The IMF has approved $174 million (148 million euros) in emergency assistance to South Sudan, the country's central bank governor said Thursday, as floods and depressed oil prices rattle its economy.
South Sudan ran out of foreign exchange reserves last year as oil prices fell sharply due to the coronavirus pandemic, depriving the fragile government in Juba of much-needed revenue and sending its currency into freefall.
Devastating flooding has deepened the economic pain and magnified a humanitarian crisis in the world's youngest country, which is enduring its worst levels of hunger since independence a decade ago.
Central Bank Governor Dier Tong Ngor said the loan would help correct "distortions" in exchange rates and pay overdue wages to public servants.
"We have agreed with the IMF that half the amount will be used for budget support to pay salary arrears, and the other half will remain with the central bank" to cover urgent balance of payment needs, he told reporters.
The money would be repaid without interest under the terms agreed with the IMF, he said.
South Sudan is emerging from five years of civil bloodshed that left 380,000 dead and shattered its economy, which is almost entirely dependent on oil.
When it split from Sudan to the north in 2011 following a decades-long war of secession, it took over three-quarters of the oil reserves.
But years of civil conflict after independence, including for control of key oil fields, deprived the country of vital income and the chance to diversify its economy.
The coronavirus pandemic drove oil prices sharply downward, gutting state coffers for a fragile new unity government that took office in February 2020 at the end of a tortured peace process.
In August, the government announced it was out of foreign reserves and unable to pay its civil servants.
The following month President Salva Kiir sacked the finance minister, the head of the tax authority and the director of the state-owned petrol company as inflation soared and the economy teetered.
Corruption and mismanagement are also often blamed for South Sudan's economic troubles.
There are few other sources of foreign currency to prop up the ailing pound, which has freefallen in value and is traded at two different rates.
Ngor says the bank was working "to unify the official exchange rate with the market rate".
South Sudan's economy is forecast to contract by 4.2 percent in the 2020/2021 fiscal year, the IMF said on Tuesday, predicting a modest recovery for the 2021/2022 fiscal year as oil prices climb.
It is the second loan extended by the Washington DC-based lender since South Sudan gained independence from Sudan, its larger, Muslim-majority neighbour to the north.