By Daniel Deng Bol
South Sudan debt level could be expected to rise to around sixty percent of Gross Domestic Product (GDP), a trend that has prompted the government to propose a lean 2017/2018 budget limiting borrowing from the World Bank and other sources to two billion, one hundred and seventy million(2,172 million).
The total outstanding debt is provisionally estimated at fifty-four billion, seven hundred and sixty-seven million Pounds (54,767 million). This includes two million, two hundred and twelve million Pounds (2,212 million) of borrowing from commercial banks, and nineteen billion, nine hundred and seventy million pounds (SSP 19,970 Million) of direct borrowing from Bank of South Sudan.
It also includes an outstanding recapitalizing claim to the Bank of South Sudan of two billion, one hundred and sixty-five million (SSP 2,165 Million). The figure also includes outstanding oil advances equivalent to eighteen billion, two hundred and eighty- nine million Pounds (18,289 million) and external loans to the World Bank and china of Fourteen billion, two hundred and ninety-six million Pounds (SSP 14,296 million.
The outstanding debt stocks of fifty -four billion Pounds (54 billion) is equivalent to twenty-five percent (25%) of GDP. However, this figure excludes domestic arrears, which are estimated to run into billion, and arrears to Sudan, which are estimated over four hundred million dollars (USD 400 Million). Once these are included,
the country debt level could be expected to rise to around sixty percent of the GDP (60%).
The Country Finance and Economic Planning minister Hon. Stephen Dhieu Dau told South Sudan parliament in Juba on Wednesday while presenting Fiscal Year 2017/2018 draft national budget that debt should
not be allowed to continue accumulating, saying it could tarnished the country’s image.
“We cannot allow our debt to continue accumulating. That is why in the budget I propose a limited amount of borrowing, amounting to two billion, one hundred and seventy million (2,172 million) of new concessional borrowing plus eight hundred and thirty -five million Pounds in net. Treasury Bill Borrowing combined with eleven billion, ninety-three millions of principal repayments (SSP 11,093 million), resulting in net financing of negative eight billion, and fifty-six million (SSP 8,086 million)”, he explained.
According to the minister, some of the new concessional borrowing will hopefully come from commercial banks.
The Country Gross National Income (GNI) has fallen by 80 percent, since the beginning of the crisis and according to the IMF, by around a tenth in the past year alone. The minister said part of this has been caused by the sharp decline in oil prices since 2014. But the conflict and natural factors such as drought and flooding have made the situation worse. Oil production has fallen further and the country is struggling to attract new investment into the oil sector.
“Our oil revenue has fallen significantly and the country non-oil revenue have not been able to grow fast enough to cover the gap,” minister Dhieu stated.
“Critically, this budget renews our commitment to limiting borrowing from the Bank of South Sudan and takes forward our commitment to reducing the current fuel subsidy, in order to reduce the budget deficit,” he also added.
The minister felt optimistic that the proposal would support the exchange rate and reduce inflationary pressures if managed well in the long run.
Acceding to him, the FY 2017/2018 budget is a budget which will use limited resources to try to consolidate peace while keeping the government running and providing core service, adding that the ministry took a significant step towards aligning the expenditure with the national income by limiting borrowing from Bank of South Sudan.
“We have seen the fruits from this approach as annual inflation has fallen from a peak of 549% in September 2016 to 362% as in June 2017,” he said.
He said unless peace and security prevail, economic recovery would remain challenging. In light of the above, he said the budget does as much as it could within the government’s limited resources to support the pathway toward peace. It would provide allocations which contribute towards implementation of the Peace Agreement.
It also supports service delivery by increasing allocations to health, education and state transfers and continues reforms toward fiscal sustainability and improving public Financial Management.
Total net revenues and grants for 2017/2018 are estimated at forty billion two hundred and thirty one million Pounds (40,231 million), compared with eighteen billion, five hundred and thirty-four million
Pounds ( 18,534 million) for 2016/2017. The situation the country faces now continues to be extremely challenging.
The minister admitted that the economic and budgetary challenges that the country face today were largely as a result of external economic shock, particularly the fall in oil price.
He went on to say that the difficulties could severely aggravate the conflict and its economic effects . Moreover, the country is reaping the fruits of indiscipline in the year when the oil revenues were plentiful. Instead of moderating its expenditure and building up saving, the government spent all that
it had while neglecting to develop its capacity to mobilize non-oil revenues.
“Indiscipline is still a feature of our budget management,” he warned.