Sudan announces stern austerity measures to ‘help’ economy

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omar hasan al bashir
Sudanese President Omar Hasan Al Bashir addressing the fifth session of the National Assembly (parliament) in Khartoum on 9 April, 2012. Photo - Ashraf Shazly/Getty Images

Sudanese President Omar Hassan Al Bashir on Monday announced wide-ranging austerity plans that include gradually abolishing fuel subsidies, reducing the size of the government, raising taxes on consumer goods, banks and imports to plug its budget deficit, and devaluing the pound in a bid to stabilise the economy and deal with a loss of oil revenue.

The North African nation is facing a deficit of around $2.4 billion which was announced by Finance Minister Ali Mahmoud in May. Khartoum lost three-quarters of its oil, the lifeline of the economy, when South Sudan became independent a year ago.

The country is locked in a dispute with Juba over oil transit fees and border dispute which has led to deadly clashes between the two states.

“We will overhaul the government … cut down the number of ministries … and shrink regional governments by between 45-50% percent,” Al Bashir told parliament.

The Sudanese president vowed to get rid of advisor jobs and allowances for senior officials altogether.

“We’ve taken some decisions that aim at increasing revenue, that include increasing imports taxes, value-added taxes, and raising income tax on banks,” Al Bashir said. Fuel subsidies will be reduced “gradually,” he said.

Other measures announced by Al Bashir include reducing the size of the North African nation’s national and regional governments by as much as 56%. The government also plans measures to cut domestic spending and reduce the need for hard currency, he said.

The former lieutenant general, who came to power in a 1989 military coup, announced moving of the official rate to 4.4 a dollar from 2.7 a dollar to “stabilise the local currency and reduce the gap between the official price and the black-market price.” The black market currency rate stands at 5.8 a dollar on the streets of the city.

Sudan raised taxes on telecoms firms in December.

The government has signalled that basic food items such as wheat, flour and sugar would be exempt from the new import tax, part of its attempts to rein in growing inflation.

Annual inflation hit 30% in May, double the level it stood at in June 2011, causing hardship for the masses who are already crumbling under years of poverty, ethnic conflicts and US trade sanctions.

The Arab African countries have managed to avoid an anti-government uprising, but rage is filling Sudan as food prices spiral out of control and the cash-strapped government struggles to fund imports.

Sudan has come under renewed International Monetary Fund (IMF) pressure to enact ’emergency measures’ to overcome its economic challenges. Khartoum effectively devalued its currency in May as part of its attempt to attract more remittances from Sudanese expats and to try to boost gold and agricultural exports. Experts believe the measures will take some time to bring an impact to the ailing economy.

Al Bashir’s government eyes oil export fees from landlocked South Sudan, which needs to pump its crude through northern pipelines and the Red Sea port of Port Sudan, to plug its burgeoning deficit.

South Sudan shut down its entire oil output of 350,000 barrels a day  in January to stop Sudan from seizing oil for what the latter called unpaid export fees. Both sides are locked in trade and ethnic disputes and have been unable to agree on solutions so far.

Reaction

Hundreds of Sudanese students rallied at Khartoum University for a second day against the government’s planned austerity measures, following a crackdown by police yesterday that included a nighttime raid on female dormitories.

Reports coming from Khartoum said crowds gathered on Monday chanted “People want the regime out” and “Khartoum University free, police out.”

The police, in a statement issued on Sunday on the state-run Sudanese Media Centre, urged citizens not to “follow rioters and rumour mongers, who aim to destabilise the security of the country.”

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