Sudan to begin mass privatization next year: state media

October 23, 2010 (KHARTOUM) – The Sudanese government intends to privatize all the companies it owns starting next year, according to a statement on Sudan official news agency (SUNA).

During the cabinet meeting on Thursday headed by president Omer Hassan Al-Bashir, it was ordered that a list of government-owned companies to be created in preparation for their privatization. No further details were given.

The pro-government Al-Rayaam newspaper quoted the cabinet spokesperson as saying that the privatization scheme will impact all companies owned by the state.

Sudan began privatizing state firms in the 1990s but the economy has been somewhat restrained by U.S. economic sanctions imposed since 1997 isolating them from international money markets. Corruption and bureaucracy have also hindered growth.

The move likely reflects the growing burden imposed on the government budget by ownership of these companies particularly as the country heads towards a likely breakup of the South following the January referendum.

Sudan derives some 45 percent of its gross domestic product from its modest output of 470,000 barrels per day of crude oil which comes mostly from wells in the south, with the infrastructure in the north. Under a 2005 peace deal oil from the south is divided about 50-50 between the semi-autonomous southern government and Khartoum.

Some sharing is likely to continue in a post-secession scenario as it will take years for the south to build refineries and a pipeline to a Kenyan port. But the north’s share will likely be reduced. Khartoum has moved to expand non-oil sectors to compensate.

Lately the central bank has been in frantic efforts to contain the steep decline in the value of the Sudanese pound versus the U.S. dollar but has achieved little success.

Travelers have been restricted in the amount of foreign currency they can buy and many imported luxury items saw their duties and taxes hiked to prevent outflow of hard currency.

One international analyst watching Sudan’s economy in an interview with Reuters, painted a grim path forward for the currency.

“They could carry on as they are in which case more and more people would be forced to change currency at the black market rate because of the shortage of availability at the official rate — This would lead to market distortions and profiteering.”

Or, said the analyst, who declined to be named because of the sensitivity of the issue, “They could devalue the currency but this could lead to uncertainty and expectation of further devaluations which could put more pressure on the exchange rate in the short term and cause it to overshoot.”

This week Sudan’s central bank said it is expecting external help in the amount of $1 billion to shore up its foreign reserves.

(ST)