The South Sudanese were overjoyed at their independence and the prospects of deciding their own destiny. This is understandable following half a century of civil war.
The euphoria of a new nation is likely to fade given the formidable challenge of building from scratch.
South Sudan still bears the wounds of decades of civil strife. The country is one of the poorest on the continent. According to the International Monetary Fund (IMF), half of the country lives below the poverty line.
Government will address this grave social situation with revenues from oil production. Oil revenues make up 98% of government coffers. The stalemate with Sudan over oil revenue sharing and a lack of a robust budget framework could adversely affect fiscal expenditure earmarked for social and economic needs. This will in turn delay poverty alleviation.
Donor funding could bolster government revenues but donor funding alone will not be sufficient to tackle poverty. Moreover, with Western government budgets under severe pressure, aid from the West will by no means flow freely.
In addition to social expenditure, infrastructure development will also form a significant portion of government expenditure. Infrastructure is practically non-existent in South Sudan with just 100km of paved road in the country. The construction sector has rarely been in such demand. Economic growth hinges on the development of infrastructure.
Government macroeconomic policy will focus on diversifying the economy away from oil production. This will ensure that non-oil industries are developed and contribute to the economy. One such industry is likely to be agriculture. Agriculture is seen as ‘low-hanging fruit’ and could be a short-term option. South Sudan is blessed with extremely fertile land with plenty of water in the White Nile Valley.
South Sudan does have more than formidable task ahead of it. Building a nation from scratch, and in the current economic climate, is no small feat. To achieve its ambitions the government has to build the necessary capacity and institutions on which to base the economy on. South Sudan has approached the IMF for technical assistance. The country is awaiting IMF membership following its application in April.
The voting proceeded remarkably smoothly with few serious complaints across South Sudan. With the referendum passed, the disputed north-south border would become the next issue to resolve. Some feared that the specter of an all-out border war would rise.
A simultaneous referendum was supposed to be held in Abyei on whether to become part of South Sudan but it has been postponed due to conflict over demarcation and residency rights. The capital of Abyei is Abyei Town. The area is disputed by South Sudan but controlled by the Sudanese government.
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