By Kidega Livingstone
Transport disruptions of crude oil to Port Sudan, coupled with threats of Red Sea blockade, have significantly impacted South Sudan’s resource envelope.
Government spokesperson, Michael Makuei Lueth acknowledged the Sudan war has detrimental effects on South Sudan’s economy, which heavily relies on oil and imported goods.
“Now the pipeline taking our crude oil to Port Sudan has experienced a jelling process in stations Four (4) and Five (5), making it difficult for the crude oil to reach the export market,” he said.
According to Makuei, the first disruption of the oil wells was waterlogging due to heavy flooding over the past rainy season. He added that the wells are still unrecovered and the oil is yet to reach the export market.
The minister lamented that insecurity along the Red Sea has also added another impediment to South Sudan’s oil predicaments.
“Even if the crude were to reach Port Sudan, it would still not be possible to ship it for sale due to the threat of a blockade of shipping in the Red Sea, so apart from low production, there are physical difficulties confronting the oil sector,” he added.
Unfortunately, the non-oil revenue sector is mainly, inter alia, dependent on imported goods, the minister stressed.
Consequently, the reliance on oil revenues and the vulnerability of the non-oil revenue sector, which depends largely on imported goods, have severely impacted South Sudan’s resource envelope.
The cost of goods, particularly fuel and electricity, has skyrocketed, and the exchange rate of the South Sudanese pound to the dollar has significantly increased.
Although South Sudan operates as a free-market economy, Lueth emphasized that the government has the responsibility to intervene and protect its citizens from opportunistic practices.
To address the fiscal crisis, he said the government is implementing proactive measures, including streamlining revenue collection, consolidating government finances, and implementing public finance management reforms.
Additionally, efforts are underway to diversify the economy, mobilize resources, stabilize the market through monetary policy measures, and strengthen the foreign exchange reserve.
“This approach will enable the government to meet its obligations, including clearing salary arrears, staying current and funding the general election in December 2024,” he said.
He expressed that the Bank of South Sudan is strengthening its monetary policy framework and mobilizing foreign exchange in order to stabilize the market, and this includes maintaining restrictive monetary policy, revisiting the deployment of monetary policy, and rebuilding the foreign exchange reserve
“Coordinating with the fiscal authority to tighten fiscal policy, while mobilizing domestic revenue and modernizing payment systems that address the issue of excess liquidity outside the banking system and support electronic banking and other mobile platforms to foster financial inclusion, he said.
Meanwhile, the Governor of the Bank of South Sudan, James Alic Garang stated that South Sudan majorly depends on oil production and any effect on the oil production would also affect the economy of the Country.
“When Oil is affected everything is affected but that is not the end the government has another alternative in non-oil revenue collection. For the next three months the collection will go higher,” he said.
He advised that the production in the country must pick up though there is hardship but also the government is planning to make sure that the economy grows.
“There are a number of things that can be done, we going to have the market monitoring agents to control the market, this is not the work of the government only but it will involve everybody,” he said.
South Sudan, an oil- and import-dependent economy has experienced economic hardships following the outbreak of conflict in 2013 and again in 2016.
The issue has now been made worse with the outbreak of the conflict in Sudan.