Juba: We can go for one more year ?By MICHAEL WAKABI | Monday, May 28 2012 at 12:11
Living off reserves since December 2011, South Sudan says it can run another year without oil revenues if the conflict with its northern neighbour is not resolved soon.
However, the country, which does not have any foreign debt, also says it can exercise its borrowing options sooner, if necessary, to stem further erosion of its foreign reserves.
Juba stopped receiving oil revenues in December 2011 after Khartoum confiscated a consignment of two million barrels of crude to recover “outstanding transit fees.” South Sudan denies the charge arguing the two countries are yet to agree on an acceptable levy and responded by shutting down oil production in January, immediately plunging the country that depended 98 per cent on oil revenues for its finances into a crisis.
While Khartoum is gunning for a $36 per barrel levy, Juba, which had been paying $13 per barrel, sees the latest demands as a backdoor attempt to dig deeper into its share of oil.
“The oil shutdown will give us some pressure in terms of the monetary policy that we would like to project,” Bank of South Sudan Deputy Governor Jamal Abdalla Wani said. “But even if we don’t have oil proceeds and the reserves are going down, we can still move confidently that we have something that can take us ahead for a while, probably a year,” he added.
Deputy Finance Minister Dr Marial Awou Yol said: “We are using our oil reserves. Oil money flow stopped on December 6 but we are still in a good position to go for another seven or so months.”
South Sudan, which hedges its income from oil at $50 per barrel, has put up considerable reserves since 2005 when it began putting earnings above that price into three separate accounts — an oil stabilisation account; a future generation fund and an emergency contingency fund, said Dr Yol.
It is from the latter account that Juba has been drawing money to fund construction of infrastructure power, roads and bridges.
“The rest was not touched; there were also unfulfilled commitments from oil companies which keep trickling in — a few hundred million dollars here and there. They have been a good source of funding for us,” said Dr Yol.
He added that Juba has also fallen back to an austerity budget in which expenditure has been cut by as much as 46 per cent in some areas.
“Our problem is budget funding but projects will have reasonable funding to move. We have also tried to mobilise and improve revenue collection. Excise tax and customs duty as well as collection of property and income tax is now assigned to the national government and we have seen sharp improvements in collection over the past three months although it is still not enough,” he said.
Citing the country’s current debt free status both domestically and externally, Mr Wani said the country would borrow should the need arise. The Cabinet has discussed the possibility of domestic borrowing from the local banking industry a move the central bank backs while it advises caution with external borrowing.
As a consequence of the reduced inflows of hard currency, the South Sudan pound has come under pressure with the black market rate edging towards five SSP’s to the dollar against an official rate of 2.96.
The South Sudan economy is estimated to have grown 6 per cent during 2011 while gross national product was $13 billion.
Wani says if this continued into the future, devaluation of the national currency mighty be considered although this was not expected to happen in the near future. The South Sudan economy is estimated to have grown 6 per cent during 2011 while gross national product was $13billion.
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