South Sudan’s Economy in Freefall: Poverty Surges Amid Oil and Inflation Crisis

South Sudan faces a severe economic and humanitarian crisis due to an oil production collapse, skyrocketing inflation, and widespread poverty, with 92 percent of the population living below the poverty line. Urgent reforms in fiscal policy, governance, and agriculture are needed to prevent further economic decline and stabilize the country.

South Sudan is facing an unprecedented economic and humanitarian crisis following a collapse in oil production, soaring inflation, and severe food insecurity. According to the latest South Sudan Economic Monitor, published by the World Bank in collaboration with the South Sudan Multi-Donor Transition Trust Fund and regional economic research institutes, the country’s financial situation has reached a breaking point. The report highlights how persistent internal conflicts, weak governance, and external shocks have freed the economy. Over the past decade, per capita GDP has dropped by 18 percent, and inflation has surged 93-fold, drastically reducing purchasing power. Three out of four South Sudanese are living in poverty, and the country remains heavily reliant on oil revenues, which have now dried up following a major pipeline rupture.

The Oil Shock and Its Devastating Effects

The economic downturn intensified in early 2024 when a rupture in the Dar Blend oil pipeline to Sudan halted nearly 70 percent of South Sudan’s oil exports. The shutdown resulted in an estimated $7 million daily revenue loss, weakening the fragile fiscal situation. With oil accounting for 98 percent of the country’s exports, this shock led to a severe foreign exchange shortage, causing the South Sudanese pound to depreciate by 259 percent against the US dollar. The immediate consequence was runaway inflation, which surged to 105 percent in 2024, making essential goods unaffordable.

Food prices skyrocketed, with maize prices increasing by 130 percent, sorghum by 110 percent, and wheat flour by 317 percent in just one year. Fuel prices followed a similar trend, with diesel and petrol costs rising by over 200 percent. The collapse in oil revenues also forced the government to cut essential spending, leading to public salary arrears exceeding 10 months, delays in infrastructure projects, and a decline in education and healthcare funding. The fiscal deficit expanded dramatically as the government struggled to cover basic expenditures.

Poverty and Hunger at Historic Highs

South Sudan is experiencing one of the worst food crises in its history, with nearly nine million people—78 percent of the population facing acute hunger. The situation has been made worse by the ongoing conflict in Sudan, which has forced over one million refugees and returnees into South Sudan, placing additional strain on the country’s fragile economy. The UN Food and Agriculture Organization reported a dramatic drop in food imports from Uganda—South Sudan’s primary trade partner with supplies falling 87 percent compared to the previous year.

Extreme weather conditions have compounded the crisis, with historic floods in 2024 displacing over 330,000 people and devastating farmland. As a result, food production has been crippled, further worsening food shortages. The extreme poverty rate which measures those who cannot afford even basic food has risen to 70 percent, while overall poverty levels have surged to 92 percent. These conditions have left millions dependent on humanitarian aid, with no immediate relief in sight.

A Fragile Financial System and Hyperinflation

The collapse of the oil sector has exposed major weaknesses in South Sudan’s financial system, which remains underdeveloped and highly dependent on oil-related foreign exchange transactions. Banks rely more on currency speculation than lending, with credit to the private sector among the lowest in Africa at just 3.4 percent of GDP. The economic crisis has further squeezed financial institutions, raising concerns about bank failures and liquidity shortages.

In an attempt to stabilize the currency, the Bank of South Sudan (BoSS) has resorted to printing money to finance the government’s deficit, further fueling inflation. The exchange rate gap between the official and parallel markets widened to 179 percent by mid-2024 before partially recovering. Foreign exchange auctions, which were meant to control the market, were suspended multiple times, leading to dollar shortages and further depreciation of the local currency. The central bank has struggled to contain the crisis, while commercial banks have been unable to absorb the shocks caused by the economic downturn.

The Path Forward: Reform or Further Decline?

The World Bank outlines two possible economic trajectories for South Sudan. The business-as-usual approach would mean a sluggish recovery dependent solely on the resumption of oil production. However, the economy would remain vulnerable, and poverty levels could rise to 99.8 percent in 2025, making South Sudan one of the poorest nations in the world. On the other hand, a reform-driven approach could help stabilize inflation, improve governance, and create conditions for sustainable economic growth.

Key policy recommendations include ending monetary financing of deficits, enhancing exchange rate flexibility, and improving transparency in oil revenue management. The government must also prioritize social spending, particularly in education, healthcare, and food security. South Sudan has vast agricultural potential, but to capitalize on it, the government must improve market access, invest in irrigation, and modernize farming techniques. Additionally, fostering the private sector and small businesses could provide alternative sources of employment and revenue beyond oil.

The stakes for South Sudan have never been higher. Without urgent action, the country faces an even deeper economic collapse. Inflation will continue to rise, essential services will deteriorate further, and food insecurity will worsen. However, decisive reforms could pave the way for long-term stability and economic growth. The future of South Sudan hangs in the balance, and the choices made in the coming months will determine whether the nation can recover or sink further into crisis.