When poverty reduction competes with state building:
The case of South Sudan
The world’s youngest nation, South Sudan, has now had over a year of
political economic autonomy, following a break away from Sudan in July 2011. Independence
was preceded by the period after the signing of the Comprehensive Peace
Agreement in 2005, during which it operated as a semi-autonomous government.
South Sudan has since made significant progress in restoration of peace,
political transition, establishment of governance structures towards building a
stable state. There have also been improvements in the socio-economic wellbeing
of the people of South Sudan.
However, this has not been without challenges some of which could negate
the progress already made. Preliminary analysis on public expenditure and
resource flows reveals critical resource management challenges that could have
far reaching implications on fiscal sustainability, public accountability and
the economic well being of the country’s poor.
Despite significant data limitations and methodological constraints, Kenneth Okwaroh analysed the flow of domestic
revenues and Official Development Assistance (ODA) in South Sudan. He used budget estimates for the period between
2006 and 2011 as a proxy to analyse the intentions, motivations and the
character of resource allocation in the country with a specific focus on
resource allocations for poverty reduction. The analysis revealed the following:
Competing resource demands - Poverty missing out
II – Since the signing of the CPA in 2005, the country has experienced
considerable growth in state revenues and ODA flows. However this has not been translated
into significant progress in human development, poverty reduction and economic
growth. Compared to other states in the East
African region, South Sudan has the lowest life expectancy at birth (42 years),
lowest adult literacy levels (27%), highest maternal mortality rate (2,054 per
100,000 live births) and one of the highest poverty headcounts (51%). Given
these high poverty and welfare indicators, and the direction of government
expenditure, it is deducible that, key priority areas for budget allocation are
not efficiently and effectively aligned poverty reduction outcomes.
III – South Sudan could be struggling
with mechanisms for balancing resource demands for state building with the
urgent need to address poverty and human development. Despite government revenues and expenditure steadily expanding,
pro-poor sectors such as agriculture, health and education, have been considerably
under-funded. For example while state revenues expanded by 17.2% between 2008
and 2012, total expenditure on agriculture, education and health as a
proportion of total spending grew by only 11.7%. These three sectors, which were
identified as expenditure priorities, collectively received 12.5% of total
average spending, compared with security, which received 28.2%. Conversely,
public administration and justice, law and order, which were not considered
priority sectors, reported higher outturns (11.5% and 11.4% respectively). Moreover
expenditure in all three sectors fell short of international standards and
targets set by peer states.
IV – There are significant gaps
in the alignment of resources with identified expenditure priorities. Both budget
allocations and donor commitments are not adequately synchronised with these
priorities. For example, the education and health sectors, which the GoSS
outlined as priority expenditure areas, received lower proportions of total
spending (6.9% and 4.2% respectively) than public administration (11.5%) and
rule of law (11.4%), which were not identified as priority sectors.
Okwaroh argues that the findings
depict a largely unstable macro-economic environment that least guarantees
fiscal sustainability, steady public revenues and predictable public spending.
There is compelling evidence that abundant oil revenues in South Sudan coupled
with aid could be impinging on effective domestic tax collection. With a small
underdeveloped and less diversified formal economy, low capacity government
institutions and inefficient tax collection, it
risks becoming an import-dependent country afflicted with the ’resource curse’.
Fluctuating GDP growth and
instability in the oil industry add to the fragility of a conflict-ridden
state, faced with multiple resource demands for reconstruction, state building
and poverty reduction. South Sudan must therefore streamline its management of oil and explore alternative, non-oil resource streams – such as agriculture – to
ensure fiscal sustainability. It must institute mechanisms to ensure effective
balancing of resource demands for state building with funding for poverty
response.
Okwaroh argues that the findings
depict a largely unstable macro-economic environment that least guarantees
fiscal sustainability, steady public revenues and predictable public spending.
There is compelling evidence that abundant oil revenues in South Sudan coupled
with aid could be impinging on effective domestic tax collection. With a small
underdeveloped and less diversified formal economy, low capacity government
institutions and inefficient tax collection, it
risks becoming an import-dependent country afflicted with the ’resource curse’.
Fluctuating GDP growth and
instability in the oil industry add to the fragility of a conflict-ridden
state, faced with multiple resource demands for reconstruction, state building
and poverty reduction. South Sudan must therefore streamline its management of oil and explore alternative, non-oil resource streams – such as agriculture – to
ensure fiscal sustainability. It must institute mechanisms to ensure effective
balancing of resource demands for state building with funding for poverty
response. 
