South Sudan to survive without oil exports - Business Recorder (blog)

South Sudan will survive without oil exports because it has boosted tax revenues, stashed away currency reserves worth around $300 million, and may use its oil reserves to borrow, a government official said on Friday. South Sudan is rich in oil, but is at loggerheads with Sudan from which it split in July 2011, and has shut down its oil production because of disputes over pipeline fees with Sudan, through whose territory its exports flowed.

The new African nation reached an interim deal last week with Sudan on how much it should pay to export its oil through northern pipelines, ending a dispute that saw Juba shut off its entire oil output in January. Oil revenue made up 98 percent of the budget. The interim oil agreement marks a step towards ending hostilities between the neighbours which came close to war in April, the worst violence since South Sudan became independent. But a wider peace agreement is needed for the oil deal to become effective with a new round of talks starting in two weeks. Both nations, which share a deep mistrust and have often broken agreements, need to reach a deal to improve security at their joint border, much of which is disputed.

The mainly Muslim north split from the south where most follow Christian or African faiths after decades of civil war ended in a 2005 peace agreement. South Sudan's Deputy Finance Minister Marial Awuou Yol said it time for the neighbours to make a lasting peace as oil was the lifeline for both economies. "In fact, it's now both of us who are facing an impending collapse (of our economies)," he told Reuters in an interview in the capital Juba.

The young nation would survive without oil as it had 1 billion South Sudanese pounds (SSP) in reserves - around $300 million based on the official rate to cover government salaries which make up the biggest budget component, thought Yol did not as for how long. With the United Nations running an extensive welfare programme in the poor nation the government's biggest worry is to pay salaries of its bloated army, a constellation of former militias estimated by some officials to number 200,000.

"The worst assumption is, if there is no (final peace) deal reached with the north, still we'll be surviving," Yol said. Since the oil shutdown South Sudan, one of the world's least developed countries, started a previously almost unknown tax enforcement, collecting now up to 60 million SSP a month. "If we're to collect about 60 million SSP per month, it means we will be collecting more than 700 million SSP in one year, and that would be above our budget target," he said.

Without a final oil deal, South Sudan would borrow abroad using its oil and mineral resources as collateral to plug an estimated budget deficit of 3.7 billion SSP. "We've made some arrangements with friendly countries for loans for budget support," Yol said, without giving details "We have projected that (budget support would) come from other sources, like external borrowing, like petroleum and mining concessions that we're going to give out to companies who are interested in investing in the oil sector," he said.