World Bank Report: With Peace and Accountability, Oil and Agriculture Can Support Early Recovery in South Sudan

The World Bank Group
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Economic recovery has stalled in South Sudan amid a multitude of crises, including the COVID-19 pandemic, climate shocks and dwindling oil production, and most recently, the adverse effect of the broad-based rise in commodity prices brought on by the war in Ukraine.

The latest World Bank economic analysis for South Sudan, Directions for Reform: A Country Economic Memorandum (CEM) for Recovery and Resilience, highlights the need for the country to leverage its natural capital in the agriculture and oil sectors to support recovery and resilience.  

Oil and agriculture are the most important sectors of South Sudan’s economy, with oil contributing to 90 percent of revenue and almost all exports, while agriculture remains the primary source of livelihood for more than four in five households. Thus, the report suggests a focus on the country’s use of its main endowments of natural capital—oil and arable land—is warranted in the early stages of recovery.

“Getting South Sudan to realize its potential will require steps aimed at consolidating peace and strengthening institutions, as well as targeted reforms tailored at harnessing South Sudan’s rich natural capital for development impact as first-order prerequisites for inclusive economic recovery,” said Firas Raad, World Bank Country Manager for South Sudan.

With weak institutions and recurring cycles of violence, South Sudan remains caught in a web of fragility and economic stagnation a decade after independence. A dearth of economic opportunities and food insecurity are major concerns, and are reinforced by inadequate provision of services, infrastructure deficits, displacement, and recurring climatic shocks

The cost of the conflict has been immense, with South Sudan’s real gross domestic product (GDP) per capita in 2018 estimated at being one-third of the counterfactual estimated for a non-conflict scenario. However, authorities in 2020 initiated an ambitious reform program aimed at macroeconomic stabilization and modernization of the country’s public financial management architecture. With this reform effort, the gap between the official and parallel exchange rates was eliminated, and inflation declined. To consolidate and broaden these gains, more will have to be done to strengthen governance systems and improve transparency in economic management.

“Three messages emerge from this report. First, there is a peace dividend in South Sudan. South Sudan’s real GDP per capita in 2018 was estimated at one third of the counterfactual estimated for a non-conflict scenario. Thus, maintaining peace can by itself be a strong driver of growth. Second, with better governance and accountability, South Sudan’s oil resources can drive transformation. Third, South Sudan’s chronic food insecurity could be reversed with targeted investments to improve the resilience of the agricultural sector,” said Joseph Mawejje, World Bank Country Economist for South Sudan.

The CEM outlines several recommendations, including:

  • Addressing the drivers of fragility, ending all forms of conflict, and ensuring peace and stability in all parts of the country are prerequisites for an inclusive economic recovery.
  • Stay the course on macroeconomic reforms and continue on a stabilization path, building on key milestones already achieved in unifying the exchange rate and taming inflation.
  • Improve oil sector governance by ensuring that all oil revenues and expenditures are on budget and used effectively to achieve national development goals.
  • Support the resilience of agricultural sector to reverse the food crisis and achieve food security for all households.

The Country Economic Memorandum is a World Bank Knowledge product that provides an assessment of the country’s drivers of growth and productivity. In this context, this report highlights what South Sudan can do to sustain future growth, but it also shows why the country has not yet managed to achieve high levels of diversified growth alongside peace, stability, and a better standard of living for its people. The report also suggests strategic pathways by which South Sudan can break free from its legacy of persistent food insecurity, in a country with enormous agricultural potential.

Distributed by APO Group on behalf of The World Bank Group.

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