South Sudan will receive a $52.3 million loan from the International Monetary Fund to help address its economic challenges.

The Executive Board of the International Monetary Fund (IMF) approved the disbursement to South Sudan on Thursday under the Rapid Credit Facility.

This is the first Fund supported financial assistance provided to South Sudan since it joined the Fund in 2012.

In September 2020, the second deputy governor of the Bank of South Sudan, Daniel Kech Pouch told reporters that the bank had run out of foreign reserves, bringing the economy to its knees.

Due to public outcry, the bank withdrew its statement, claiming it still had little in the reserve.

In addition, the minister of trade and industry admitted that there was nothing the government could do to stop the local currency from losing its value.

This compelled President Salva Kiir to form the economic crisis management committee to devise ways of revitalizing the economy.

The loan disbursement will help finance South Sudan’s urgent balance of payments needs, contain the fiscal impact of the shock and will provide critical fiscal space to maintain poverty-reducing and growth-enhancing spending, the IMF said in a statement.

According to the IMF, prior to the COVID-19 pandemic, South Sudan had achieved significant progress due to improved political stability and an increase in global oil prices.

However, the pandemic and oil price shock created a severe economic disruption, leading to deterioration in the fiscal and external balances, and a sharp decline in growth, reversing some early gains from political stability.

IMF projects South Sudan’s economy to contract 3.6 percent in the 2020/2021 Financial Year, about 10 percentage points below the pre-pandemic baseline.

“The health and economic impact of the pandemic, coupled with the decline in oil prices, led to a collapse of revenues and have created an urgent balance of payments and fiscal financing needs,” said Mr. Mitsuhiro Furusawa, IMF’s Deputy Managing Director and Acting Chair.

He adds that additional financing from the international community remains critical to close the external financing gap and ease the adjustment burden.

Financing under the RCF carries a zero interest rate, has a grace period of 5 and a half years, and a final maturity of 10 years.