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Sudan’s economy “grave”, says ex-finance minister
When North Sudan losing 75 percent of oil output when the South seceded, fighting continues while food price inflation angers ordinary Sudanese.
October 9, 2011 8:00 by Reuters
…was not yet as dire as during the hyperinflation of the 1990s, adding: “As expected, the first quarter after secession has proved economically difficult for Khartoum. The depreciation of the currency and accelerating inflation is increasingly concerning.”
The International Monetary Fund (IMF) expects Sudan’s economy to shrink this year and next.
Experts have long urged Khartoum to prepare for the loss of southern oil, but the government has been in denial, blaming a U.S. trade embargo or insisting that all is under control.
After secession, Sudan’s parliament approved a budget based on unchanged oil revenue. But diplomats say southern oil sales — worth $2 billion until October — now go directly to Juba, while the small northern output mainly serves local consumption.
In September, the central bank governor said expenditures would have to be cut by more than 25 percent this year.
Officials hope gold exports will compensate, predicting an output of 74 tonnes in 2011, a target analysts say is out of reach — Sudan’s biggest mine produces just 2.3 tonnes a year.
Instead of pinning its hopes on gold, the government should focus on industry, agriculture and animal wealth, said Mohammed Siddiq, a Sudanese financial journalist.
Mahdi said things would get worse unless North and south agreed on sharing of oil revenues by the end of the month.
The landlocked south should pay transit fees for using northern oil export facilities, but has paid nothing yet, in the absence of an agreement, diplomats say.
More trouble looms in November when 40,000 Sudanese will head for the Muslim pilgrimage in Saudi Arabia, fuelling demand for dollars and piling more pressure on the pound.
Instead of devaluing to bridge the gap with black market rates, authorities threatened to punish moneychangers, which only stalled the dollar’s rise for a couple of days.
“They should have learned from previous crises that you won’t end the dollar scarcity by rounding up black market dealers,” said a local economist.
Sudan hopes a conference in December sponsored by Norway and Turkey will drum up investors and help with debt relief — South Sudan refuses to shoulder any part of the $38 billion debt pile acccumulated by Sudan when it was united.
But Western powers, irked with Khartoum for seizing the disputed border region of Abyei in May and for fighting in South Kordofan and Blue Nile, may be reluctant to help.
Nor are they well disposed towards Bashir, who has been indicted for war crimes by the International Criminal Court.
“I fear those conflicts in the border will hold back the West,” said Chris Philips of the Economist Intelligence Unit. (By Ulf Laessing; Editing by Alistair Lyon)
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