South Sudan Approves Austerity Measures to Address the Loss of Oil Revenues after Oil Shutdown
14 min readSouth Sudan halves spending after oil shutdown row
By Hannah McNeish (AFP)
JUBA — South Sudan slashed non-salary government spending by half, weeks after halting the oil production that forms 98 percent of its budget in a bitter row with former foes in north Sudan, officials said Sunday.
But the government of the oil-rich but impoverished nation said salaries would not be touched by the austerity measures despite a bloated civil service and massive military.
“These are swift and deep cuts, but no layoffs of civil servants, organised forces personal, and SPLA (army),” Kosti Manibe, Minister of Finance said in a statement. “Everyone?s pay check is being maintained.”
Non-salary spending will be cut “by an average of 50 percent” as well as reductions in “unconditional monthly grants” to the world’s newest nation’s 10 states.
The finance ministry said it also planned to triple tax revenue within six months by enforcing a 2009 tax law on income, businesses, and customs.
“The cutbacks are effective immediately, and will ensure that the necessary funds are available for the continued operation of the government and security forces,” the statement added.
South Sudan?s first budget, after splitting from the north in July with around three quarters of the crude oil, allocated over 40 percent of around $2 billion spending on salaries this year.
After decades of war left the country in ruins, South Sudan is tasked with building a new nation from scratch, but it took the drastic step of shutting down oil production in late January in a furious dispute with Sudan over transit fees.
South Sudan vowed to halt oil production of around 350,000 barrels per day until Sudan repaid 2.4 million barrels of southern crude it “stole” from pipelines running through the north to its Red Sea port.
The latest round of African Union-mediated talks foundered last week after South Sudan accused the north of “stealing” another 2.6 million barrels of crude.
The next round of AU talks in the Ethiopian capital Addis Ababa are slated to start on Wednesday.
In October, the government pledged to weed out up to 65 percent of rogue employees in a civil service plagued by nepotism, fraud and ghost workers, but the Minister of Labour resigned weeks later and the unpopular plan was shelved.
Around 300,000 people from the ex-rebel force that secured South Sudan?s independence are thought to make up its security forces, including police.
While opposition leaders and aid agencies have urged South Sudan to reduce military spending, analysts fear that widespread cuts could spark revolt and an increase in rebel militia groups still threatening the new nation?s stability.
South Sudan is already reeling from multiple crises, including hundreds of thousands fleeing an explosion of ethnic violence and rebel attacks, as well as tens of thousands of refugees fleeing civil war in the rump state of Sudan.
South Sudan slashes spending after halting oil output
South Sudan has halved spending on everything but salaries to compensate for the loss of revenue following an oil shutdown due to a row with Sudan.
Oil makes up 98% of its budget, after it split from the north last year.
There will be no job losses and government wages will still be paid, the finance ministry stressed.
President Salva Kiir said his nation would rather struggle for a bit than continue to hand over its oil revenues to the old enemies in Khartoum.
The pipelines run from South Sudan through its northern neighbour, with which it fought a bitter civil war for decades, leading to the deaths of some 1.5 million people.
But the two countries have never reached an agreement over how much the south must pay.
In January, South Sudan shut down its entire oil production of 350,000 barrels a day after Sudan started seizing southern oil to compensate for what it called unpaid transit fees.
After the new country shut down its oil production, Sudan’s President Omar al-Bashir responded by saying war was now closer than peace.
Each country accuses the other of backing rebel groups and there have been clashes along the new border.
‘Swift and deep’
The austerity measures are immediate.
“These are swift and deep cuts, but no layoffs of civil servants, organized forces personnel and [army] SPLA,” Finance Minister Kosti Manibe said in a statement on Sunday.
“Everyone’s paycheck is being maintained,” he said.
Vice-President Riek Machar: “We will definitely freeze our activities on development”
The BBC’s James Copnall in Khartoum says this is good news for South Sudan’s hundreds of thousands of civil servants and men and women in uniform.
South Sudan’s first budget allocated over 40% of $2bn (£1.2bn) to salaries, the AFP news agency reports.
Our correspondent says leaving the oil in the ground has been a popular move in South Sudan – many people see it as the moment the country finally became truly free.
Tax collection
The amount transferred to each of South Sudan’s 10 states will also be lowered, though the reduction will be “minimal” according to the statement.
The government says it will also triple tax revenue within six months through better tax enforcement.
Our correspondent says detailed figures are not available, but it seems unlikely these measures will fully compensate for the loss of the oil revenue since no significant economy exists outside of oil.
Vice-President Riek Machar told the BBC last week that the loss of oil revenues would mean development would have to be put on hold for several years, but basic services would not suffer.
“For a period of 30 months we will definitely freeze our activities on development, but we’ll provide basic services: Health; education; water and even some infrastructure projects will go on,” he said.
New talks to try to resolve the oil impasse between South Sudan and Khartoum are due in the next few days in the Ethiopian capital, Addis Ababa.
http://www.bbc.co.uk/news/world-africa-17098350
South Sudan cuts non-salary spending by 50 pct
JUBA (Reuters) – South Sudan said on Sunday it would cut non-salary spending by around 50 percent as part of austerity measures to compensate for the loss of oil revenues due to a row with Khartoum.
In January, South Sudan shut down its entire oil production of 350,000 barrels a day after Sudan started seizing southern oil to compensate for what it calls unpaid fees.
A newly-independent but landlocked country, South Sudan must export its oil through Sudan. Both sides have failed to reach an agreement over fees.
Oil makes up 98 percent of South Sudan’s state income.
South Sudan’s Finance Ministry said in a statement non-salary spending will be cut by an average of 50 percent, adding that transfers to the country’s ten states would also be slightly reduced.
“These are swift and deep cuts, but no layoffs of civil servants, organized forces personnel and (army) SPLA. Everyone’s paycheck is being maintained,” Finance Minister Kosti Manibe said in a statement.
It gave no figures, but added that non-oil revenues would triple within six months through better tax enforcement.
No public data exists for South Sudan’s foreign currency reserves or detailed 2012 budget projections.
Diplomats say the South is unlikely to survive longer than several months without new oil revenues as the war-torn country is one of the most underdeveloped places in the world. No significant economy exists outside the oil industry.
South Sudan is locked in a conflict with Sudan over oil payments. The nation took three-quarters of Sudan’s oil production when it became independent in July 2011, but needs to export crude through a northern pipeline and a Red Sea port.
Both states have failed to agree on the fee Juba needs to pay, prompting Khartoum last month to seize at least three southern oil shipments at the Red Sea terminal.
Chinese-Malaysian oil consortium Petrodar, which provided 230,000 bpd of South Sudan’s output, said it could take at least 40 days up to six months or longer to resume production after pipes were flushed with water.
“Petrodar is currently assessing the impact of the shutdown to the wells and facilities,” it said in a statement.
Petrodar operates oil fields in Upper Nile state and also an export pipeline to the Red Sea.
South Sudan is due to resume oil talks sponsored by the African Union in Addis Ababa on Thursday, but diplomats see no breakthrough as positions are wide apart.
Sudan wants $1 billion in back payments plus $36 a barrel, while South Sudan has said it is willing to pay around $1 a barrel.
Sudan’s President Omar Hassan al-Bashir has warned the conflict could lead to war. North and south fought for decades in a civil war that killed an estimated 2 million people.
http://af.reuters.com/article/topNews/idAFJOE81J00E20120220?sp=true
South Sudan halves spending on oil shutdown
Monday February 20, 2012
South Sudan slashed non-salary government spending by half, weeks after halting the oil production that forms 98 per cent of its budget in a bitter row with former foes in north Sudan, officials said Sunday.
But the government of the oil-rich but impoverished nation said salaries would not be touched by the austerity measures despite a bloated civil service and massive military.
‘These are swift and deep cuts, but no layoffs of civil servants, organised forces personal, and SPLA (army),’ Kosti Manibe, Minister of Finance said in a statement. ‘Everyone’s pay cheque is being maintained.’
Non-salary spending will be cut ‘by an average of 50 per cent’ as well as reductions in ‘unconditional monthly grants’ to the world’s newest nation’s 10 states.
The finance ministry said it also planned to triple tax revenue within six months by enforcing a 2009 tax law on income, businesses, and customs.
‘The cutbacks are effective immediately, and will ensure that the necessary funds are available for the continued operation of the government and security forces,’ the statement added.
South Sudan’s first budget, after splitting from the north in July with around three quarters of the crude oil, allocated over 40 per cent of around $2 billion spending on salaries this year.
After decades of war left the country in ruins, South Sudan is tasked with building a new nation from scratch, but it took the drastic step of shutting down oil production in late January in a furious dispute with Sudan over transit fees.
South Sudan vowed to halt oil production of around 350,000 barrels per day until Sudan repaid 2.4 million barrels of southern crude it ‘stole’ from pipelines running through the north to its Red Sea port.
The latest round of African Union-mediated talks foundered last week after South Sudan accused the north of ‘stealing’ another 2.6 million barrels of crude.
The next round of AU talks in the Ethiopian capital Addis Ababa are slated to start on Wednesday.
In October, the government pledged to weed out up to 65 per cent of rogue employees in a civil service plagued by nepotism, fraud and ghost workers, but the Minister of Labour resigned weeks later and the unpopular plan was shelved.
Around 300,000 people from the ex-rebel force that secured South Sudan’s independence are thought to make up its security forces, including police.
While opposition leaders and aid agencies have urged South Sudan to reduce military spending, analysts fear that widespread cuts could spark revolt and an increase in rebel militia groups still threatening the new nation’s stability.
South Sudan is already reeling from multiple crises, including hundreds of thousands fleeing an explosion of ethnic violence and rebel attacks, as well as tens of thousands of refugees fleeing civil war in the rump state of Sudan.
http://www.skynews.com.au/world/article.aspx?id=720343&vId=
South Sudan slashes spending after halting oil output
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| South Sudan slashes spending after halting oil output The Standard South Sudan has halved spending on everything but salaries to compensate for the loss of revenue following an oil shutdown due to a row with Sudan. Oil makes up 98% of its budget, after it split from the north last year. There will be no job losses and … |
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