Stacked U.S currency notes

Members of the public have voiced their concern about the government’s plan to borrow $500 million outside its draft budget.

On Friday, the Minister of Finance informed the cabinet that it intends to borrow $500 million from the Afri-Exim Bank to supplement the 2019/2020 budget.

Salvatore Garang presented more than 208 billion South Sudanese pounds for the financial year.

He said the loan, which would support infrastructural development and the peace process, would be paid back within four years.

Read related story: https://www.eyeradio.org/government-to-borrow-500-million-dollars-to-fund-infrastructural-devt/

However, some members of the public are questioning this move, asking what exactly happens to the oil proceeds.

Oil money

In August last year, South Sudan resumed pumping 20,000 bpd of crude oil from the Toma South oilfield, with expectations to increase production to 80,000 bpd by the end of the year.

Officials said the resumption of production would increase government’s share in oil production and eventually oil revenue.

Petroliam Nasional Bhd of Malaysia also promised to put a further $300 million into its operations, while Oranto Petroleum International Limited of Nigeria pledged $500 million on developing an oil block, and local firm Trinity Energy proposed another $350 million.

The former Minister of Petroleum, Ezekiel Lol Gatkuoth had said “Russian, Spanish and Emirati companies may soon join them.”

The total pledge reached $2 billion in investment in the South Sudan’s oil industry.

Two weeks ago, oil production resumed at Torr oilfield, an area with about 16 wells expected to produce between 5,000 to 45,000 barrels of crude oil per day in Ruweng state.

Read related story: https://www.eyeradio.org/government-resumes-oil-production-at-torr-oilfield/

Those who spoke to Eye Radio on Monday morning wondered “where the money goes.”

“The former Minister of Petroleum once said the economy is booming because more oil fields were being reopened. Now given this high rate of production of our oil, what is the justification for this borrowing,” a listener in Yambio asked.

Last month, South Sudan and South Africa officially signed an oil deal worth $50 million -covering three major projects, namely: oil exploration and production, building of an oil refinery and the construction of a pipeline.

“The civil servants have stayed for almost a year without salaries, and the government keeps borrowing and getting money from other places, but why are people not being paid?” a listener from Wau wondered.

According to the International Monetary Fund, South Sudan remains in debt distress and the external position is weak.

Experts said additional oil revenue would enable the government to stick to its policy of not printing money – borrowing from the central bank – and hence more control of inflation and the exchange rate, leading to gradual macroeconomic stability.”

“We have to depend on our oil money, because these borrowings will not be easy to pay back at the end of the day. We have the oil and we have timbers/logs that are always being taken to the neighboring countries -why do we keep borrowing,” a listener in Awiel said.

The IMF’s June 4 report said the mechanical risk ratings of the Debt Sustainability Analysis indicates that South Sudan is at high risk of debt distress with breaches of thresholds related to the Present Value of debt-to-GDP and debt service-to-revenue ratios.

A governments often borrows if its revenue is insufficient to pay for expenditure – a situation called a fiscal deficit. It enables governments meet a temporary shortfall, rather than having to immediately cut back on spending.

Borrowing, which can be short term or long term, involves the sale of government securities -including oil.