Sudanese financial experts are concerned about the impact of the lifting of subsidies to basic commodities on the economy of the country. The Minister of Finance proposes a gradual removal of the subsidies that are to be replaced by direct subsidies to the poor. The rate of the Dollar on the parallel market is still rising.
At a forum of the University of Khartoum on Monday, economists said they fear that lifting of subsidies on basic commodities will negatively affect inflation rates, and the production and consumer processes.
They further pointed to the fact that the calculation of the subsidies in the country’s 2020 budget relies on statistics produced by the former regime, “which employed statistics for well-known purposes”.
It would be better to reduce the expenses of the security and defence departments, the experts said. They called for a budget aimed at “implementing the goals of the revolution”. The budget should be more gender-sensitive as well.
On Monday, Radio Dabanga reported that according to Finance Minister Ibrahim El Badawi the 2020 budget will have a deficit of SDG 150 billion ($3.3 billion*). The subsidies consume 34 percent of the budget, that is based on real revenues.
The Minister said the current subsidies on basic consumer goods depend on unrealistic spending, disability financing and inflationary effects. If it was agreed to lift the subsidies gradually, the government would be able to cover the budget deficit.
The subsidies are to be replaced with direct subsidies targeting the poor and the impoverished middle class. Direct subsidies provide the opportunity for the target groups to choose the type of subsidy they prefer, El Badawi asserted.
He said that the Ministry will address the lifting of subsidies on basic commodities within the framework of a societal dialogue. “This dialogue should be based on knowledge. The economic effects and the fairness and efficacy of the subsidies should be taken into account as well as the way of transition from commodity subsidies to citizen subsidies.”
Pilot for basic incomes
The 2020 budget includes a pilot programme for basic incomes that will start within six months. It includes direct cash subsidies to 900,000 families (4,5 million people) in monthly amounts ranging from SDG 1,500 to SDG 2,000 per family.
The government has received assurances from the international community that they will annually fund this Social Protection Programme with $ 2 billion during the transitional period, El Badawi explained.
For the establishment of a register of eligible families, the Finance Ministry will rely on the civil registry figures of the Ministry of Interior Affairs of 33 million Sudanese, in addition to databases of the Ministries of Health and Education, humanitarian aid organisations and their networks.
He explained that the selection of the families will be made randomly, based on a scientific method. The beneficiaries will receive the direct cash transfers through a mobile telephone application or to bank accounts of those people who have one.
In the second phase, the programme will cover between 60 and 80 per cent of the Sudanese.
The Minister further explained that 30 per cent of the 2020 budget is allocated to the states. Eleven states that are in particular affected by war and poverty will receive an extra seven per cent: The five Darfur states, Blue Nile state, South and West Kordofan, and Red Sea state, Kassala, and El Gedaref in eastern Sudan.
The foreign exchange rates at the parallel market in Khartoum continue to rise against the Sudanese Pound.
Dealers reported on Monday morning that the Dollar price varied between SDG 90 and SDG 91.
They attributed the rise foreign currencies to the increasing demand for the Dollar because traders need the foreign currency to import the requirements for next Ramadan, along with the increase in the size of speculation from currency traders and the security campaigns against currency traders.
* As effective foreign exchange rates can vary in Sudan, Radio Dabanga bases all SDG currency conversions on the daily US Dollar rate quoted by the Central Bank of Sudan (CBoS).
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