Sudanese president promises no quick fixes to economic woes

Khartoum
October 19, 2011 (Sudan Tribune)

The Sudanese president Omer Hassan al-Bashir on Wednesday offered a more detailed assessment of the economic challenges facing the country in one of his most candid speeches on the topic to date.

Addressing an economic forum at the ruling National Congress Party (NCP), Bashir underscored the negative impact created by the secession of the oil-rich south last July.

The Sudanese leader said that losing oil as a major source of revenue has led to a budget deficit and an unfavourable balance of trade, which he said put the government in the dilemma of needing to raise new revenues without having to raise taxes.

"How do we bridge the gap [...] without increasing taxes? We need to broaden the tax base to tax those outside the tax system," Bashir said. He also stressed that reducing government spending is needed, along with seeking more revenue sources in order to adjust with the new economic reality.

Sudan lost 75% of its oil reserves after the south became an independent state which fueled an unprecedented economic boom since the signing of the 2005 Comprehensive Peace Agreement (CPA). But analysts say that Khartoum mismanaged the oil wealth by overspending on security organs and forfeited an opportunity to invest in agricultural and industrial sectors to diversify the economy.

In its World Economic Outlook published last month, the International Monetary Fund (IMF) projected a negative real GDP growth for Sudan; -0.2% in 2011 and -0.4% in 2012. This is down from the 6.5% growth achieved in 2010 and an average of 6.7% in the years 2003-2009.

Sudanese officials are hopeful that an agreement can be reached soon with the landlocked south on how much the new state should be charged for using the oil pipelines to export its crude through Port Sudan. Khartoum has reportedly asked South Sudan for $32 per barrel which was swiftly rejected by Juba and described as "daylight robbery." The two countries are set to soon resume negotiations on the issue under the auspices of an African Union (AU) panel headed by former South African president, Thabo Mbeki.

Bashir called for boosting export levels and local production to ease growing pressure on the already low levels of foreign currency reserves. Earlier this year the government has placed restrictions on imports and curtailed the amount of hard currency Sudanese citizens can buy.

Sudan’s non-oil exports in the January-September period came to $1.58 billion compared with $1.21 billion for the January-August period in 2010, the central bank said on Wednesday. It did not give figures for January-September 2010. Exports of gold, the key earner on the export list, reached $977.41 million in January-September this year, up 33 percent compared with January-August 2010, it said. The central bank did not say how much Khartoum made from oil exports. Last year the whole of Sudan made around $10 billion from oil, which was shared equally between north and south.

In recent months the black market for foreign currency has flourished, pushing the Sudanese pound to deteriorate to record levels. The Sudanese president disclosed that a meeting is held every week by ministers dealing with the economy to monitor the situation. However, he noted that the entire world is going through economic turmoil, which he said is a result of capitalism.

"Our recommendations are not for lifting the Sudanese economy from the immediate crisis, but to research and find treatments for the suffering of the world now after the failure of the system of capitalism, and finding an exit by returning to God for a way out of the severe economic crisis, and move away from [charging] interest because it is [like] fighting against God,” Bashir said.

The Sudanese president also criticized states for the way they handle investments and implored on them to show a more serious attitude towards attracting investors and to remove any hurdles in that regard.

Bashir also expressed surprise at the large numbers of foreign workers inside Sudan. "We have unemployment and there are no jobs, and at the same time we have a large number of foreign laborers," he said. "This creates social and economic problems, and these are the problems we want to solve.”

The IMF estimated unemployment rate in Sudan at 13.4% in 2011 but projected this figure to decline to 12.2% in 2012. Many observers and pro-government figures have warned that the worsening living situation for many Sudanese, in the form of rising food prices and other necessities, could push the country closer to a popular uprising similar to other countries in North Africa. Sudanese officials routinely dismiss this possibility.

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