The East African newspaper has reported that South Sudan President Salva Kiir has received an offer of €100 billion ($105 billion) for budget and project support from a Luxembourg-based investment fund, to shore up the country’s struggling economy, as analysts warn the debt may be difficult to sustain.
According to The East African, the funding package was arranged in Kampala on October 10, 2016, between well-wishers for peace and stability in South Sudan and the Ugandan agent of Suiss Finance Luxembourg AG.
The “well-wishers,” who are also President Kiir’s peace and security advisers, were Kalisa Mohammed and Twinomuhwezi Henry Williams, while the Suiss Finance representative was Moses M. Engadu.
It is said that Rene A Cortez, the Director of Suiss Finance Luxembourg AG, wrote a letter on December 6 offering the South Sudan government a range of financial aid instruments, which included safekeeping receipts, foreign exchange and natural resources trading, as well as a line of credit, to be used as a direct support to the national budget.
Mr. Cortez suggests that the funds could be used to finance projects through joint ventures in infrastructure, transportation, oil and energy. Accordingly, Suiss Finance is ready to provide the Juba administration with an initial $10.5 billion.
President Kiir is said to have quickly responded to the offer as it provides a lifeline for his struggling government. The respected weekly newspaper in the region says that the President responded to Suiss Finance’s letter by inviting representatives of Suiss Finance Luxembourg AG for Africa and for Uganda, Patrick G. Thimba and Moses M. Engadu to Juba to meet his advisers, Mr. Mohammed and Mr. Williams.
According to the report, the deal is yet to be finalized. If it goes through, it would signify a major breakthrough for the Juba government. But this is not the first time the country is entering a deal to mortgage its natural resources for cash. Juba is currently fighting to survive bankruptcy and a potential array of sanctions against its officials.
Analysts are now warning that with the burden of old debt, the Suiss Finance forex for natural resources swap may prove difficult for Juba to navigate. In May 2012, when South Sudan was caught up in a standoff with Khartoum over its crude oil exports, it secured a $100 million line of credit from Qatar National Bank. It was to receive a further $500 million within a month from an unidentified source.
Those familiar with the impending deal warn of many international finance deal fixers who are aware of the funding crisis the government in Juba faces, and spend their time shuttling between Juba, Nairobi, Kampala and European cities, staking South Sudan’s natural resources, especially oil, to get the forex for the government.
This is happening at a time when reports indicate that the South Sudanese Pound (SSP) lost about 80% of its value since December 2015, effectively increasing prices of basic commodities in the market.
