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Sudan Tribune

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Corruption threatens South Sudan’s loan dealings: Global Witness

By Julius N. Uma

May 18, 2012 (JUBA) – South Sudan’s decision to pursue oil-backed financing in the wake of a looming economic crisis faces real transparency tests, if details of any loan agreements secured are not publicly declared to the country’s citizens, Global Witness said in its latest report.

Dana Wilkins in Juba, Septmeber 5. © The Niles | Waakhe Wudu
Dana Wilkins in Juba, Septmeber 5. © The Niles | Waakhe Wudu
There have been several reports over the last week of the Government of South Sudan securing loans, ranging from $100-500 million, to mitigate the impacts of the current economic crisis and finance specific infrastructure projects.

Global Witness argues, the exact terms of these deals have not been published but there are indications that they will be, at least in part, tied to future oil revenues. Such a move, it adds, is critical in preventing “exploitative terms, corruption, and mismanagement from undermining immediate benefits.”

“Taking on loans with a commitment to repay them in future oil production or revenues can be risky under the best circumstances,” said Dana Wilkins, a Global Witness campaigner.

“The risks of corruption and mismanagement are huge, and given the importance of oil to South Sudan’s future, the Government must be extremely careful and transparent in managing these deals,” she added.

In South Sudan, oil revenues accounted for nearly 98 percent of the country’s annual budget; prior to the government’s decision to shut down oil production early this year.

According to Global Witness, however, though austerity measures are being put in place to address this near total deficit, reserves held by the Central Bank are reportedly depleting quickly and critical institution-building, infrastructure, and other projects may have to go unfunded.

The organisation further highlights the threat foreign financial institutions pose to South Sudan’s natural resources in the name of providing funds, saying any deal transacted must involve the wider public and not be done behind closed doors.

Citing what is described as the “international best practice” outlined by International Monetary Fund (IMF), Global Witness urges the Government of South Sudan to put in place a robust protection mechanism that seeks to minimise future costs and consequences, if it feels oil-backed loans are currently necessary to prevent economic collapse.

As part of this mechanism, the IMF policy reportedly demands money from these loans should be received by a carefully controlled national bank account managed by the ministry of finance and economic planning, and the balance, liabilities, and loan terms should be fully disclosed to the public.

“As the rightful owners of the country’s natural resources, all South Sudanese citizens should be allowed the information necessary to understand exactly what has been agreed and what the future obligations of the country will be,” added Wilkins, adding that, “This will be one of the first major tests of the Government’s repeated commitments to transparency and accountability.”

(ST)

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