Wages for civil servants with lower grades in South Sudan should be raised to compensate for the loss of purchasing power, the International Monitory Fund has recommended.

In a report published on its official website, IMF says South Sudan is facing massive economic challenges due to prolonged internal conflict and subdued oil prices in the international market.

It says South Sudan requires decisive economic measures and lasting peace to rebuild confidence in the economy.

“Restoring of macroeconomic stability will require immediate reduction of the large fiscal imbalance that in the last couple of years has led to a rapid expansion in government borrowing from the central bank and the accumulation of significant arrears,” said Jan Mikkelsen, IMF team leader.

The call comes days after an IMF staff team met with the Minister of Finance and Economic Planning, Stephen Dhieu Dau, the Governor of Bank of South Sudan, Kornelio Koryiom Mayik, and top staff from the Ministry of Petroleum, and the National Bureau of Statistics in Nairobi, Kenya .

The 5-day meeting which concluded last weekend aimed at discussing solutions to the economic situation in the country.

IMF says the current inflation which stands at 500 percent, with individual purchasing power reduced by 50 percent since 2013, has been aggravated by the July incidence, and the drop of oil prices in the global markets.

According to the IMF, the country’s foreign exchange reserves were close to exhaustion.

The body calls on the Bank of South Sudan to ensure that the difference between the official and parallel rates is reduced to 2-3 percent by allowing the auction and indicative rates to reflect market conditions.

It urges the authorities to also adopt further measures, including eliminating fuel subsidies, ghost workers, and reducing costs of foreign diplomatic missions.

In order for the recommendations to be effective, it says it will require simultaneous efforts to promote reconciliation and address the security challenges in the country as a ‘key priority’.

IMF commended the 2016/17 fiscal year budget recently adopted as an important step towards restoring macroeconomic stability.

For IMF 2016 Article IV Mission on South Sudan, click here.