February 10, 2017 (JUBA) - South Sudan Finance Minister, Stephen Dhieu Dau, said fuel subsidies will be scraped after Members of Parliament approved his request.
- People queue at a fuel station in South Sudan’s capital, Juba on 18 October 2014 (ST)
Fuel prices, which is fixed currently at 22 South Sudanese Pound (SSP) or about 20 United States cents a litre, will be determined by market forces of demand and supply. In the black market, a litre cost 100 SSP - a price expected in the aftermath of lifting subsidies.
Local media quoted Dhieu claiming that lifting fuel subsidies will "save money" for the government to narrow deficit gap of about USD 200 million.
Economic experts say fuel subsidies cost the government United $40 monthly. A liger of diesel or petrol is purchased at about $1 from East African countries and sold at 20% of the actual market price in Juba by state-owned NilePet company.
However, fuel is scarce in Juba and long queues that last several hours are common in Juba. It is not clear when the lawmakers recommendation will be implemented but economists are divided on the effects of the decision.
"South Sudan lack of hard-currencies will continue to inhibits private sector from importing fuel and hence fundamental problem of supply and demand won’t be resolved (sic)," writes economist Garang Atem, reacting to removal of fuel subsidies by the government.
Atem said prices of basic commodities such as food items and water will surge, further deteriorating the economic situation. He said NilePet will struggle to supply sufficient fuel, affecting the common man.
"Such reforms should be done in a comprehensive way so that compensation for public sector are reviewed," he said.
Other economists said the move is "excellent" and the subsidies were creating the black market because fuel dealers were creating scarcity.