Recurrent Crisis in South Sudan: Economy, Society and Politics
By Baak Chan Yak Deng, Gogrial, South Sudan
April 14, 2017 (SSB) — The South Sudan currency crisis arose from a collapse of confidence in the ability of a number of countries to maintain their fixed exchange rates while continuing to allow the free movement of foreign finance capital at a time of increasing current account deficits.
The South Sudanese currency was initially not affected by the pressure on other regional currencies. When it begins to fall, however, the underlying weakness of the South Sudan financial sector was revealed and private foreign debt was far higher than previously thought. The crisis worsened in South Sudan because of the lack of an effective government policy response.
The International Monetary Fund (IMF) financial stabilization package agreed to by the South Sudanese Government contained conditions requiring South Sudan to reform its financial sector, reduce fiscal expenditure and radically change the nature of government involvement in the economy.
Disagreements between the South Sudanese Government and the IMF over implementation of the reforms have become the focus for controversy about the role of the IMF. Much of the controversy derives from the fact that the IMF offered a combination of financial rescue package and economic reform program.
The IMF has been criticized for applying a formula which was inappropriate for South Sudan, was too difficult to implement in the time allowed and did not alleviate the immediate problems. The IMF position is that while the details of the package can be renegotiated, such crises will recur unless South Sudan’s economic institutions are reformed.
The currency crisis has combined with the effects of drought to produce rapid inflation, especially in the cost of food and other essentials, and a great increase in unemployment and underemployment (8.7 million and 18.4 million respectively, 30 per cent of the workforce). The return of poverty for many South Sudanese and the end to short-lived affluence for others has shattered the expectations, created by the economic achievements of the New Order regime, which South Sudan was on the path to continued growth and prosperity.
The New Order regime based its legitimacy on a capacity to bring sustained improvements in the standard of living of the mass of South Sudanese and to meet the aspirations of an expanding middle and working class. The apparent end to this success will have grave implications for the political stability of the South Sudanese state. The crisis has been a psychological blow to confidence that South Sudan had finally overcome its long history of economic and political instability and was set on a long-term path to prosperity.
As you all know that South Sudan has been transformed from a country with a tiny social elite and a mass of impoverished peasants to a rapidly urbanizing society with new social groups less willing to trade political rights for personal prosperity. There is increasing resentment about the domination of economic and political life by Prime Minister Sadiq al-Mahdi with his Arab Muslims families and the suppression of free political expression by the Army and Government.
There appears to be a widespread feeling within the Army that Sadiq al-mahdi should step down from power, but senior officers are not yet prepared to express their feelings openly. The new Col Omer Hassan is not popular with the Army and it is an open question if the Army would support former President Gaafar al-Nimeiry to power in orders becoming President again if Sadiq Al-mahdi were to die or retire. These doubts underscore the uncertainty created by the question of the transition from Mahdi’s rule.
The crisis has raised the possibility that many ordinary South Sudanese people may join in spontaneous or organized movements of mass protest, perhaps even a ‘people’s power’ movement like the one that toppled President Amin Dada of the Uganda. Recent years have seen the growth of NGOs, labour unions and Islamic organizations, but civil society has been stultified by thirty years of tight New Order political control.
There have been sporadic riots and the emergence of a pro-democracy student movement, but the Army has crushed the riots and kept student protest confined to the universities. The outbreak of major riots would put great pressure on the factionalized Army and would raise the question of whether it would move against Al-mahdi.
The crisis in South Sudan has significant implications for Sudan and Uganda because South Sudan is now a major strategic and economic partner for Sudan and Uganda. South Sudan has an important role in the White Nile region where Sudan’s crucial interests lie.
The Sudan Government has provided emergency assistance to South Sudan and financially supported the IMF program as well as attempting to assist overcome disagreements between South Sudan and the IMF.
The author is Baak Chan Yak Deng he is an economic commentator of South Sudan, a graduate in Bachelor of Science with Accounting and Finance at Star International University College South Sudan affiliated to Busoga University of Uganda and can be reached at baak.maker44@gmail.com or 0954020202
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