There is a substantial reduction in the fiscal deficit of this financial year due to measures incorporated in the budget, the International Monetary Fund has said.

Last year, the body said South Sudan had a deficit of $1.1 billion in the 2016/2017 budget.

IMF warned that if the deficit was financed by borrowing from the central bank or accumulation of arrears, it would continue to fuel inflation and raise the exchange rate against the pound.

The International Monetary Fund welcomed the adoption of the 2016/2017 budget and accompanying policy measures, including a decision to stop monetizing the deficit and improve public financial management.

It says the annual inflation declined to 370 percent as of January from the 550 percent in September last year.

The directors of IMF urged authorities to implement the adopted revenue measures and spending cuts.

They also say the government should take additional measures to reduce domestic financing to a level consistent with macroeconomic stability.

The Executive Board of the International Monetary Fund issued the statement after the conclusion of the Article IV consultation with the Republic of South Sudan on March 15, 2017, in Washington DC.

“Directors emphasized the need to improve expenditure management and prevent domestic arrears, primarily through enforcement of monthly budget allocations, strict control of extra-budgetary expenditures, and setting up of a treasury single account,” partly reads the statement.

They also stressed the need to minimize revenue leakages by implementing domestic oil market reforms, including removal of fuel subsidies, transparent transfer of government crude oil receipts to the budget, and liberalization of the fuel market.

Directors underlined the need to tighten monetary policy to reduce inflation and gradually replenish international reserves.

The IMF acknowledged the progress achieved in the liberalization of the exchange rate regime and elimination of several exchange restrictions and multiple currency practices.

For the medium term, the IMF Directors underscored that policies should be focused on reprioritizing budgetary spending and rebuilding international reserves.

The statement stressed that budgetary spending should be shifted from security-related outlays towards public services and infrastructure investment.