Lack of progress in peace talks will lead to economic collapse in South Sudan. Jul. 03 National, Uncategorized no comments
By Chap Phan, South Sudan, JUL/03/2015, SSN; South Sudan goveornment cannot afford to maintain its current levels of military spending for long given dwindling foreign reserves. The military sector spending has increased significantly since the war started in December 2013. The government’s original budget for 2012/2013 was based on the assumption that oil would be above $100 dollars a barrel; that the GDP would grow in a positive direction; and that inflation would be kept under a reasonable rate. None of these things have proven to be the case; instead the government has cut overall spending on social service and the real economy has spinned downhill ever since. The resolution to the conflict, which has killed well over 50,000 citizens, is not coming to an end fast enough for the average South Sudanese despite mediation of Intergovernmental Authority on Development (IGAD). Several peace agreements have passed and gone without real resolution to the underpinning of the conflict. They government side has not shown desire for political dialogue and the opposition leader, Dr. Riek Marcher’s aversion to war has made it less likely for the government to take his compromises seriously. Unfavorable environment for the Kirr government. South Sudan government generates most of it revenues from oil, the major life-blood of the nation’s economy, but the oil production has been reduced from 350,000 barrels a day in 2011 to average of 160,000 barrels a day, a general 54 percent reduction in the output. Paloch oil field is the only surviving operational oil field that supports government budget. External factors have put more heavy pressure on the government budget as well, i.e., lower oil prices on the world market, lack of foreign direct investment, and high foreign exchange induced inflation. In addition, the government has lost most of the financial aid it receives from development partners and friendly nations. Essentially, the government in Juba does not have enough money to cover their operational expenses, most of which goes to military. Plugging the gap in the budget. During the fiscal year 2014/2015, South Sudan government budgeted 5.6 billion dollars for fiscal year ending on July, 2015, more than half of the budget was allocated to security sector, and some of the money to pay down interest on outstanding debts, thus social services was barely allocated any budget. On the revenues side of the equation, Government received $2.496 Billion in oil revenues in 2014 after netting out $884 million for transit fee to North Sudan. Lower oil price and reduced output have created fiscal deficit for the country. Consequently, in order to fill the gap in the budget the government needed to borrow over 1 billion dollar from the Oil companies; this is in addition to $256 million and $78 million it borrowed from China National petroleum Corp (CNPC) and Dutch firm Trafigura, respectively. Due to the ongoing conflict, Kirr government has not been successful in attracting funding anywhere so far. As a result, Kirr government has been forced to dip into its reserves fund. These fund stood at near 1 billion dollar at the beginning of Dec 2013; as of Feb, 20015, South Sudan had only 309.74 million in it reserve (refer to figure 1.1 below). If the deficit continues at the current rate, Kirr government will run out of money in a few months; which would force the government to accept unsustainable peace deal given the overhanging of sanctions from the Western Governments. A sanction from the West would make it harder to borrow money or sell oil in the world market. Figure 1.1. Withdraw of South Sudan reserves for the last 15 months since the beginning of the War in Dec, 2013. South Sudan monthly reserves in dollar: Month Dollar December, 2013 $947.81 January, 2014 $930.33 February, 2014 $612.85 March, 2014 $555.31 April, 2014 $527.87 May, 2014 $321.55 June, 2014 $370.69 July, 2014 $518.70 August, 2014 $504.92 September, 2014 $518.23 October, 2014 $454.65 November, 2014 $470.16 December, 2014 $416.81 January, 2015 $251.93 February, 2015 $309.74 Sources: Data from domestic authorities and the World Bank data, 2015. Summary. South Sudan war is costing the country far more than Kirr can count, he need to find a way out. The human costs are terrible; tens of thousands have died, 2 million people have been displaced and South Sudan is facing downward economic free-fall. If that level of spending continues, South Sudan’s reserves fund will be exhausted before the end of the year, if not sooner. The international community needs to do more to pressure the government to accept peace to prevent the escalation of the conflict. They can apply appropriate economic pressure to government to accept sincere peace; in particular, International community should ensure that oil revenues are not used to fuel the conflict. Kirr government has not defeated the dissenter since the beginning of the war although government had advantage in terms of resources and access to the funding from the outside. It will be certainly hard to defeat the rebels now given that oil prices have collapsed and Western governments are frustrated with Kirr Government. The long term solution is for the government to accept peace that addressed the underpinning of the conflict; otherwise, a bad deal where corruption and mismanagement still reigns could only lead to more disaster that can threaten the future of South Sudan; Peace is the only path that will save South Sudan from impending economic collapse. References 1-African development Bank, 2015 2-IMF World Economic Outlook, April 2014 3-World Bank, 2015 -- To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] Visit this group at https://groups.google.com/d/forum/southsudankob View this message at https://groups.google.com/d/msg/southsudankob/topic-id/message-id For more options, visit https://groups.google.com/d/optout --- You received this message because you are subscribed to the Google Groups "South Sudan Info - The Kob" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/SouthSudanKob. To view this discussion on the web visit https://groups.google.com/d/msgid/SouthSudanKob/CAJb14oqeLRWGdX3_XtL-OX4xQnAVtKAUEhiLxRJZaTU-Q5DpYg%40mail.gmail.com. For more options, visit https://groups.google.com/d/optout.
