South Sudan outlines budget for "uncertain times"

JUBA Wed Jun 20, 2012 1:39pm BST

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JUBA (Reuters) - South Sudan's finance ministry presented a 2012/13 budget that aims to slash state spending, boost tax revenues and raise loans to make up for the loss of almost all state revenues with the country's shutdown of oil production in January.

The 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 pounds would go to salaries.

Landlocked South Sudan, which seceded from Sudan a year ago, dependent on oil for about 98 percent 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.

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 pounds - 440 million from taxes and 260 million from fees, charges and other "non-tax revenues," it said.

Another 1 billion pounds 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 pounds - 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 percent 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 pounds 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."

(Reporting by Alexander Dziadosz and Hereward Holland; Writing by Alexander Dziadosz)

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