South Sudan's Minister for Petroleum and Mining Stephen Dhieu Dau (L) prepares to press button to resume oil production May 5, 2013, Paloch, South Sudan
South Sudan's Minister for Petroleum and Mining Stephen Dhieu Dau (L) prepares to press button to resume oil production May 5, 2013, Paloch, South Sudan
JUBA - The South Sudanese government has stopped paying the salaries of many of its public sector workers as it struggles to pay back $5 billion dollars in loans it took out to tide the country over during the long oil production shutdown.

"Our borrowing has caught up with us and we cannot run away from it," Finance Minister Aggrey Tisa Sabuni said as he explained why some civil servants' wages have not been paid for two months.

"We must meet these challenges as part of the price of being forced to shut down our oil,” he said.

Juba-based civil servant Suzy Enocka said she hasn't been paid since September and her kids are beginning to badger her as the end-of-year holidays draw near.

“Now, even our children are stressing us, saying, 'Christmas is coming, when will you buy us things, clothes?'  Food is also expensive. Our situation is bad," she said, pleading with the govenrment to pay civil servants what they are owed.

Sabuni said that once the government has repaid its foreign loans, it hopes to pay civil servants' wages promptly. But, he added, that won't happen for "another two or three months."

Loan repayments, often on unfavorable terms to South Sudan, and $3.2 billion in compensation that Juba has to pay to Sudan to make up for revenues that Khartoum lost when the south became independent in 2011 "have squeezed our fiscal space and made it difficult for us to have sufficient funds at hand in order to pay funds promptly," Sabuni said.

"That’s why we are dragging on the issue of salary payments," he said. 

The South Sudanese government borrowed some $5 billion to offset a foreign currency shortage and fund government spending after oil production, which brings in the bulk of South Sudan's revenues, was shut down in early 2012 over a row with Khartoum on pipeline transit fees.

"We borrowed practically all available funds that any of the commercial banks could spare -- we borrowed it all to the tune of $4.5 billion,” and then borrowed another $650 million from foreign lenders, such as the National Bank of Qatar, and oil companies, Sabuni said.

Some of the loans were supposed to be repaid within 12 months, but the production shutdown lasted longer than that, and full production did not resume immediately once it ended.

The loans from foreign sources were to be repaid in oil taken from the volume of crude the South Sudanese government is entitled to under production-sharing agreements, and the domestic loans were to be repaid using non-oil and oil revenues.

But as unfavorable the repayment terms are, Sabuni said the government had no option but to take out the loans. 

“If borrowing on those terms was not done around that time, I cannot imagine how we could have survived," Sabuni said, adding that South Sudan was paying the price now.

"The chickens have come home to roost," he said.