The Economic Realities of War Sinking In
By Aggrey Idri,
April 2, 2015(Nyamilepedia) — During the December 2014 peace talks in Addis Ababa between the Government of South Sudan and the opposition, the IGAD arranged for some experts to present their views on outstanding issues between the between the two partiesin areas of economy, finance, transitional justice and reconciliation. These Experts, from World Bank, Ethiopian Ministry of Finance and Planning, gavea very excellent and brilliant presentation. Their inputs drew experiences with special focus on South Sudan current situation. The expert from World Bank, who have been working and assisting the Ministry of Finance in Juba was very clear and straight forward on the state of affairs. For instance, he stated that South Sudan budget2014/15 is running a deficit of 50% and the government is struggling to fill the gap. According to the expert the shortfall in income is primarily caused by two factors: reduction in total production and drop in international oil prices. These two factors, combined, paint a very bleak future for the economy of the country. Adding that the government will find it extremely difficult to run its affairs beyond April 2015!!
The price is now $43/barrel. The agreements between Sudan and South Sudan gives Khartoum $24 per barrel, oil companies will take their shares, services of loans from advance sales of oil will also are affect the net income per barrel. Fear remains that South Sudan will not be able to generate enough cash to cater for its expenses. The country’s vice president in one of his public lecture hinted that the net income /barrel can stand at about US$6-5 per barrel!!! This is worrying and puts the government in a challenging situation to wage a war against the rebellion, and to cater for its day-to-day expenses. To date there is no estimate as to how much the current war costs the government. If the cost of the previous civil war is taken as an estimate, we will be looking at some USD 2 million expenditure, on daily basis,which comes to US$60 million per month. The inclusion of the Ugandan army-UPDF in South Sudan war budget complicates the situation even more.The challenge posed by shrinking income is one story, and the challenges of managing the national budget yet another challenge.
Budget control remains a major problem affecting allocation and appropriation of resources in the new country. For instance, the office of the President spent its entire annual budget 2014/2015 of over USD $175 million in only the first quarter of the year which alone amounted to entire annual budget of Central Equatoria State with a total population of over 3 million!!! That means of the highest office in the land spends a whopping US$ 58.333 a month!!!
Another issue of concern is management of reserves. According to the IMF, the hard currency reserve is very low, estimated worth two weeks of imports. On the other hand the local currency reserve with the central bank of over SSP 2.5 billion is now confirmed to have been depleted as well! Our national currency is under intense pressure as hard currency is fast running out and our income fast dwindling and hence a runaway inflation currently sweeping the country. With such inflation and the salaries of the majority working class in the government remained the same, living conditions for the poor is deteriorating in the same rate the inflation is going. The higher it is the more the suffering.
Other alternative income sources are not promising as well. The agriculture sector which has been ignored during the last 10 years reels also behind and the current budget had no any significant allocation for this important and driving sector of most economies in the region. The country has no any single agricultural project that it can pride itself with. Currently two States namely Warrap and Lakes have publicly declared hunger and urging international donor community to come to their help. Subsistence agriculture has continued to dominate our rural areas with no prospects towards commercialization or mechanization!! It is only when the sanctions are waved on the face of the President he suddenly started seeing agriculture as a survival weapon against the west and is pleading with God not to join them in the war against him!!
On Thursday March 27th, 2015 the Minister of Finance and Economic Planning called for a meeting with the donor community in Juba pleading for them to assist the government run its affairs until when peace comes back to country. The donors in their response urged the government to expedite the resolution of the ongoing war as a condition for any support. This door now remains closed. The none oil revenue from Nimule post, Juba Airport and Warawar in Northern Bargazal State cannot even satisfy the office of the President alone leave alone the entire country!! The drive to loan from Gulf countries the sum of US$ 500 million seems to be the only hope, but is it a sustainable the solution?? Definitely NO!
Civil servants salaries continue to delay and with this picture they hope for more delays as time goes. The none payment of the security sector salaries is driving them to get their own by their own ways the Zairean style hence more armed robberies, more thefts, more insecurity!!The BodaBoda guys continue to disappear and even killed in broad daylight and their boda taken at gun point! The victims are the innocents! This situation is expected to continue and worsen!
The situation in the States is equally getting worse since these levels of governments have always been marginalized and poorly fed through the current existing centralized system of governance. The level of frustration and desperation is very high and expected to worsen!!
The government is either not having good economic or financial advisors or it has deliberately chose to not to abide by Adam Smith’s principles!
What is the way forward?
- One major factor in the current economic meltdown is the civil war! Unless it is addressed and resolved in a just, fair and a sustainable manner there will be no solution to this and the Government will shut down in next maximum of three months!!!
- Peace talks must to lead to a comprehensive resolution of all the outstanding issues!
- Any efforts to stop the inflation shall only be through increasing our export oil which will only happen once peace is achieved;
- The donor community should only give their support when there is peace in the country while attending to the humanitarianneeds of the most affected population!
- Government institution starting with the office of the Presidency must learn budget discipline and be exemplary to others!! How could it make a budget for 12 months and finish it in three months?? We have to grow up and learn to behave like grownups otherwise this country is doomed!!
Aggrey Idri is the Deputy Chairman of Finance and Resource Mobilization of SPLM/SPLA, founder and former Chairman of South Sudan Agricultural Producers union (SSAPU) and former Member of the Eastern Africa Farmers Federation until December 31st, 2013, founder and former Managing Director of Nile Commercial Bank Plc! Can be reached at: firstname.lastname@example.org