Oil output, profits prop up Sudan economy

Dec 13, 2005 (WASHINGTON) — Sudan’s economy is set to expand 13.4 percent next year, from an expected 8.3 percent in 2005, amid higher oil output and profits, the International Monetary Fund said on Monday.

Sudanese President Omar el-Bashir with ex-President Gaafar Nimeiri and Hassan Turabi among others during the inauguration of an oil pipeline on Monday May 31, 1999, in Heglig, central Sudan. (AP) .

In its mid-year review of the Sudanese economy, the IMF said the increase in oil production from new fields next year was “opportune,” given reconstruction needs following the end of more than 20 years of civil war between the Khartoum government in the north and rebels in south.

The sides signed a peace agreement early this year and established a unity government, but a conflict in western Darfur region still rages on, with violence among rebel factions and attacks on civilians, which the United States calls genocide. The government has denied the charge.

Sudan’s oil revenues are expected to be 22 percent higher than originally planned this year, because of increases in world oil prices and despite delays in the start-up of the new fields, the IMF said.

The global lender said Sudan’s budget program had gone off track in 2005 with higher expenditures mainly from a large subsidy for domestic fuel and higher-than-planned spending on aid and security in Darfur.

It said the situation in Darfur was “precarious and pressure is mounting for a political solution to the conflict”.

With peace between the north and south, the IMF urged the new unity government to prioritize its spending to benefit the poor and rebuild infrastructure.

“In 2006, higher oil production will help finance additional expenditures, but resources should be allocated to priority sectors and high-return projects within a macroeconomic framework conducive to low inflation,” the fund said.

It said Khartoum was hesitant to raise fuel prices for fear of social repercussions so soon after the establishment of a unity government in September.

The global lender said the government believed the best approach was to gradually increase the fuel price, likely starting at the end of 2005 or in early 2006. Fuel prices are traditionally set by decree and are not automatically adjusted in response to changing market conditions.

The IMF repeated that Sudan’s foreign debt was unsustainable, with external public debt estimated at $26 billion at the end of 2004, the bulk of it in arrears to institutions like the IMF.

While the IMF has an economic monitoring agreement with Sudan, it cannot provide loans to the government until the debt is paid back.

(Reuters)