South Sudan Faces Hurdles as World's Newest Country

Newfound independence gives hope to South Sudanese

Country faces challenges in human capital, infrastructure

IMF is helping build South Sudan’s capacity for macroeconomic management

After decades at war, South Sudan faces considerable difficulties. With a population of about 8 million, the country covers a land area nearly as large as France, but has only 100 kilometers of paved roads. One of least developed nations in the world, South Sudan lags the rest of sub-Saharan Africa on most of the U.N.’s Millennium Development Goals, with half its population living below the poverty line (see Table 1).

“South Sudan’s challenges are formidable,” says Kristina Kostial, the IMF’s mission chief for the country. “Much has been done since 2005, and achieving independence on July 9 was a very important step, but the South Sudanese still have a long road ahead of them.”

The new country has untapped potential, Kostial says. There are large livestock, fishery, and forestry resources, which—together with adequate rainfall, fertile land, and available water—could hold promise for labor-intensive agricultural exports. Developing agriculture in South Sudan could reduce the country’s dependence on oil, which currently accounts for 98 percent of the government’s revenue. And revenue from oil provides an opportunity to invest in social and infrastructure development and set aside savings for the future.

New beginning

Sudan’s civil conflict went on for nearly 50 years with few breaks, starting just before independence from Egypt and the United Kingdom in 1956 and ending in 2005 with the signing of the peace agreement.

The agreement provided for a six-year interim period of autonomy for South Sudan, followed by a referendum for the people of South Sudan to determine their future status. In January 2011, the South Sudanese voted overwhelmingly in favor of secession. Since then, leaders from both sides—with help from the African Union—have been negotiating the terms of the secession.

Several factors complicate Sudan’s split, but the most contentious is the division of oil resources. While the majority of the oil fields are found in the south, the oil pipelines flow north to Port Sudan on the Red Sea. Cooperation between the two countries will be essential.

Three key issues are at the heart of the negotiations taking place under the auspices of the African Union:

• Oil sharing. The 50-50 split of oil revenues was scheduled to end at independence, but how...