Sudan faces severe economic crisis

Bread and meat prices have risen at double-digit rates across Sudan in recent months as the value of the country's currency has fallen.

Protests flared for a 10th day yesterday as people vented their anger at the increasing prices of everyday items and government spending cuts.

But the protests have also taken on an anti-government flavour, with some activists calling for changes to president Omar Al Bashir's government.

"Sudan is facing a very serious crisis as it belatedly imposes austerity measures," said an expert on Sudan who asked to remain anonymous because of ties to the government.

The protests come against a backdrop of instability after the secession of South Sudan last July.

The split meant Sudan lost 40 per cent of its oil revenue, 80 per cent of its foreign-exchange reserves and 20 per cent of its population. In response, the government has sought to rebalance its economy by introducing austerity measures aimed at cutting spending.

Subsidies on fuel and sugar have also been partly lifted by Mr Al Bashir, in a move that has been welcomed by the IMF.

On Sunday he dismissed the protests "as no Arab Spring", saying the number of demonstrators were small.

But after a group of students at the University of Khartoum began demonstrating this month, other groups inside and outside the capital have taken to the streets.

Rising food prices and the depreciation of the Sudanese pound has caused inflation to climb to 30 per cent last month from a year earlier. Inflation is expected to remain at a high level after the government announced a 50 per cent jump in petrol prices this month.

Sudan has other deep-seated problems. The budget deficit is forecast to widen to 5.4 per cent of GDP this year from 5 per cent last year as the loss of oil revenues, armed conflict and financing a peace deal with South Sudan take a toll on public funds.

"As a result of US sanctions as well as Sudan's heavy debt, external borrowing options are severely limited and internal borrowing is likely to increase," according to African Economic Outlook, an annual report covering developments across the continent.

After visiting the country last month, an IMF mission urged Sudan to do more to create jobs.

Youth unemployment stood at 22 per cent, official data for 2009 shows, double the jobless rate for adults. A high rate of population growth means openings in the labour market are not keeping pace with the proportion of youths who are at working age.

But analysts say a change in Sudan's fortunes may only come about when it patches up differences with its new neighbour South Sudan, which shut down its oil output of 350,000 barrels a day in January after Sudan started taking oil in returned for what it said were unpaid fees.

Sudan has also barred its landlocked neighbour from exporting crude through its territory unless border disputes are settled.

The two nations have yet to sign a United Nations security council resolution proposed last month, requiring both to agree to security measures and resuming oil production and export.

"On that basis [once that's agreed], the south will have an income again, the north will obtain some revenues from tariffs, and the north can turn to the international community to lift sanctions and allow it access to debt relief and concessionary finance," said the Sudan expert.

tarnold@thenational.ae

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