South Sudan raises spending plan amid jitters on economy

South Sudan is raising its spending plan for the fiscal year by a third, even as Juba’s economic reforms received a bleak assessment from Washington on Monday.

President Salva Kiir on Monday signed into law this year’s national budget worth SSP2.1 trillion ($16.2 billion), which is 33 percent higher than last year.

And Juba wants to raise salaries of civil servants by as much as 400 percent, but more than two thirds of the allocations will go to spending on security, a signal of the country's continual challenge since it became independent in 2011.

Read: 95 killed in South Sudan communal conflicts^[1]

Kiir, according to a statement from the Presidency in Juba, said the country’s legislators had endorsed the spending estimates, a legal requirement for the executive to begin using the budget for the new year. But this was still three months late, as has been routine since 2019.

South Sudan’s annual budgets are supposed to be passed before end of May every year, but the country has often made them with late endorsements. Initially, the country delayed as it haggled over the formation of the transitional assembly, a legislative body formed after the revitalised peace agreement signed in 2018 and which created a coalition government.

Back in June this year, then Finance Minister Dier Tong Ngor had told MPs the 2023/24 budget was targeting to stimulate economic “recovery through viable fiscal, monetary and structural reform measures.”

“Our economy continues to suffer from numerous external shocks and internal structural weaknesses, which have created acute macroeconomic instability and suffering to our people,” he said then. Ngor was fired shortly after MPs passed the budget early this month in a presidential decree that did not elaborate reason. Ngor was replaced by Baak Barnaba Chol Baak on August 3.

South Sudan hopes to finance the budget from oil sales. And according to the proposals, the increasing global oil prices are likely to push up its earnings. Yet the war in neighbouring Sudan^[2] through which Juba exports its oil may hurt prospects. More than 90 percent of the country’s revenues are from oil, but previous Finance Ministers and Central Bank Governors have been fired amid questions on oil revenues. Some of the oil, in fact, had already been cashed in up to 2027, before it is extracted from the ground.

Read: South Sudan’s oil sector pulls in more deals^[3]

A 2023 Fiscal Transparency Report by the US State Department said South Sudan’s government has continued to mismanage revenues, with corruption and lack of transparency a key problem.

“The government maintained off-budget accounts beyond what was allocated by the budget, including military and intelligence expenditures not subject to parliamentary or civilian public oversight.  Information in budget documents was not reliable. 

“The supreme audit institution did not meet international standards of independence and did not audit the budget,” it says.

Allocations to and earnings from the national oil company, information on debt obligations, including major state-owned enterprise debt, is not often made public, and actual revenues and expenditures “did not reasonably correspond to the budget” even when there was no revised budget to accommodate new demands.

On Monday, the US The Departments of State, Labour, and Commerce issued a Business Advisory on South Sudan^[4], warning on “growing reputational, financial, and legal risks to US businesses and Americans conducting business or transactions with companies that have significant ties to South Sudan’s extended transitional government or that are controlled by family members of government officials.”

“These risks continue to grow as a result of South Sudan’s transitional government’s failure to implement political and economic reforms, improve transparency and public financial management, and address pervasive, endemic corruption and human rights violations,” the Assessment says.

“Businesses and individuals should be particularly wary of the associated illicit finance, reputational, economic, and potential legal risks of conducting business and utilising supply chains of enterprises with ties to the South Sudanese government officials or their family members (hereafter, collectively referred to as “enterprises with ties to the South Sudanese government”).”

Businesses and individuals that operate in the oil and mining sectors are particularly exposed to such risks.

Read: EDITORIAL: Juba’s future will be built on sound oil governance^[5]

Juba rejected the assessment, indicating it was malicious.

“We don’t have American investors here since 2012. What is wrong with the Americans,” posed James P Morgan, South Sudan’s Ambassador to the African Union.

“We have problems yes, but so is every economy around the world. You cannot pin these things to one person. South Sudanese have decided to walk together to rebuild the country. It is slow but is better than going to war,” he told The EastAfrican.

References

1. ^{^} 95 killed in South Sudan communal conflicts (www.theeastafrican.co.ke)
2. ^{^} war in neighbouring Sudan (www.theeastafrican.co.ke)
3. ^{^} South Sudan’s oil sector pulls in more deals (www.theeastafrican.co.ke)
4. ^{^} Business Advisory on South Sudan (www.theeastafrican.co.ke)
5. ^{^} EDITORIAL: Juba’s future will be built on sound oil governance (www.theeastafrican.co.ke)