JUBA Motorists in South Sudan queued for hours on Sunday to try to buy petrol as filling stations ran dry due to a shortage of dollars less than three months after the world's newest nation shut down oil production in a row with Sudan.
Four petrol stations visited by Reuters in Juba, the capital of South Sudan, had run out of petrol while motorists waited in long queues at the few stations that were still open.
"We've run out of fuel," one staff member at a petrol station said, declining to be identified.
"I don't know when new supplies will come and whether we will be able to pay for it."
The dispute over oil payments has stirred serious tensions between the two former civil war foes, escalating into border clashes that risk pushing the two neighbors into a full-blown war.
The Sudanese army said on Saturday it was fighting South Sudan's forces in the disputed Heglig region just a few kilometers (miles) from a key oilfield, although South Sudan denied the claim.
On Sunday, Khartoum warned it would not negotiate with Juba until South Sudan withdrew all its forces from the area. A South Sudanese government spokesman in turn accused the north of bombing Heglig's oil facilities "to rubble".
The fighting is the worst since the south declared its independence in July, and the oil dispute has begun to inflict serious damage on South Sudan's economy.
Oil production used to account for 98 percent of the state budget and was almost the sole source of foreign currency.
But the two sides have been unable to agree how much Juba should pay to export its crude through Sudan, and South Sudan halted oil production in January to stop Khartoum taking oil to make up for what it called unpaid fees.
South Sudan says it has enough reserves to hold out for a long time, but a dollar shortage is driving up the cost of imports, putting a strain on the economy. The underdeveloped nation needs to buy almost everything from abroad including basic food items and fuel.
Annual inflation rose to 50.9 percent in March from 42.4 percent in February, official data showed last week. Some analysts say prices are actually rising much faster in parts of the country.
As dollars become scarce and the South Sudanese pound weakens, petrol stations are struggling to pay foreign suppliers who truck in fuel for a premium from Kenya and Uganda. South Sudan has no refineries.
"I got up at 4 o'clock in the morning and got petrol at 7.30 but only because I was fourth in the line. Others waited all morning," Samuel, a taxi driver in Juba, said.
"There is no fuel in town. I have been trying to get fuel for four days," said Sharif Mohammed, another motorist. "It's very bad."
South Sudan's Information Minister Barnaba Marial Benjamin blamed strong demand and logistical challenges for the shortage.
"It happens from time to time, but new fuel supplies are on the way," he said. "It's not about dollar shortages."
However, a banker said the central bank had drastically cut dollar flows to commercial banks to preserve dwindling reserves. A dollar now buys between 4 and 4.2 South Sudanese pounds on the black market, compared to 3.5 before the shutdown.
Fuel products used to come from Sudan but fighting on both sides of the border has disrupted cross-border trade since southern secession.
(Editing by Andrew Osborn)