Blog / 9 Juillet 2014

Three years in, is South Sudan’s oil driving its crisis?

On the third anniversary of its independence, South Sudan looks like it is sliding into a dangerous cycle of oil-backed debt. The new budget, announced last week, signaled that another 3 billion SSP ($1 billion) would have to be borrowed from oil companies next year.

This is a huge sum and is almost equivalent to the amount donors are spending to alleviate the humanitarian catastrophe that is unfolding. Worryingly, most of this money will go straight back to the same oil companies, to pay off last year’s debts.

More alarmingly still, the South Sudanese public have no idea on what terms this $1 billion is being borrowed. It’s all been agreed behind closed doors. Citizens must be told the terms that their government have struck with the oil companies so they can be sure their government is negotiating the best deals in the high risk world of oil-backed borrowing.

The government and the rebels failure to negotiate a way out of the conflict is pushing up state spending on the armed forces, while development projects go unfunded. Around 35% of the budget will be used to pay for the security sector. At the same time, Ban Ki-Moon has warned that if the conflict continues, half of South Sudan’s population will be homeless, starving or dead by the end of the year.  After the debts are paid-off and the soldiers paid, little remains for spending that will directly benefit ordinary citizens. Only 12% of the budget will be invested into healthcare, infrastructure and education combined.

We have seen these types of debt cycles before. If the government is to avoid bankruptcy, it must take steps to get its house in order and make any future loan deals transparent. If it is serious about investing in the South Sudanese people,  it also needs to get serious about the peace talks too. And if these talks are to produce a stable South Sudan, oil has to be at the top of the agenda.

For further comment please contact Emma Vickers, South Sudan Campaigner, on +44 (0)7715 076 548, [email protected];

or Sarah Morrison, Senior Communications Advisor, on +44 (0) 207 492 5840, [email protected]