OPINION: South Sudan needs fiscal discipline and stronger governance to achieve economic stability
The International Monetary Fund’s (IMF) call for South Sudan to continue strengthening fiscal and governance policies is timely and important. For a country facing persistent economic challenges, the message is clear: sustainable economic stability requires fiscal discipline, transparent management of public resources, and strong institutions.
A welcome sign of institutional cooperation
First and foremost, I welcome the noticeable working relationship between the Governor of the Bank of South Sudan, Dr. Addis Ababa Othow, and the caretaker Minister of Finance and Economic Planning, Mr. Athian Diing Athian.
Both technocrats are respected economists and committed reformists. Their cooperation is encouraging, particularly at a time when South Sudan needs stronger coordination between its fiscal and monetary authorities.
The Ministry of Finance is responsible for managing government revenue and expenditure, while the central bank plays a critical role in monetary policy and price stability. Effective cooperation between these institutions could contribute to meaningful economic and institutional reforms.
However, this cooperation must translate into practical policies and measurable results.
The IMF’s message: fiscal discipline and good governance
The IMF’s acknowledgement of South Sudan’s gradual progress in the financial and institutional sectors is encouraging. However, continued progress will depend on the government’s commitment to addressing weaknesses in public financial management and governance.
The IMF’s message is straightforward: government spending must be aligned with available revenue, public debt must remain sustainable, and public resources must be managed transparently.
In simple terms, the government must live within its means and avoid consistently spending more than it collects.
Achieving this requires reducing off-budget expenditure, modernizing public financial management systems, strengthening budget controls, and improving the collection and accountability of oil and non-oil revenues.
These measures are essential to ensuring that public resources are used responsibly and in accordance with national priorities.
Why deficit monetization is a concern
One of the key concerns in South Sudan’s economic management is deficit monetization, also known as monetary financing of government budget deficits.
This occurs when a government finances its budget shortfalls through central bank credit or other forms of monetary financing.
When government expenditure exceeds available revenue, the deficit must be financed. However, persistent reliance on the central bank to cover these shortfalls can create significant macroeconomic risks.
Although monetary financing may provide temporary relief, it does not address the underlying causes of fiscal deficits, such as weak revenue collection, uncontrolled expenditure, and inadequate budget management.
Instead, it risks allowing these challenges to persist while creating additional pressure on monetary stability.
For South Sudan, reducing reliance on deficit monetization should therefore form part of a broader strategy to strengthen fiscal discipline and restore confidence in the economy.
Inflation, currency depreciation, and the cost of living
Excessive monetary expansion can contribute to inflation and currency depreciation, particularly when the money supply grows faster than the economy’s capacity to produce goods and services.
When confidence in the South Sudanese pound weakens, depreciation can increase the cost of imported goods, including food, fuel, and other essential commodities.
The consequences are felt directly by ordinary citizens. Rising prices reduce the purchasing power of salaries and household incomes, making it increasingly difficult for families to meet their basic needs.
Although inflation and exchange-rate movements have several causes, including foreign-exchange shortages, supply constraints, and external shocks, persistent monetary financing of fiscal deficits can intensify existing pressures.
This is why fiscal discipline and monetary stability must be treated as complementary economic objectives.
Protecting central bank independence and strengthening governance
Another important concern is the independence of the Bank of South Sudan.
When the central bank is routinely expected to finance government expenditure, monetary policy risks becoming subordinate to immediate budgetary needs. This can limit its ability to pursue price stability, manage liquidity effectively, and strengthen confidence in the national currency.
The Ministry of Finance and the Bank of South Sudan must coordinate their policies, but this cooperation should not undermine the central bank’s mandate.
Deficit monetization also raises broader governance concerns. Weak expenditure controls, off-budget spending, revenue leakages, and limited transparency can increase pressure on the central bank to finance government shortfalls.
Consequently, fiscal discipline must go hand in hand with transparent budgeting, stronger revenue administration, and accountability in the management of public resources.
Every pound collected and spent by the government should be accounted for through credible public financial management systems.
Three priorities for economic reform
In my view, the government and the Bank of South Sudan should prioritize three practical measures.
First, fiscal consolidation. Government expenditure should be aligned with realistic revenue projections. Off-budget spending must be brought under effective control, while public debt should remain within sustainable limits.
Second, stronger domestic revenue collection. South Sudan needs to broaden its non-oil revenue base, improve tax administration, strengthen the collection of oil revenues, and reduce leakages that prevent public resources from reaching the national treasury.
Third, central bank independence. The government should establish a credible path towards reducing reliance on direct central bank financing of budget deficits. Monetary policy should support price stability and strengthen confidence in the South Sudanese pound.
These measures are achievable, provided there is effective coordination between the relevant institutions, clear policy direction, and sustained commitment to implementation.
From international commitments to domestic action
South Sudan’s high-level engagement with the IMF in Bangkok is an important opportunity to strengthen international cooperation and rebuild confidence in the country’s economic management.
However, the success of this engagement will ultimately depend on the implementation of reforms at home. International meetings and statements are important, but their value lies in the practical results they produce.
The working relationship between Dr. Addis Ababa Othow and Mr. Athian Diing Athian provides an encouraging starting point. Their institutions now have an opportunity to translate cooperation into policies that strengthen public financial management, improve revenue collection, and support monetary stability.
Ultimately, the IMF’s call for fiscal and governance reforms should not be viewed simply as a requirement for maintaining international support. It should be understood as an opportunity to strengthen South Sudan’s economic institutions and improve the management of public resources.
South Sudan needs fiscal discipline, stronger governance, and credible monetary policies to achieve sustainable economic stability.
The government must spend responsibly, collect revenue effectively, and reduce its reliance on monetary financing to cover budget shortfalls.
About the Author
Stephen Omiri Obur is a prominent South Sudanese media executive and the Chief Executive Officer of Eye Media and Eye Radio. He is also a Certified Public Accountant and a PhD candidate in Strategic Management at the University of Nairobi.
He writes on media, leadership, governance, and the social and economic development of South Sudan.
He can be reached at Stephen.Omiri@eyeradio.org.
