Oil-rich South Sudan caught in a dangerous cycle of debt
Kaieteur News – The Republic of South Sudan is an underground country in East Central Africa that is stuck in a borrowing cycle that it is struggling to get out of. The country continues to borrow money from several major funders for projects to lend to its development. Despite having billions of barrels from oil reserves, the country is struggling to drag itself out of debt.
The anti-corruption watchdog Global Witness (GW) sounded the alarm in 2015 on South Sudan’s lending, when its Parliament approved the government’s decision to negotiate a hundreds of millions of dollars loan with the Qatar National Bank (QNB). GW called the loan a risky one. He pointed out that the country had received US $ 1.7 billion in oil money in the previous year, and that the $ 500 million US Qatari loan had such a high interest rate that Qatari would owe US $ 281 million in addition to paid back over seven years. This is not a significant change for South Sudan. Its economy has proven very volatile over the years, due to years of ethnic strife, civil war, and over-reliance on oil. GW said the deal was also risky because the government had agreed that if it is low on cash, it will pay oil.
“Using crude as collateral threatens to lock the country into a dangerous cycle of debt,” said GW. “Oil dollars are used to pay off old loans while new loans finance the budget. By taking this loan, the government is in danger of selling South Sudan’s future to pay for it today. ”
Worse yet, GW says, is that there are serious concerns about government spending and corruption priorities, while millions are suffering in poverty.
In October, Sudans Post, an independent media organization, said the Qatar National Bank had lodged a complaint against Sudan at the International Center for Investment Dispute Settlement (ICSID) for its failure to repay a $ 700 million US debt. Sudans Post said the African country benefited from multiple payments from the Qatar Bank and failed.
In its 2019 Article IV consultation, the International Monetary Fund (IMF) said that South Sudan is in a deep economic crisis, and that debt sustainability is a key issue. Together with the World Bank International Development Association (IDA), the IMF prepared a debt sustainability analysis in 2019 that placed the decade-old republic’s total external debt stock at US $ 1.196 billion or 34.4 percent of its Gross Domestic Product (GDP).
According to that analysis, in March 2019, US Sudanese had US $ 53 million to the World Bank, African Development Bank (AfDB) US $ 28 million, China Export Import Bank US $ 150 million, Qatar National Bank US $ 627 million, and oil- related developments US $ 338 million.
The IMF and the World Bank said South Sudan has a weak debt-carrying capacity.
Even then, Reuters reported in August that South Sudan was seeking a US $ 250 million loan from the African Export Import Bank. The loan was requested so that the country can implement a deferred peace agreement from the war that ended two years ago, fight COVID-19 and work towards food security.