South Sudan May Seek Loans to Cover Lost Oil Revenue, UN Says

South Sudan may seek commercial loans to compensate for revenue lost since it shut down its oil industry in January because of a dispute with Sudan, the head of the United Nations mission in the country said.

Hilde Johnson, the special representative of the UN secretary-general, said she has had discussions with government officials about how to cover the gap in lost revenue from oil, which accounts for more than 95 percent of the newly independent nation’s income.

“They seem to be leaning more towards loans than donor support, but it is too early to tell,” she told reporters today in Nairobi, the Kenyan capital.

South Sudan, which gained control of about 75 percent of the formerly united Sudan’s 490,000 barrels a day of output at independence in July, completed a shutdown of production Jan. 28. It took the action after accusing Sudan of stealing its oil. Sudan said it confiscated the crude to make up for unpaid fees.

Negotiations between the countries since independence have failed to yield an agreement on how much the landlocked south should pay to transport its oil through a pipeline across Sudan. The latest round of negotiations was scheduled to begin today in the Ethiopian capital, Addis Ababa.

“Unless an agreement is reached with Sudan that will allow for a resumption of oil production and exports, there is a risk that severe cuts will have to be undertaken a few months from now,” Johnson said.

While South Sudan may ask international donors to help make up the budgetary shortfall, there is no guarantee they would agree to provide funding, she said.

To contact the reporter on this story: Jared Ferrie in Nairobi at jferrie1@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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