South Sudan Fails to Pay Workers as Oil Plunge Fuels Crisis

(Bloomberg) -- South Sudan is running short of foreign-cash reserves and is struggling to pay public-servants’ wages as Africa’s newest country battles weak oil prices and violence that’s straining a peace agreement.

The country generated 3 billion South Sudanese pounds ($18 million) in non-oil revenue in August, which allowed it to pay state workers for April, Deputy Finance Minister Agok Makur said by phone from the capital, Juba. He’s hopeful increased non-oil income can help the government settle the May-through-August arrears.

“The situation of economic crisis in South Sudan now is very bad,” he said. “It is not like those days, 2010, 2011, because at that time oil was very high.”

The East African nation’s official production of crude has dropped to 170,000 barrels a day as lockdowns to control the coronavirus delay the movement of production equipment and materials. The commodity is the landlocked country’s only major export and is crucial to an economy shattered by conflict since it seceded from Sudan in 2011.

“Because of this Covid-19, because of the oil price dropping there is no foreign exchange and our pound has become of less value,” Makur said.

The nation’s currency has plunged to about 440 pounds to the dollar on the parallel market, compared with the official rate of 168.5 pounds. Inflation was 37.2% in April, according to the last data released by the central bank.

Waiting for Aid

With brent crude prices almost 40% lower this year as the pandemic drains global demand, the government is looking to boost income from gold and gum arabic, a sap that’s extracted from acacia trees and used in sodas and pharmaceuticals, Makur said.

It’s applied for a $250 million loan from the African Export-Import Bank to help finance its recovery plan and is in talks with the International Monetary Fund and World Bank.

The government is also seeking aid as it tries to hold together a peace deal that brought an end to its civil war. Violence between ethnic groups in rural communities has continued, leaving hundreds of people dead.

“We are still waiting for the promises from countries like America and others in Europe and Africa,” Makur said. “Before we signed this agreement, we got promises from those countries, but up to now there has been no help.”

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