The South Sudanese government has scrapped fuel subsidies in a bid to cut spiralling public expenditure costs in the youngest nation hit by rampant fuel shortages due to a four-year long armed conflict.
Deputy Minister of Information Lily Albino Akol told journalists that President Salva Kiir ordered the removing of the fuel subsidies in order to find badly needed supplementary cash to pay government workers’ pending arrears.
“The president and Council of ministers noticed and acknowledged that the people of South Sudan are suffering and that the fuel subsidies which were meant to alleviate the economic condition of most of our people are not happening. So it will be in the best interest of our people that these fuel subsidies are lifted,” Akol said in Juba on Saturday.
She disclosed that market forces of demand and supply will determine the fuel price as the state-owned Nile Petroleum will see its budget cut.
Nilepet which solely imported fuel in the country will now share this obligation with private companies.
The state allocated in the past about 158 million U.S. dollars to Nilepet to import fuel which it would sell at subsidized rate of less than half a dollar, but the latest development has seen fuel prices skyrocket in the market with a liter of petrol selling at 0.97 dollars while diesel at 0.95 dollars.
South Sudan’s annual inflation peaked at 550 percent, according to data from the International Monetary Fund (IMF).
The country depends hugely on oil exports to finance 98 percent of its fiscal budget but conflict has curtailed oil production to less than 160,000 barrels a day from the previous 350,000 bpd.
The country also imports fuel products and is yet to finalize construction of the Tharjiath fuel refinery in the northern Unity region.
South Sudan descended into violence in December 2013 after political dispute between President Salva Kiir and his former deputy Riek Machar led to split within the SPLA, leaving soldiers to fight alongside ethnic lines.
The 2015 peace agreement to end the conflict was weakened after the outbreak of renewed fighting in July 2016.