Oil revenues fall, South Sudan faces budget crunch

JUBA, Sudan, (Reuters) - South Sudan's finance minister on Friday said falling oil revenues had caused a budget crunch, leaving officials struggling to pay salaries.

The war-ravaged region gets as much as 99 per cent of its revenues from oil found in its territory and has been hit particularly hard by the decline in world energy prices.

Southern Finance Minister Kuol Athian said the region had only just managed to pay civil servants for January and now did not have enough cash for salaries at the end of February. "This has created a big problem for us ... It will affect everything," he said.

Ministry officials said the region received just over a quarter of the 300 million Sudanese pounds ($133 million) of oil revenues that it had budgeted for in January. The shortages will add extra strain to an economy devastated by more than two decades of war with north Sudan.

South Sudan won its own semi-autonomous government and a share in the country's oil wealth in a 2005 peace deal that ended Africa's longest civil war. Under the Comprehensive Peace Agreement, the south is supposed to receive half of oil revenues from wells south of a contentious north-south border.

Athian said the south's foreign currency reserves were also running low because the Khartoum-based Central Bank of Sudan had, since September, started sending oil revenues to the south in local currency. Before September, the South had received its allotted revenues in foreign currency, he said. But now the Central Bank was keeping all foreign currency in its own reserves, he added. No one was immediately available to confirm the change of policy from the central bank. "We are now using old (dollar reserves) from 2007... It is almost finished now," said Athian. The lack of foreign currency, he added, would hit the south's ability to attract investors and limit the Bank of South Sudan's ability to service local banks. Officials from Kenya Commercial Bank, which has a branch in South Sudan's capital Juba, have said they regularly fly in dollars from Nairobi to meet demand for foreign currency.