South Sudan halves spending after oil shutdown row

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.