Sudan during wave 4 in 2017 rather than inflation between waves 1 and 2 in 2016. The coefficients for the regression model for waves 1 and 2 are generally not statistically significant, while those for the regression for waves 1 and 4 are significant with the initial specifications above. This is consistent with the inflation dynamics between waves 1 and 2 and waves 1 and 4 and changes in welfare indicators (see Figure A16).

# **4. CONCLUSIONS AND POLICY RECOMMENDATIONS**

The high inflation in South Sudan continues to put many households under extreme financial stress, as they face increased prices without compensatory increases in income. This paper contributes to the available empirical evidence on micro-level impacts of inflation by analyzing the impact of high inflation on household livelihoods in urban South Sudan. We use panel data collected during the High Frequency South Sudan Survey (HFSSS) waves in 2015, 2016 and 2017. Increasing resilience to high inflation would allow to shift the inflation crisis management paradigm from a humanitarian to a development approach.

Breaking down inflation by food price inflation and non-food price inflation reveals that the latter increased drastically more than the former during this period. Although there have been significant increases in both food and non-food prices, the observed high inflation in South Sudan is mostly driven by the escalation of non-food prices. Inflation negatively impacted various household livelihood indicators related to poverty, education, labor, hunger and perceptions of welfare.

Inflation had a strong negative impact on urban poverty between 2015 and 2017, mainly driven by the increase of non-food prices. The loss of purchasing power of wages and salaries has driven many of the South Sudanese residing in urban areas into poverty. Continuous increases in inflation will only worsen the already high poverty situation. Addressing the issue of high inflation must be at the center of efforts to achieve stability the economy and reduce poverty in South Sudan. In addition, higher education has a key role for poverty reduction because the impact of inflation on consumption is significantly lower for households whose heads do have university education.

Food price inflation had a negative and statistically significant impact on girls’ primary and secondary school attendance. The probability of a girl attending school diminishes as food prices increase. Proximity to school is very important for school attendance. School attendance is less likely for girls who take more than 5 hours to walk from their home to the nearest school, compared to girls who take less than 30 minutes to do so. This corroborates earlier reports that long distance to school was one of the most cited reasons for dropping out of primary and secondary school in South Sudan (EMIS, 2016). While the cost of schooling is a major constraint for school attendance of both boys and girls, it disproportionately affects girls. In the face of limited resources, parents apparently prioritize boys for schooling over girls (World Bank, 2018b). Investing in female education is very important for poverty reduction and development, especially as we also find that school attendance increases if the household head is a woman and has secondary or university education. One important policy implication from this study is that bringing schools closer to households will help to mitigate the adverse impact of inflation especially on girls’ school attendance. Investing in education, particularly in fragile contexts like South Sudan, also helps to create resilience against such economic shocks.

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