South Sudan 2019/20 spending to more than double - finmin

JUBA (Reuters) - South Sudan’s finance minister unveiled dramatically higher spending for the 2019/20 fiscal year to be partly funded by increased oil revenues, following criticism from the IMF for deep cuts in prior years which paralysed public services.

It was Finance Minister Salvatore Garang Mabiordit’s second attempt to present the draft budget following a row three weeks ago when lawmakers stormed out of the meeting over non-payment of salaries to civil servants and soldiers.

In May the International Monetary Fund said South Sudan’s fiscal stance that relied on huge spending cuts was unsustainable and had paralysed government services and led to accumulation of arrears, including on wages.

On Monday, Mabiordit said spending was expected to rise 155% in 2019/20 compared with the previous year’s low base, with a bulk of the funding expected to come from increased oil revenues and external borrowing.

He told parliament the 2019/20 budget will increase to 208.16 billion South Sudanese pounds ($1.6 billion), up from 2018/19’s approved SSP 81.6 billion ($620 million), with a deficit of SSP 77 billion ($590 million).

“We propose to manage the budget deficit through increase in oil production as well as positive difference between the bench mark price and market price of crude oil. We will also explore other external financing from the international market on favourable terms,” he told lawmakers.

FUNDING PEACE

In May South Sudan’s ruling and opposition parties agreed to give themselves six more months to form a unity government as part of the September peace deal that largely ended years of unrest in a brutal civil war [nL5N22F5VB].

South Sudan’s only major economic resource is oil, but fighting forced operators to shut down many fields. Output has rebounded to 180,000 barrels per day, but still falls short of its pre-war level of 245,000 barrels per day in 2013.

The IMF forecasts South Sudan’s GDP to grow 8.1% in 2019/20 and 6.6% in 2020/2021 from 3.4% in 2018/19.

In March, IMF said South Sudan should stop selling expensive and opaque oil advances, because loan resettlements were hindering spending vital for the implementation of a peace deal.

Mabiordit said the budget had set aside SSP 10 billion for what he said was the implementation and consolidation of peace, but gave no further details.

It was still unclear how much funding donors would provide for budgetary support, he said.

“We have not received information of any grants from donors, which can report to the budget. As you know the donors shifted most of the support to humanitarian and relief efforts,” he said.

Inflation has been in the triple digits at various stages during the conflict, with hyperinflation persisting for several years due in part to the country’s depreciating currency.

Mabiordit said inflation was running at 93% in December.

“These improvements are largely due to reduction in borrowing from the central bank,” he said.

The budget is expected to be approved within 45 days.