South Sudan to cut spending by 35%

South Sudan will cut its spending this budget year by 35 percent to cope with the drying up of oil revenues and plans to build a 10,000-barrel per day oil refinery in the capital, a senior Treasury official said on Tuesday.

South Sudan shut down its entire output of about 350,000 bpd in January in a row with Sudan over how much the landlocked new nation should pay to export its oil through northern pipelines.

With oil revenues making up 98 percent of South Sudan's income, Juba is scrambling to slash spending.

“(The austerity measures) will save us 35 percent of the total budget. The total budget is 8.5 billion (South) Sudanese pounds ($2.9 billion),” Albino Chol Thiik, acting undersecretary of planning in the ministry of finance and economic planning, told Reuters on the sidelines of an infrastructure conference in Kenya's capital Nairobi.

Thiik said there would be no cuts to health, education and military spending and that the savings would come from areas like civil servants' allowances.

No public data exists for South Sudan's detailed 2012 budget projections, or of its foreign currency reserves. South Sudan has no significant economic activity outside the oil industry.

South Sudan, which seceded from the north last July, runs its budget from July to June.

Sudan's oil minister said on Tuesday Khartoum had lowered its oil transit fee demand to $32.20 a barrel, but the two sides remain way apart as negotiations continue in Ethiopia. South Sudan wants to pay less than $1 a barrel.

Oil revenues are vital to South Sudan as it tries to develop infrastructure devastated by a war that killed an estimated 2 million people.

South Sudan's government in Juba is seeking to borrow 5 billion South Sudan pounds from local and foreign banks to develop its oil infrastructure, roads and power network, Thiik said in an interview.

Some institutions had agreed in principle to a loan, he said, but declined to give details on the amount or terms offered.

Building a refinery was a priority for the world's newest country, the acting undersecretary said, with plans in place for a 10,000 bpd refinery in Juba.

“Within the next six months, we plan that the refinery should be operational. Tenders have been issued and construction will start soon,” Thiik said. - Reuters