Central Bank Moves to Offset Foreign Aid Loss

(Juba) – The Bank of South Sudan has warned that recent reductions in United States foreign aid will hit the country’s fragile economy hard, cutting funds for vital services such as health and education. In an extraordinary meeting held over the weekend and chaired by newly appointed governor Addis Ababa Othow, the bank’s Monetary Policy Committee (MPC) said the aid freeze will widen financing gaps for programmes that millions of citizens rely on.

The committee noted that South Sudan is already grappling with outside pressures, including the conflict in neighbouring Sudan and growing tensions in the Gulf of Aden—factors that could disrupt the export of crude oil, the country’s main source of hard-currency income. Any interruption to oil shipments would sharply reduce government revenue and further weaken the South Sudanese Pound (SSP), which officially trades at about SSP 4,612 to 1 US dollar as of 23 June 2025.

According to the MPC statement, the suspension of most USAID contributions will directly affect essential public services. Health facilities, schools and water-sanitation projects that depend on donor funds risk shutting down or scaling back, leaving communities without basic support.

To soften the blow to businesses and households, the central bank lowered its benchmark interest rate from 15 percent to 13 percent. Officials hope cheaper credit will encourage private-sector borrowing, support small enterprises, and keep economic activity from stalling. Commercial banks are expected to adjust lending rates accordingly, though the effectiveness of the move may be limited if foreign-exchange shortages persist.

The committee welcomed what it described as a recent rise in government spending on agriculture and mining. Diversifying away from oil, it said, is the only sustainable way to cushion South Sudan against external shocks. Agriculture, in particular, holds promise for boosting food security and reducing the costly import bill that drains scarce foreign currency.

Even with these measures, policymakers conceded that without a quick resolution to regional conflicts, and a possible restoration of US aid, South Sudan will face tighter budget constraints. The bank urged government ministries to prioritise critical social services and called on international partners to maintain humanitarian commitments while the country works to broaden its economic base.