South Sudan officials announced Monday that they would cut government spending by half just weeks after halting oil production.
In January, South Sudan shut down its entire oil production of 350,000 barrels a day after its northern neighbor, Sudan, began 'stealing' crude due to what Sudanese officials say were unpaid transit fees.
In a drastic move, South Sudan said it will stop all oil production until Sudan repaid 2.4 million barrels of southern crude it "stole" from pipelines running through the north to its Red Sea port, says AFP.
The government has insisted that salaries for government workers will not be reduced during the cuts and there would be no layoffs, says Reuters.
Reuters quoted South Sudan Finance Minister Kosti Manibe as saying, "These are swift and deep cuts, but no layoffs of civil servants, organized forces personnel and (army) SPLA. Everyone's paycheck is being maintained."
Salaries make up more than 40 per cent of South Sudan's budget
According to the BBC, crude oil revenue made up 98 per cent of South Sudan's budget.
Sudan and South Sudan disagree on the costs associated with transporting oil and have been locked in a fierce conflict over payments.
The next round of African Union talks to solve the dispute will be held on Wednesday in the Ethiopian capital Addis Ababa, AFP reported.