Why South Sudan is in debt distress

South Sudan, a country rich in oil, is currently facing high levels of debt distress, posing significant challenges for its economy. The nation's debt levels have reached alarming rates, raising concerns about the future economic stability of the region. The CEO of Orus Consulting Limited, Akol Dok, shed light on the intricate factors contributing to South Sudan's debt crisis and the measures being taken to address this pressing issue. Following its independence in 2011, South Sudan plunged into conflict just two years later, leading to a turbulent period marked by declining oil production and prices. The country's oil production dropped significantly from 400,000 barrels per day to around 180,000 barrels per day, while oil prices plummeted from previous highs to as low as $60-$70 per barrel. Despite the signing of the revitalized agreement in 2018, which aimed to foster stability, South Sudan's economy continues to grapple with the aftermath of conflict and external economic pressures. In a bid to diversify its economy and reduce reliance on oil revenues, South Sudan has embarked on various initiatives to spur growth in non-oil sectors. Agriculture has emerged as a key focus area, with substantial investments being made to boost agricultural output across the country. Additionally, infrastructure projects, such as road construction, are underway to enhance connectivity and facilitate economic development. Moreover, the hospitality and service industries are experiencing growth as peace has been restored in the region. The tourism sector, in particular, shows promise as South Sudan aims to leverage its natural attractions to attract visitors and investments. These efforts to diversify the economy are essential in reducing the country's debt burden and ensuring sustainable economic progress. Despite the considerable challenges posed by its debt levels, South Sudan has taken steps to implement tight fiscal measures to address the issue. The Ministry of Finance and Economic Planning has been actively restructuring debts and renegotiating terms to ensure timely repayment. Collaborating with international financial institutions like the IMF and World Bank, the government has secured rapid credit facilities to stabilize the currency and manage internal debts effectively. South Sudan's debt-to-GDP ratio has shown improvement, declining from 60.7% to 35.8% between 2017 and 2020. The government is leveraging the current high oil prices to pay off debts backed by oil revenues and reduce its external debt burden. With the country's oil production gradually increasing and a prevailing peace environment, South Sudan has a window of opportunity to enhance economic stability and foster growth through diversification. Efforts to boost non-oil revenue collections through taxation measures are also underway, aimed at reducing reliance on oil revenues and enhancing government income. By empowering the national revenue authorities to improve tax collection efficiency and broaden the revenue base, South Sudan aims to achieve a more balanced and sustainable economic model. As South Sudan navigates its debt distress challenges, the path to economic recovery hinges on effective diversification, stable oil prices, and prudent fiscal management. By seizing opportunities for growth in non-oil sectors and implementing sound financial strategies, South Sudan can pave the way for a resilient and prosperous economy in the future.