* Plans to remove "ghost" workers from payroll
* Conflict shook confidence of donors
* Vital oil output only modestly hurt by fighting
By Carl Odera
JUBA, Feb 10 (Reuters) - South Sudan's foreign exchange reserves can last for six months and the currency has been more resilient than the government expected, the finance minister, said after a conflict that erupted in December but had limited impact on oil output.
As part of efforts to restore battered donor confidence in Africa's newest nation, the government is also reviewing the state payroll to ensure wages are not paid to "ghost" workers, or those who don't turn up, Aggrey Tisa Sabuni told Reuters.
The conflict erupted in the capital, Juba, and briefly affected some oil fields forcing a modest cut in production, but those two main drivers of the economy were left largely unscathed. Oil accounts for 98 percent of government revenues.
The fighting between backers of President Salva Kiir and those loyal to the vice president he fired in July, Riek Machar, quickly spread across the nation that won independence from Sudan in 2011.
Thousands were killed and more than half a million fled their homes during five weeks of fighting until a shaky ceasefire was agreed between the government and rebels on Jan. 23. Peace talks resume on Monday, despite sporadic clashes.
Although the economy has held up better than expected, the finance minister said in a weekend interview that much depended on the pace of progress in negotiations taking place in Addis Ababa.
"If the ceasefire holds, the peace talks progress very rapidly, whatever has happened over the last seven weeks will be a very unfortunate gap but can very easily be bridged," he said. "If it drags on then definitely the investors we had expected to come will not come back."
The government had started to rebuild foreign reserves in the second half of 2013 after oil production resumed following a more than year-long shutdown.
Juba was also drawing more investment interest, hosting a well-attended investor conference in December, days before soldiers clashed around the capital.
"The foreign reserves of South Sudan have not been affected by the current crisis. Before the crisis the foreign reserves of the country had steadily built up," the minister said.
Oil fields were a target in the fighting but output dropped only modestly - by a fifth to about 200,000 barrels per day.
Oil firms in South Sudan include China National Petroleum Corp, India's ONGC Videsh and Malaysia's Petronas. Work in some fields has been suspended.
"We have foreign reserves for up to six months," he said without giving a figure. "For the time being ... the country has no problem is terms of foreign currency."
He said fighting had disrupted budgeted capital spending for January and February, hurting road and other projects.
About 2.5 billion South Sudanese pounds ($845 million) were earmarked for capital investment for the year. How much of that is finally disbursed will depend on restoring order, he said.
That will be a blow to South Sudanese who have long grumbled about the government's failure to improve even basic services in the oil-producing nation. The country of 11 million is the size of France in terms of land area but has barely any hardened roads.
Many citizens and donors complain that corruption means the benefits of oil wealth are barely felt by most ordinary people.
"What is happening is as we speak now we are cleansing our payroll," Sabuni said, referring to a plan to pay salaries to civil servants and soldiers in person not by direct transfer.
Automatic transfers meant the central bank could not be sure that those paid turned up for work or even existed, he said.
"This (new method) we believe is going to result in a very good payroll that will be devoid of 'ghost' names," he said, adding it would "allay the fear of the donors" although he did not give more details about the system.
Even before the conflict, businesses complained about the difficulty of sourcing dollars, fuelling a parallel or black market where the exchange rate before the conflict was 4 to 4.50 pounds to the dollar, compared to the official level of 2.96 pounds.
"At the onset of the crisis, one would have expected the parallel rate to go to 7, 8, 9, 10 per dollar, but surprisingly it has remained between 4.50 and 4.80," the minister said, citing a black market figure that traders confirmed.
But the minister said the central bank was careful about providing dollars to the market to avoid dealers profiting from the difference between the official and parallel rates.
Inflation had also held broadly steady at about 11 to 12 percent a year, the minister said, although residents had reported a spike in prices for some goods during the conflict, in part because of higher transport costs. (Writing by Edmund Blair; Editing by Richard Lough and Susan Fenton)