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Ben LeoOn Saturday the world’s newest nation exuberantly celebrated its first independence day. The Republic of South Sudan, an area the size of Texas that is home to eight million people, has finally fulfilled its long-sought goal of freedom and self-determination. Independence however, is just the beginning.

My guest this week is Ben Leo, a CGD research fellow and expert on the economic issues concerning the new nation of South Sudan and its major challenges going forward.

Ben’s exhaustive CGD working paper on Sudan’s external debt burden caught the attention of the African Union’s High Level Implementation Panel, a group of Sudan-focused negotiators assembled and led by former President of South Africa, Thabo Mbeki. At the invitation of the African Development Bank – which provided substantial technical support to the AU Panel – Ben served as the facilitator for pre-partition negotiations on how to divide some $37 billion in external debt between the north and the newly independent south. He brings a gripping, insider’s perspective to the discussion.

I start by asking Ben to frame the most pertinent issues for the new nation, which he divides into three categories – political, security-related, and economic. Spanning across these groups are disputes over borders, citizenship rules, oil revenues, and existing external debt obligations. Apart from a tentative resolution of the external debt issue based upon one of the options presented in Ben’s paper, all of these issues remain unresolved.

What happens next? Developments in the past few days, including the massing of troops by both sides along the new border, are cause for concern, Ben explains. Sudan has unilaterally announced that it will require hard currency for trade with its new southern neighbor, potentially making worthless an estimated $1 billion worth of Sudanese pounds still circulating in the south. Skirmishes have broken out in contentious border areas in recent weeks, and people of Southern Sudanese origin living north of the border have been stripped of their Sudanese citizenship. Unlike the debt issue, these remaining concerns present a steep uphill battle and illustrate an alarming dynamic of unilateral, non-cooperative interaction between the two nations.

Ben remains convinced, however, that win-win solutions are possible. Neither country can prosper if the other is in chaos, he says. The two nations will continue to be closely linked through cross-border trade and travel, as well as the transport of oil for export. International pressure on both states to find suitable compromises will continue to be extremely important, he says. Ultimately, he adds, “no solution will be truly sustainable without two viable states.”

To learn more, including the somewhat surprising outcome of the debt negotiations, listen to the Wonkcast. My thanks to Wren Elhai for recording and editing the Wonkcast, and to Ross Thuotte for a solid first draft of this blog post.