“Last year, [the government] introduced a very sensible budget, with some austerity spending for the first six months of the year, while oil production got back up towards capacity. This year the country’s in a civil war that’s displaced almost one and a half million people, and been responsible for the deaths of more than 10,000 people,” Richard Nield, an independent analyst, told CNBC Africa.
“The government [is nevertheless] expecting spending to increase slightly on government agencies, with a two and a half per cent increase. More importantly is the money they’re expecting to come in: it’s expecting to see a 23 per cent rise in oil income, and 35 per cent rise in non-oil income.”
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Nield added that the expectations come at a time when South Sudan’s economy is in tatters, with almost all other major cities outside the capital of Juba having been emptied, and oil production is down.
Oil production in Unity State in particular has completely stopped, and oil production in the upper Nile state has also declined to roughly 165,000 barrels a day from 220,000 barrels per day.
“For the government to suggest that it can increase its earnings in this context is wildly unrealistic,” Nield added, and explained that reaching the proposed target is almost impossible.
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This is in light of the fact that South Sudan’s government expects oil production to begin almost immediately yet most oil fields have shut down, and could take between 12 to 18 months to restart.
“Those [oil] fields are well protected by government forces, but they are still being threatened by opposition forces, and it’s very difficult for the government to reopen the outlying fields that it shut down for security reasons because it’s not sure that it can protect them,” said Nield.
“It’s not at all clear that the security situation is anything like as stable as it needs to be for the government to start generating oil revenues on which this budget depends.”