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Economic Analysts Question South Sudan's Large Loans

FILE - In this Jan. 5, 2014, photo, South Sudan's information minister, Michael Makuei, attends a press conference in Addis Ababa, Ethiopia.

South Sudan has secured $88 million in loans from the Africa Export-Import Bank (Afreximbank) after receiving cabinet approval, but local economic analysts say the hefty loans won’t solve the country’s serious economic problems.

Information minister Michael Makuei told reporters following an extraordinary cabinet meeting that the council of ministers agreed to borrow more money so the government could settle all its internal outstanding debts.

“The Afreximbank in the last meeting approved a loan of $25 million. This time the bank has decided to increase the amount, and it also approved that they will give us an additional sum of $63 million for the same pandemic trade impact mitigation,” said Makuei.

The government considers the money a soft loan, saying it will be paid back using the country's oil revenue, according to Makuei. South Sudan relies on oil production for about 99% of its revenue.

FILE - The Commission on Human Rights in South Sudan is led by Yasmin Sooka in Geneva, Dec. 14, 2016.
FILE - The Commission on Human Rights in South Sudan is led by Yasmin Sooka in Geneva, Dec. 14, 2016.

In a scathing report to the U.N. Human Rights Council late last month, Yasmin Sooka, chair of the U.N. Commission on Human Rights in South Sudan, said lives are being destroyed by financial corruption on an epic scale in South Sudan.

“Looting and pillage aren’t just offshoots of war — they are arguably the main drivers of the conflict,” said Sooka. “South Sudan’s political elites are fighting for control of the country’s oil and mineral resources, in the process stealing their people’s future.”

Ahmed Morgan, an economic analyst and a senior economics lecturer at the University of Juba, said the government should have a clearly stated the purpose for borrowing tens of millions of dollars, since the loans will come due for the next generation.

In the past, the government received numerous loans from various countries and institutions, but the money was later squandered or used for something other than its intended purpose, according to Morgan. He said borrowing to fix the budget deficit was one thing, but borrowing this amount money to remedy an economic crisis wouldn't work.

“Economic problems in the country can only be fixed when you actually fix the pay for production in the economy, which we don’t have in the current state. And the basics for production of a good economy, we are supposed to have sustainable peace and general stability for security purposes so that we start local production for local consumption,” Morgan told South Sudan in Focus.

He said the government should use the new loans to pay civil servant salaries in arrears and current salaries.

“Civil servants have not been paid for months; then the government has to come up with plans on how it will never go back to the same position again. I have been complaining that we need to strengthen our policies of foreign exchange, by reducing imports of such things, not forgetting that South Sudan is an oil-producing country and still we are importing the final products of oil,” Morgan told VOA.

Petrol, diesel and engine oil are all products that the nation could be producing at home, according to Morgan.

Marial Awou, an economics professor and vice chancellor at Upper Nile University, welcomed the loan, noting the country’s reserves are nearly bankrupt.

“It is a relief to the government since the government is in the very serious situation of not being able to pay the salaries of civil servants and not able to operate normal functions of the government. There is almost a complete bankruptcy in the government,” Awou told South Sudan in Focus.

But Awou also cautioned against consuming and relying on exports at the expense of future generations.

Afreximbank is a pan-African multilateral trade finance institution based in Cairo, Egypt, that was created in 1993 under the auspices of the African Development Bank.

Carol Van Dam Falk contributed to this report.