S.Sudan oil production to halve by 2020 -IMF

KHARTOUM Oct 26 (Reuters) - South Sudan, Africa's newest nation, needs to use current windfall oil revenues to diversify its economy as oil production is expected to halve by 2020, the International Monetary Fund said on Wednesday.

South Sudan became independent on July 9 after a referendum agreed under a 2005 peace deal with its former civil war foe Khartoum but has struggled to build up state institutions and end tribal and rebel violence.

The new nation took control of two-thirds of the country's oil production of almost 500,000 barrels a day, which account for 98 percent of state revenues. Since independence Juba has contracted oil sales worth $2.14 billion.

The IMF said South Sudan needed to use a "small window of opportunity" while oil revenues were still flowing to build up alternative industries.

"(Oil) production has already started falling from its 2009 peak of about 360,000 barrels per day and, barring new discoveries or improved recovery, it is likely to halve by 2020," the IMF said.

South Sudan produces around 300,000 bpd.

Despite having a per capita income of $1,000, more than twice the average of its neighbours, South Sudan is totally underdeveloped and has less than 100 km of paved roads.

"Its human and physical capital levels are extraordinarily low, and literacy and road density rates rank below those of neighboring countries despite higher income levels," the IMF said in its latest regional outlook.

South Sudan needs to establish immediately "the credibility of its macroeconomic policy framework, including monetary operations," the IMF said.