July 10, 2014 (JUBA) – The UK-based Global Witness organisation has warned that South Sudan is in the process of racking up more debt, the bulk of which is not going to be used towards development projects.
“On the third anniversary of its independence, South Sudan looks like it is sliding into a dangerous cycle of oil-backed debt. The new budget, announced last week, signaled that another 3 billion SSP ($1 billion) would have to be borrowed from oil companies next year,” the transparency group said in a statement yesterday.
The group asserted that this “huge sum” equals the amount requested by donors to meet humanitarian needs resulting from the South Sudanese conflict that broke out late last year.
“Worryingly, most of this money will go straight back to the same oil companies, to pay off last year’s debts”.
South Sudan’s total debt is estimated to be at 10 billion SSP, according to its finance minister Agrey Tisa Sabuni.
Global Witness , a group which campaigns against conflict and corruption related to natural resources, stressed that the public must be informed on the terms under which the money is being borrowed so that citizens “can be sure their government is negotiating the best deals in the high risk world of oil-backed borrowing”.
“The government and the rebels failure to negotiate a way out of the conflict is pushing up state spending on the armed forces, while development projects go unfunded. Around 35% of the budget will be used to pay for the security sector…….Only 12% of the budget will be invested into healthcare, infrastructure and education combined,” it added.
“We have seen these types of debt cycles before. If the government is to avoid bankruptcy, it must take steps to get its house in order and make any future loan deals transparent. If it is serious about investing in the South Sudanese people, it also needs to get serious about the peace talks too. And if these talks are to produce a stable South Sudan, oil has to be at the top of the agenda”.
Last week the South Sudanese government tabled the 2014-2015 annual budget before parliament.
Oil revenue contributes 8.891 billion SSP, while non-oil revenue accounts for 2.650 billion SSP, with 436 million SSP received through donations and loans from the World Bank.
The largest expenditure in the 11.278 billion SSP budget is the salaries of government employees, including soldiers serving in the national army (SPLA) and other organized forces, accounting for 4.378 billion SSP or 39% of the overall budget. This is followed by the security sector, accounting for 3.13 billion SSP or 35% of the budget.
Just 13% of overall budget spending will be allocated to generating capital.
The education sector will receive 622 million SSP for payment of 28,000 teacher salaries, as well as provide support for state and county education departments. This budget also includes funds for universities and teacher training, according the proposal tabled before lawmakers on Wednesday.
The health sector will receive 451 million SSP, jointly provided by the government (397 million SSP) and the World Bank (54 million SSP).
The infrastructure sector has been allocated 393 million SSP, 158 million of which will come from government revenues and 235 million from development partners.
Oil, which is considered South Sudan’s economic lifeline, has been reduced to about 160,000 barrels per day since the outbreak of the conflict between the government and forces loyal to ex-VP Riek Machar.