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Economists urge Sudan govt. to reduce its expenditure

February 12 - 2018 KHARTOUM
Sudanese government forces (file photo)
Sudanese government forces (file photo)

Khartoum should bring down government spending as soon as possible and seek financial assistance from befriended countries, to regain control over the Sudanese Pound rate, says economist Esameldin Abdelwahab Bob.

“A strong political will is needed for the reduction of government spending,” Professor Bob told Radio Dabanga on Sunday.

The 2018 National Budget allocated SDG 173 billion ($ 9,5 billion*) for public expenditure, compared to SDG 96 billion last year. “This is a significant increase while the situation at the moment requires cuts in the government spending,” the economist said.

He further urged the Ministry of Finance to seek to obtain direct aid, grants, loans or bank deposits from befriended countries, “to support the country's foreign exchange reserves, so as to control the exchange rate of foreign currencies against the national currency”.

Budget

Sudan’s 2018 Budget has been widely criticised for allocating a high percentage to the army, security service and paramilitary forces, and neglecting the education and health sectors. The deteriorating economic situation has led to dire living conditions in the country.

The budget relies on direct and indirect taxes to cover its deficit. Economist Dr Sidgi Kaballo told Radio Dabanga in December last year that the planned taxes are not feasible because the incomes of most of the Sudanese are listed below the minimum wage level. “The government should impose taxes on those who make big incomes and do not pay tax,” he noted.

Regarding the increase in the national GDP predicted by the government, he said that it is unrealistic because the agricultural and industrial production have not improved. As for the government’s production of gold, there is a smuggling problem hindering its contribution to the economy as three quarters of the gold produced is smuggled abroad.

Dollar rate

In an attempt to halt the plummeting Pound on the black market, the Sudanese government raised the customs rate of the US Dollar from SDG 6.7 to an indicative SDG 18 in early January.

The prices of basic commodities immediately doubled and in some cases tripled. The measure also led to the halting of incoming and outgoing traffic at the Port Sudan harbour, as suppliers refused to have their goods cleared. The Dollar rate however, continued to rise. The greenback sold for 42 Pound on the parallel forex market on 4 February – against 28 Pound in early January.

The price of gold at the markets in the Sudanese capital witnessed a major leap as well. “A gram of gold sold for SDG 1,000 ($ 55) last week now costs SDG 2,000,” a trader reported on Febraury 4.

On February 5, the indicative exchange rate of the US Dollar was raised again, from SDG 18 to SDG 30. The prices of wheat and sorghum jumped again.

On February 7, the Central Bank of Sudan banned any import operations by banks using their own foreign currency without obtaining its prior approval. Professor Hamid Eltigani, Head of the Department of Public Policy and Administration at the American University of Cairo, described the decision as “a police security measure that has nothing to do with economic measures that will have disastrous consequences in a matter of days”.

Cash

According to Dr Khalid El Tijani El Nur, a journalist specialising in economic affairs, the devaluation of the national currency indicates “a deeper crisis related to the macro-performance indicators of the Sudanese economy”.

In an interview with Radio Dabanga broadcast today, he said that the plummeting of the Sudanese Pound against the Dollar is the result of the large amounts of cash the Central Bank of Sudan injected into the economy last year – amounting to three times the amount set in the 2017 National Budget.

Regarding calls for a change of economic policies, El Nur said that “first of all, political change is required. The economy is not operating in a vacuum, but through policies setting priorities, especially with regard to government spending”.

Oil producer

Sudanese Minister of International Cooperation Idris Suleiman announced on Sunday that he expected Sudan would receive foreign aid amounting to one billion Dollar this year.

“Sudan can regain its status as oil producer if 600 million Dollars have been invested in the production,” he said.

Since the signing of the peace agreement with the South Sudanese rebels led by John Garang in 2005, Khartoum decided to compensate the loss of oil income after the expected secession of South Sudan in 2011 by increasing the gold production.

According to a report by the International Monetary Fund in October last year, "the economic conditions in Sudan remain challenging".

* Based on the official US Dollar rate quoted by the Central Bank of Sudan (CBoS)


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