Sudan announces 9-month plan
to rescue economy
On the politically tricky topic of Suddenness government subsidies, Hamdok said any changes would only be made after "deep discussions" with the people. KHARTOUM - Sudan’s transitional government will start a 9-month economic rescue plan aimed at curbing rampant inflation while ensuring supplies of basic goods and is asking the World Bank for $2 billion. Shortages of bread, fuel and medicine coupled with hefty price rises sparked protests that led to the toppling of long-time ruler Omar al-Bashir in April. The economy has remained in turmoil as politicians negotiated a power-sharing deal between the military and civilians. Sudanese Finance Minister Ibrahim Elbadawi said the new plan, to begin in October, would restructure the budget and tackle inflation but leave bread and petrol subsidies in place until at least June 2020.
“It aims… to restructure the banking sector, rationalise government spending, address the state’s financial burden and review tax exemptions, because 60% of economic activity is tax exempt,” Elbadawi said. It would also combat corruption. The transitional government, led by Prime Minister Abdalla Hamdok, is Sudan’s first since al-Bashir’s overthrow. The government needs billions of dollars to import basic goods, such as fuel and flour. Fuel subsidies account for 8% of GDP, Elbadawi said. The government wants to replace commodity subsidies with direct cash transfers to poor families, he added. Hamdok was expected, during the UN General Assembly meetings in New York, to ask the World Bank for $2 billion in funding, Elbadawi said. Khartoum has asked the bank to send three Sudanese experts as secondees and to help pay their salaries to improve Central Bank and Finance Ministry performance during the political transition. Sudan has been unable to tap the International Monetary Fund and World Bank for support because the United States lists the country as a state sponsor of terrorism.
"American officials have informed us that removing Sudan from the US terrorism list is complicated because it is tied to Congress and could take nine months to a year," Elbadawi said. The new economic plan aims to address the country’s weakening currency, he said. The Sudanese pound is officially set at 45 to the US dollar but on the black market on September 23 it was trading at 69 pounds. Elbadawi said he hoped to unify the two exchange rates by June. Hamdok, shortly after his appointment in late August, said Sudan needed $8 billion in foreign aid over the next two years. He said up to another $2 billion of foreign reserves deposits were needed in the next three months to halt a fall in the currency. Mounting public anger over shortages of food, fuel and hard currency triggered mass demonstrations that forced al-Bashir from power in April. On the politically tricky topic of government subsidies for bread, fuel, electricity and medicine, Hamdok said any changes would only be made after “deep discussions” with the people.
"The people are the ones who will make the decision on this issue," he said. Sudan has been in economic turmoil since it lost the bulk of its oil production in 2011 when South Sudan seceded after decades of civil war. It has devalued the pound several times but not been able to halt the fall. "We will work to unify the exchange rate and to manage the exchange rate using a flexible managed exchange rate," Hamdok said, without going into details. He said Sudan needed to restore trust in the banking system. Hamdok, who studied agricultural economics, has worked at the African Development Bank and most recently was a special adviser at the Trade and Development Bank in Ethiopia. He said Sudan needed to tap its agricultural potential. Sudan is rich in agricultural resources but high taxes, corruption and mismanagement have held back investment in the sector for decades. "We want to take the Sudanese economy from an economy based on consumption and imports to a productive economy and stop exporting products such as livestock and agriculture as raw materials," Hamdok said. "Instead, we will aim to process them so as to create added value."
He said he wants to focus on peace building in a nation that has seen conflicts flare in multiple parts of the country and endured a civil war that ended in the secession of the South. "Stopping war, which represents 70% of the expenditure in the budget, will create a surplus that can be invested in production and particularly agriculture, livestock and related industries," he said. Shortly after al-Bashir was ousted, the United Arab Emirates and Saudi Arabia pledged $3 billion in aid to Sudan in the form of a $500 million deposit in the central bank, which Sudan has received, as well as fuel, wheat and medicine. Many hope Hamdok can shepherd Sudan through the transitional period but some opposition members and analysts worry that the power-sharing deal may fall short of expectations in a country where the military, backed by Islamists, has dominated for decades.