World Bank Warns South Sudan Must Fix Public Finances to Halt Economic Collapse
Juba, 11 February 2026
The World Bank has issued a stark warning that South Sudan stands at a critical crossroads, requiring urgent fiscal reforms to reverse its deepening economic decline and achieve sustainable development.
World Bank Sounds Alarm on Fiscal Crisis
Two comprehensive World Bank Group reports released on 10 February 2026 underscore the severity of South Sudan’s economic predicament [1]. The reports emphasise that restoring public finances and implementing urgent, climate-smart actions are essential prerequisites for reversing the country’s economic decline and establishing a sustainable development trajectory [1]. This assessment arrives at a particularly critical juncture for the world’s youngest nation, which has struggled with economic instability since its independence in 2011 [GPT].
Massive Budget Deficit Forces New Borrowing Strategy
The scale of South Sudan’s fiscal challenges becomes evident in its proposed 2025/2026 budget, which projects total expenditure of 8.58 trillion South Sudanese pounds against expected revenues of only 7.01 trillion pounds [2]. This creates a financing gap of 1.57 trillion pounds, equivalent to a deficit of 8% of gross domestic product [2]. Finance Minister Pak Barnaba Chol informed parliament that the government intends to cover this shortfall primarily through new loans and adjustments to oil revenue projections, highlighting the country’s continued dependence on debt and volatile crude income [2]. The government plans to secure funding from diverse sources, including external commercial borrowing, expected loan disbursements of approximately 802.8 billion pounds, and support from the International Monetary Fund’s Food Shock Window [2].
Debt Burden Reaches Critical Levels
The proposed borrowing will exacerbate South Sudan’s already substantial debt burden, with total debt service costs for the 2025/2026 financial year projected to reach $187.3 million (approximately 842.4 billion pounds) [2]. Principal repayments alone account for $178.5 million, representing nearly 9% of total government expenditure, whilst interest payments are estimated at $8.79 million [2]. Commercial creditors and ‘prepayment-for-oil’ lenders will receive the largest share of repayments at $169.1 million, including payments to companies such as Sahara Energy and Nasdec [2]. Bilateral payments, predominantly to China, are estimated at $11.45 million, whilst multilateral lenders including the World Bank and African Development Bank are owed approximately $630,000 [2].
Oil Crisis Compounds Economic Woes
South Sudan’s economic challenges are further complicated by severe disruptions to its oil sector, which is expected to account for 74% of total revenue in the upcoming budget [2]. The situation deteriorated dramatically following the outbreak of war in Sudan in 2023, which has disrupted the critical oil transit route through Port Sudan [3]. Production at the strategic Heglig oil field in West Kordofan ceased on 8 December 2025 after Rapid Support Forces took control, paralysing a facility with 75 oil wells and a central processing station capable of handling 130,000 barrels per day [3]. Whilst Heglig typically produces about 20,000 barrels daily, it plays a crucial role in processing oil from Unity State before export [3]. The broader impact of Sudan’s conflict on South Sudan’s oil exports has been severe, with the World Bank projecting a GDP contraction of approximately 30% in the 2024-2025 fiscal year due to export cessation [3].
Regional Instability Threatens Refugee Return Prospects
The economic crisis occurs alongside escalating political tensions that pose significant risks for South Sudanese refugees considering repatriation. Political conflict between President Salva Kiir and former Vice President Riek Machar has intensified, with Machar facing treason charges and house arrest in Juba [4]. Military commanders issued orders in early February 2026 for forces to act decisively against Machar’s militias, whilst tensions remain concentrated in Jonglei State, where 180,000 people have been displaced according to the United Nations [4]. Tim Glawion, a researcher at the Arnold Bergstraesser Institute in Freiburg, describes the current situation as ‘truly appalling’, noting that more than three-quarters of the population faces severe distress and threats of hunger and death amid war, with the prospect of a new civil war looming alongside flooding [4]. The combination of economic collapse, renewed conflict risks, and humanitarian crisis creates an extremely challenging environment for potential refugee returns, as economic stability remains a fundamental consideration for those contemplating repatriation decisions.