a gradual increase in oil revenue from early 2025 to reach its full potential by June 2025.
By Opio Jackson
The International Monitoring Fund (IMF) on Friday said South Sudan’s GDP growth is estimated to have dropped to -5.8 percent in the fiscal year 2024, between July 2023 and June 2024.
It attributed the downgrade to lowering oil exports (a 21 percent decrease in oil export values in FY2023/24 compared to FY2022/23).
The report, titled: IMF Executive Board Discusses the Third Review of the Staff-Monitored Program with Board Involvement with the Republic of South Sudan, also noted the increase in the exchange rate.
It said while the parallel exchange rate depreciated by 306 percent during January−September 2024, the official exchange rate depreciated by 190 percent during the period.
“The Bank of South Sudan (BoSS)’s attempt to delay the official exchange rate adjustment to dampen the impact of the shock led to a large parallel foreign exchange market premium,” the statement read in part.
“It however recently allowed gradual depreciation of the official exchange rate, which decreased the premium—54 percent on average in September 2024 from 140 percent in July 2024.”
The board of directors also noted that the inflation surged to 107.3 percent at the end of July 2024 due to the parallel exchange rate depreciation.
The report establishes that the execution of the FY2023/24 budget reflects the challenging conditions.
It said while oil revenue collection was strong at the end of December 2023 at 16 percent of GDP (for six months), the outturn was weak owing to the pipeline damage (24.8 percent of GDP in FY2023/24 compared to 30.5 percent in FY2022/23).
However, the report acknowledged a significant improvement in the non-oil revenue collection.
“Strong non-oil revenue partly compensated, contributing 6.5 percent of GDP in FY2023/24 compared to 4.2 percent of GDP in FY2022/23.”
The IMF attributed the positive outturns of the non-oil revenue to an increase in November 2023 in the exchange rate used for customs valuation from $ 90 to $300 and other revenue administration measures including hiring of new staff and digitalization of tax and customs processes.
“Public wages were not paid in 2024, adding to previous arrears (reaching 8 months at end-June),” says the report.
Meanwhile, the zero ceiling on contracting non-concessional debt and floor on net international reserves were met, according to the IMF.
“The other five quantitative targets were not met. As the duration of the oil production shock lengthened more than initially expected, financing constraints led the authorities to further delay salary payments and under-execute social spending while incurring a larger primary deficit, debt to the central government, and monetary financing than programmed.”
In fiscal policy, the fiscal deficit is projected to decrease to 1.9 percent of GDP in FY2024/25, from 5 percent of GDP in FY2023/24, as the oil production shock gradually recedes, and spending restraint continues.
Meanwhile, the Board also projected a gradual increase in oil revenue from early 2025 to reach its full potential by June 2025.
However, this will only be complemented by a strong non-oil revenue uptick (a nominal increase of 125 percent in FY2024/25 compared to FY2023/24), in line with the draft budget as revenue administrative measures adopted in FY2023/24 continue to yield and new measures included in the draft budget FY2024/25 are implemented, says IMF statement.
“Overall, revenue will however decrease to 26.5 percent of GDP in FY2024/25 compared to 31.3 percent of GDP in FY2023/24, owing to the still recovering oil production and strong exchange rate-driven nominal GDP increase.”
On spending, the staff projects full payment of FY2024/25 salaries (3.9 percent of GDP) and repayment of six months of the domestic salary arrears incurred in FY2023/24 (3.0 percent of GDP) plus foreign salary arrears12 (0.5 percent of GDP).
They said the payments will include one month of current salary and one month of salary arrears every month (the equivalent of two months of salaries paid every month) starting when oil production increases.
The balance of two months of arrears will be deferred to FY2025/26 owing to financing constraints. Capital spending under the oil-for-infrastructure scheme is projected to resume gradually from early 2025, consistent with the assumed timeline of oil revenue recovery.
Other outlays are projected in line with the draft budget assumptions (para. 13). However, the overall spending is projected to remain constrained at 28.4 percent of GDP in FY2024/25, lower than in FY2023/24 (36.4 percent of GDP) reflecting six months of constrained oil exports.
The IMF attributed the positive outturns of the non-oil revenue to an increase in November 2023 in the exchange rate used for customs valuation from $ 90 to $300 and other revenue administration measures including hiring of new staff and digitalization of tax and customs processes.