South Sudan's 2012/13 budget aims to make up for the loss of almost all its revenues after its shutdown of oil production in January.
The country’s finance ministry expects to do this by slashing state spending, boosting tax revenues and raising loans.
Its proposed budget put annual spending at 6.4-billion South Sudanese pounds – roughly $1.3-billion at recent black market rates – of which about £2.9-billion would go to salaries.
Landlocked South Sudan, which seceded from Sudan a year ago, dependent on oil for about 98% of its state revenues, but halted output in January in a row with Khartoum over how much it should pay to export via pipelines in Sudan.
The sudden shortfall of state revenues and foreign currency caused the pound to weaken sharply on the black market and pushed up the prices of food and other commodities in the import-dependent nation.
“This is not the budget I would have wanted to present. This is a budget for difficult and uncertain times,” Finance Minister Kosti Manibe Ngai said in a copy of a presentation on Tuesday to South Sudan’s Parliament seen by Reuters on Wednesday.
‘Unprecedented shock’
The shutdown led to a “massive and unprecedented shock to our economy”, it said, adding that while the government’s foreign currency savings had helped cushion the impact, “these will not last for the whole year”.
To help make up for the loss, the government aimed to boost non-oil revenue for 2012/13 to £700-million – £440-million from taxes and £260-million from fees, charges and other “non-tax revenues”, it said.
Another £1-billion would be drawn down from foreign currency reserves at the start of July, the presentation said.
The rest would be financed with domestic borrowing from commercial banks – which the minister estimated could raise another £1-billion – and the sale of petroleum and mining concessions and foreign loans.
“It is important to note that these loans are not certain, and may not be offered on acceptable terms. If loans and other sources of financing are not forthcoming, then we will have no choice but to reduce expenditure further,” the presentation added.
Other measures included a 50% cut in housing allowances of national government employees, the elimination of “job specific allowances” for most employees, and the ending of all overtime and incentives, it said.
The budget presentation estimated donors were planning to spend £3.9-billion in addition to the government spending.
The presentation said the government would “not risk an explosion of inflation by printing money or by excessive borrowing from the Bank of South Sudan.” – Reuters