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South Sudan Cuts Non-Salary Spending by 50 Percent

Source: Reuters 2/19/2012, Location: Africa

South Sudan said it would cut non-salary spending by around 50 percent as part of austerity measures to compensate for the loss of oil revenues due to a row with Khartoum. In January, South Sudan shut down its entire oil production of 350,000 barrels a day after Sudan started seizing southern oil to compensate for what it calls unpaid fees. A newly-independent but landlocked country, South Sudan must export its oil through Sudan. Both sides have failed to reach an agreement over fees. Oil makes up 98 percent of South Sudan's state income.

South Sudan's Finance Ministry said in a statement non-salary spending will be cut by an average of 50 percent, adding that transfers to the country's ten states would also be slightly reduced. "These are swift and deep cuts, but no layoffs of civil servants, organized forces personnel and (army) SPLA. Everyone's paycheck is being maintained," Finance Minister Kosti Manibe said in a statement. It gave no figures, but added that non-oil revenues would triple within six months through better tax enforcement. No public data exists for South Sudan's foreign currency reserves or detailed 2012 budget projections.

Diplomats say the South is unlikely to survive longer than several months without new oil revenues as the war-torn country is one of the most underdeveloped places in the world. No significant economy exists outside the oil industry. South Sudan is locked in a conflict with Sudan over oil payments. The nation took three-quarters of Sudan's oil production when it became independent in July 2011, but needs to export crude through a northern pipeline and a Red Sea port. Both states have failed to agree on the fee Juba needs to pay, prompting Khartoum last month to seize at least three southern oil shipments at the Red Sea terminal.

Chinese-Malaysian oil consortium Petrodar, which provided 230,000 bpd of South Sudan's output, said it could take at least 40 days up to six months or longer to resume production after pipes were flushed with water. "Petrodar is currently assessing the impact of the shutdown to the wells and facilities," it said in a statement. Petrodar operates oil fields in Upper Nile state and also an export pipeline to the Red Sea.

South Sudan is due to resume oil talks sponsored by the African Union in Addis Ababa on Thursday, but diplomats see no breakthrough as positions are wide apart. Sudan wants $1 billion in back payments plus $36 a barrel, while South Sudan has said it is willing to pay around $1 a barrel. Sudan's President Omar Hassan al-Bashir has warned the conflict could lead to war. North and south fought for decades in a civil war that killed an estimated 2 million people.

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