What advanced oil sale means for South Sudan

What advanced oil sale means for South Sudan
FILE PHOTO: A worker walks by an oil well at the Toma South oil field to Heglig, in Ruweng State, South Sudan August 25, 2018 | REUTERS

The recent pronouncement by Finance Minister, Agak Achuil that South Sudan might not directly benefit from the proceeds of crude oil for the next five years has elicited widespread reaction from financial experts and academicians.

Achuil said last Thursday that the government had sold in advance all oil produce until 2027. The decision, according to Achuil, was taken by authorities to raise funds and settle salaries of civil servants.

Civil servants are owed salaries arrears dating back to September 2021.

A nation still reeling from a brutal civil war that erupted not long after independence in 2011, South Sudan has heavily depended on oil which funds upto 70 per-cent of her GDP. But the world’s youngest nation will, however, have to wait for another five years, if it has to benefit from the proceeds of local crude oil.

Economists are now pointing an accusing finger at relevant ministries – that of Finance and their colleagues from Petroleum, for their failure to manage the economy.

“If you decide to make your life depend on loans, you consume the future,” Ahmed Morgan Yanga, a professor of economics at the University of Juba told BBC.

Dr Yanga further opined that the government warns that overreliance on oil revenues could be detrimental in the long run.

But Finance Ministry says the government spends the little earned oil proceeds to pay back loans and fund priorities, resulting in the accumulation of arrears as the civil servants’ monthly salaries could not be paid on time.

“If I have to pay salaries, I have to borrow and when I borrow, that means that your oil is being sold in advance. noted Achuil.

The minister added: “The reason why we are not paying the arrears is that part of the (oil) money is going towards the repayment of loans and other priorities of the government. That is why there are years of arrears,”

While the South Sudan oil advance sale revelation raised eyebrows among the public and critics, Abraham Matoc, the Vice-Chancellor of Dr John Garang University poured cold water on the ragging debate.

“At the moment, peace should be at the top of everyone’s priority. Peace is expensive. The moment we have security, we have peace in the country, and we tend to utilise our natural resources, our economy will grow in a short time.

South Sudan is now struggling with the implementation of the revitalised peace agreement with over 50 per cent of the provisions outstanding including Chapter 2 of the security arrangement critical to the overall peace process,” he said

The International Crisis Group, an independent organization working to prevent wars and shape policies in the country, suggests a coordinated effort is needed to bring South Sudan back on track, given the unfolding realities.

“Drawing from the 2018 peace deal’s ambitious reform agenda, and the government’s technical commitments to the IMF, South Sudanese reformers and outside actors should pursue more select financial reform priorities that can redirect oil revenues back onto the books of the national budget.

“These should include the public disclosure of government revenues and debts, aided by the designation of a single oil revenue account.

“Future IMF disbursements and donor support should require such transparency in total oil revenues, rather than simply accepting better management of funds that make their way into the official budget,” reads their recommendations in part.

The group advices that a systematic engagement with the commodity firms, and their bankers and insurers, upon which South Sudan depends, is needed if the country is to escape from the cage of overdependence on loans.

“Banks and insurers should protect themselves from legal and reputational exposure by requiring the same of their customers who do business in South Sudan,” reads the report.

But most importantly, the group challenges South Sudanese authorities “to start thinking now about impending transition from a carbon economy as its oil production declines.

“In particular, donors should consider how their present and future support might help reconfigure, rather than reinforce, the top-down, centralised political economy.”