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------Original message------ From: John Ashworth <[email protected]> To: "Group" <[email protected]> Date: Saturday, May 12, 2012 6:26:21 PM GMT+0300 Subject: [sudan-john-ashworth] South Sudan Negotiates Loans 1. South Sudan Negotiates Loans as Oil-Output Halt Dents Economy By Jared Ferrie - May 11, 2012 12:01 AM GMT+0300 Bloomberg South Sudan is negotiating loans to boost the value of its currency and keep its economy afloat as foreign-exchange reserves decline after the country halted oil production, Deputy Finance Minister Marial Awou Yol said. The East African nation has secured a $100 million line of credit from Qatar National Bank and will receive a $500-million loan within a month from an unidentified provider, Yol said in an interview in Juba, the capital, on May 8. Loans are also being sought from countries includingChina. “We have oil in the ground, we can mortgage this oil for money,” Yol said. Lines of credit will be used to give importers access to foreign currency to buy goods including fuel, and future loans will allow the government to release dollars into the economy to fight inflation, he said. South Sudan, which seceded from Sudan in July, halted oil output in January after accusing the Khartoum government of stealing $815 million worth of its crude from a pipeline to Port Sudanon the Red Sea. Sudan said it confiscated the oil to make up for unpaid fees. Crude sales accounted for 98 percent of South Sudan’s government revenue. South Sudan’s inflation rate jumped to 50.9 percent in March from 21.3 percent in February, the country’s statistics office said last month. The South Sudanese pound, which officially trades at 2.95 per dollar, plunged to 5 per dollar on the black market from 3.5 in January, according to an April 27 report by Standard Chartered Bank Plc. (STAN) “The current situation highlights the vulnerable position of the authorities because of an over-reliance on oil exports for foreign exchange,” the London-based lender said. World Bank Concern The World Bank said in a statement on May 7 it is “deeply concerned with the economic and development impact of the unresolved oil issues” between South Sudan and Sudan. “The World Bank’s economic analysis unambiguously shows that it is in the interests of both countries to resume talks urgently and resolve their ongoing dispute.” The Sudan Tribune, a Paris-based news website, on May 8 posted what it said were two World Bank documents in which the Washington-based lender said South Sudan faces a “dramatic contraction” in its gross domestic product, a “massive depreciation” of its currency and an “exponential rise in inflation.” Reserves may be depleted by July, “at which point state collapse becomes a real possibility,” according to the documents. The World Bank won’t comment on whether the documents are authentic and its May 7 statement will be the only official comment on the issue, Peter Warutere, a Nairobi-based spokesman, said in an e-mailed response to questions yesterday. Economic Strategies Yol dismissed fears of an economic collapse. The government has a short-term strategy of offsetting oil revenue losses by borrowing; a medium-term strategy of building two oil refineries to meet domestic demand and trucking excess oil to neighbouring countries for export; and a long-term plan to construct pipelines that would allow it to avoid using those running across Sudan. The pound’s value is being affected by uncertainty about where the government will acquire foreign exchange after losing revenue from oil production, Yol said. “The system is being driven by speculation” and adjusting the official exchange rate to bring it in line with the black market would only create more uncertainty, he said. Instead, the government plans to stabilize the currency by injecting foreign exchange into the economy obtained from the loans it’s negotiating. Rob Borthwick, an analyst at Maplecroft, the London-based risk analysis company, said tensions between the two countries make the resumption of oil production unlikely for two years. Loans may stabilize the government, though the debt would increase pressure to resume exports, he said in an e-mailed response to questions on May 9. “Trucking oil large distances along poorly maintained roads and through unstable regions clearly poses significant risks,” he said. “However, given South Sudan’s dire macroeconomic situation, diminished returns remain better than none.” http://www.bloomberg.com/news/2012-05-10/south-sudan-negotiates-loans-as-oil-output-halt-dents-economy.html END 2. Qatar to loan South Sudan $100 million: official May 10, 2012 (KHARTOUM) – The government of South Sudan has managed to secure a total of $600 million in loans amid growing fears about how long the new nation’s economy can survive following its decision to halt its entire oil production this year. Juba retaliated to Khartoum’s move of seizing part of its oil to make up for unpaid oil transportation fees. The two countries have negotiated at length without agreeing on how much landlocked South Sudan should pay for using the north’s oil infrastructure. Sudan lost three-quarters of its roughly 500,000 bpd of crude oil output when South Sudan gained independence in July 2011 under a 2005 settlement that ended two decades of civil war. This week the Sudanese finance minister said that Khartoum stands to lose $2.4 billion in revenues this year as a result of the oil dispute. Khartoum’s budget for this year had assumed it would receive around $36 per barrel in oil transit fees from South Sudan. However, Juba refuses to pay more than $1 a barrel. A confidential document obtained by Sudan Tribune this week showed a senior World Bank official warning that South Sudan’s economy could go bankrupt as early as July due to the depletion of its foreign currency reserves. But an official in Juba dismissed the fears and said that help is on the way. South Sudan Deputy Finance Minister Marial Awou Yol told Bloomberg news that his country secured a $100 million line of credit from Qatar National Bank (QNB) and will receive a $500-million loan within a month from an unidentified provider. Loans are also being sought from countries including China. “We have oil in the ground, we can mortgage this oil for money,” Yol said. Lines of credit will be used to give importers access to foreign currency to buy goods including fuel, and future loans will allow the government to release dollars into the economy to fight inflation, he said. The official said the value of South Sudan’s pound is being affected by uncertainty about where the government will acquire foreign exchange after losing revenue from oil production. “The system is being driven by speculation” and adjusting the official exchange rate to bring it in line with the black market would only create more uncertainty, he said. Instead, the government plans to stabilize the currency by injecting foreign exchange into the economy obtained from the loans it’s negotiating. (ST) http://www.sudantribune.com/Qatar-to-loan-South-Sudan-100,42555 END2 ______________________ John Ashworth Sudan, South Sudan Advisor [email protected] +254 725 926 297 (Kenya mobile) +211 919 695 362 (South Sudan mobile) +27 82 050 1235 (South Africa mobile) +44 750 304 1790 (UK/international) +88 216 4334 0735 (Thuraya satphone) PO Box 52002 - 00200, Nairobi, Kenya This is a personal e-mail address and the contents do not necessarily reflect the views of any organisation -- The content of this message does not necessarily reflect John Ashworth's views. Unless explicitly stated otherwise, John Ashworth is not the author of the content and the source is always cited. You received this message because you are subscribed to the Google Groups "sudan-john-ashworth" group. 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