Abu Dhabi, UAEMonday 3 August 2020

Sudan: Prime Minister Abdalla Hamdok announces reforms to rescue economy

Changes come as government seeks foreign support to offset revenue loss caused by the coronavirus pandemic

Sudan's Prime Minister Abdalla Hamdok is seeking to rescue the economy while negotiating a political transition to full civilian rule. Reuters
Sudan's Prime Minister Abdalla Hamdok is seeking to rescue the economy while negotiating a political transition to full civilian rule. Reuters

Sudan's Prime Minister Abdalla Hamdok announced a gradual float of the currency and the removal of fuel subsidies as part of a plan to address the country's long-running economic crisis.

The measures will be implemented after amendments to the 2020 budget in order to mitigate the impact of the coronavirus pandemic, Mr Hamdok said on Wednesday.

Mr Hamdok said the government would "gradually cut subsidies on petrol and diesel" but subsidies on medicine, electricity, bread and cooking gas would remain in place.

He also announced the appointment of civilians to replace military officials as governors in the country’s 18 provinces, part of an ongoing transition to civilian rule after the removal of longtime dictator Omar Al Bashir last year.

Battered by decades of US sanctions and mismanagement under Al Bashir, Sudan's economy is at risk of freefall. The annual inflation rate is more than 100 per cent and shortages of electricity, bread, fuel and medicine are chronic. The currency recently hit a record low of 150 Sudanese pounds to the dollar on the black market compared with 55 at the official rate. Foreign debt stood at more than 190 per cent of GDP is currently close to $60 billion.

The coronavirus pandemic has hit the economy hard, causing a loss 40 per cent of public revenues, acting Finance Minister Hiba Mohamed Ali said.

Overall, the economy contracted 2.5 per cent in 2019 and is projected to shrink 8 per cent this year, according the IMF.

The IMF said last month that it reached an initial agreement with Mr Hamdok’s government on a programme that envisages increasing government revenue and overhauling energy subsidies to create room for more spending on social programmes, including the health sector and assistance to the poor.

Ms Ali said the government would set aside $484.7 million of the $1.8bn pledged by foreign donor nations in June for a cash transfer programme to support poor families as the subsidies are being phased out.

Mr Hamdok said the new provincial governors would take office in the “next few days” and included two women for the Nile River and Northern provinces.

“This is the genuine beginning of change in the provinces,” he said. “I hope this step will have a profound effect in preserving security and stability.”

He acknowledged that the representation for women among the governors was low and proposed higher representation for women in the provincial governments.

“We need to deal with this issue and to go beyond slogans to the real action,” he said.

Women were at the forefront of the popular uprising that led the military to topple Al Bashir in April 2019 after nearly three decades in power.

A power-sharing agreement, signed last August between the military and protesters, created a joint military-civilian administration that must navigate a delicate path towards eventual democratic elections in 2022.

The appointment of the governors and the make-up of an interim parliament were part of the power-sharing agreement.

The government has apparently reached a compromise with Sudan’s rebels since they both had agreed to delay the appointment of new governors and the make-up of an interim legislative body until they struck a peace deal.

Sudan has for decades been convulsed by insurgencies in the west and south. The transitional government is under pressure to end the wars with the rebel groups.

The power-sharing deal required the government to reach a peace agreement within six months. Although the deadline has passed, Khartoum wants to link a settlement with the rebels mainly to reduce military spending, which takes up 80 per cent of the government budget.

Updated: July 23, 2020 02:20 PM

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