S.Sudan economy in foreign exchange crisis-finmin

* Foreign exchange reserves drying up

* Imports, investor confidence eroded

By Jeremy Clarke

JUBA, Sudan, Aug 23 (BestGrowthStock) – South Sudan said on Monday
that the central government had stopped paying its share of oil
revenues in foreign currency (Read more about trading foreign currency., creating a foreign exchange crisis
in the region ahead of a January vote on independence.

Under a 2005 north-south peace deal which ended a two-decade
long civil war, the south receives about 50 percent of Sudan’s
oil revenues. The oilfields are in the south but all the ports
and refineries are in the north, so wealth-sharing is likely to
continue even if the south votes to secede on Jan. 9.

The semi-autonomous South Sudan government derives some 98
percent of its budget from oil revenues, making its economy
almost totally dependent on the cash sent from the north.

David Deng Athorbei, the south’s finance minister, said the
decision to pay its oil revenues in local Sudanese pounds since
July was a “sinister” ploy to unsettle the south’s economy.

“This is a clear attempt to violate the CPA (peace accord),”
Athorbei said. “It is an attempt by NCP (the north’s ruling
party) to stifle the southern Sudanese economy.”

He said the north had taken similar action in June 2008, but
the dispute had been resolved through political dialogue.

The finance ministry in Khartoum was not immediately
available to comment, but the Central Bank has suffered a
massive depletion in foreign currency (Read more about trading foreign currency. over the past year because
of the global financial crisis.

Athorbei said the switch to local currency payments meant
the south’s central bank was unable to supply southern banks and
foreign exchange bureaux.

“Investor confidence in southern Sudan is eroded,” he said.
“(It) is starving the economy of southern Sudan of the hard
currency it needs to operate.”

Athorbei said the Sudanese pound had fallen sharply against
the dollar since the change, dropping to 3.10 to the dollar in
the south compared with the national exchange rate of 2.43.

“If the situation is not reversed it means southern Sudan
cannot import essential commodities which are necessary for our
development, like steel and cement,” he said.

Most of Sudan’s oil lies near a disputed north-south border
and the parties are negotiating the future shareout of oil
revenue. The fact that both sides rely on oil revenue gives them
an interest in ensuring that a southern secession would be
carried out amicably.

But failure to agree on post-secession wealth-sharing could
also lead to conflict.
(Editing by Opheera McDoom and Tim Pearce)

S.Sudan economy in foreign exchange crisis-finmin