South Sudan's December 22 Election Uncertain Amid Economic Crisis

South Sudan is approaching its historic general election on December 22, amidst a looming economic collapse and a recent $1 billion award to Qatar National Bank (QNB) by a US-based international arbitrator. The award, related to a wartime debt, has major implications for the economy and threatens the lives of a population caught between worsening cost of living and political uncertainty. The country is grappling with soaring fuel price spikes driven by systemic currency depreciation, amid regional oil supply disruptions.

The South Sudanese economy remains structurally vulnerable due to its dependence on crude oil exports for foreign exchange and imports of most consumer goods. Economist Rombek Rombek notes that any reduction in foreign exchange inflows or increase in demand for US dollars puts pressure on the exchange rate, causing import costs to rise, fuel to become more expensive, and inflation to spread rapidly. The continuing conflict in neighbouring Sudan has disrupted oil exports and regional trade, while tighter global financial conditions have intensified pressures on many developing economies.

The World Bank says South Sudan's outlook is constrained by political and economic instability, and that the restoration of oil production will lift GDP growth in 2026 to 10 percent, assuming no further conflict-related disruptions in Sudan. However, sustaining growth will require attracting investment, particularly foreign direct investment, into both oil and non-oil sectors. As state coffers run on empty, the National Elections Commission (NEC) remains severely underfunded, raising fears that pushing ahead with the vote could shatter the nation's fragile stability.

The $1.02 billion award against the Government of South Sudan and the central bank in a US arbitration centre has deepened Juba's financial woes. A US District Court in Washington, DC, ruled in favour of QNB, enforcing an International Centre for Settlement of Investment Disputes (ICSID) arbitral award related to defaulted wartime loans. The dispute originates from loans advanced to Juba by QNB, beginning in 2012, with a quarterly repayment schedule starting in 2019.

South Sudan did not make payments as scheduled, prompting QNB to demand immediate repayment. From 2019 to 2020, QNB sent multiple demand letters to South Sudan's central bank seeking repayment of the loan. In 2020, Juba made some partial payments by directing proceeds from oil sales, repaying about $70 million between 2020 and 2022. QNB initiated arbitration proceedings under the ICSID Convention in September 2020, and the Arbitral Tribunal was constituted in March 2021.

The Arbitral Tribunal received briefing from the parties and held a hearing in January 2023, listening to arguments on both jurisdiction and the merits. South Sudan argued that the ICSID did not have jurisdiction to determine the matter, and that they did not breach the facility agreement. The lender argued that the Arbitral Tribunal had jurisdiction over the dispute and over all parties, and that South Sudan and the central bank had breached the facility agreement.

The latest legal action increases Juba's financial pressure as it continues to face challenges managing public debt and funding essential services. The country's economic crisis, combined with the looming election, has raised concerns about the nation's stability. The outcome of the election and the government's ability to manage its debt will be crucial in determining the country's future.

Key points

• South Sudan's economy is structurally vulnerable due to its dependence on crude oil exports and imports of most consumer goods.
• The $1.02 billion award to Qatar National Bank has deepened Juba's financial woes and increased pressure on the government to manage its debt.
• The country's economic crisis, combined with the looming election, has raised concerns about the nation's stability.