South Sudan is willing to withdraw its army from the disputed border with Sudan, President Salva Kiir said, signalling a possible compromise at a summit with his Sudanese counterpart.

Kiir and Sudan's Omar Hassan al-Bashir agreed in September to withdraw troops from the disputed border as a precondition to resume oil exports from landlocked South Sudan through Sudan. Oil revenues are vital to both economies.

But both countries still have troops 10 km from each other's border, and both accuse each other of supporting rebels on the other's territory.

Kiir and Bashir are scheduled to meet this month at a summit brokered by the African Union to discuss how set up the border zone which will be monitored by soldiers from both sides and U.N. peacekeepers.

"To be able to establish the border monitoring mission, we are temporarily withdrawing our forces from the immediate border areas," Kiir said in a speech on New Year's Eve.

"This will allow for a demilitarised border zone to be operational," he said, without giving a date for the pullout.

South Sudan's Information Minister Barnaba Marial Benjamin told Reuters the withdrawal would have to be coordinated between the two countries. He did not elaborate.

South Sudan seceded from Sudan under a 2005 peace deal which ended decades of civil war. But both countries have yet to demarcate the border, which straddles oil production facilities.

The two rivals are also at odds over Abyei, an area between Sudan and South Sudan prized for its fertile grazing land.-Reuters