Sudanese NCP official discounts government assertions on usefulness of lifting subsidies
September 17, 2013 (KHARTOUM) – The Sudanese finance minister Ali Mahmoud Abdel-Rasool, has vowed to implement a package of economic reform measures that would significantly contribute to improving the performance of the economy and return it to its “golden era” when the inflation rate fell from 160% to less than 10%.
The tripartite program was meant to help Sudan cope with the impact of losing most of the country’s oil reserves after South Sudan’s secession in July 2011.
Mahmoud on Wednesday briefed president Omer Hassan Al-Bashir, defense minister Abdel-Rahim Mohamed Hussein and senior army officers on the new economic measures amid tight security at the military academy in Khartoum.
But Qutbi al-Mahdi, a leading NCP figure, called the planned measures as ones that will help address specific imbalances but will not fundamentally change the economic situation which he said will likely take a turn to the worse later on.
“Maybe we won’t find any subsidies to lift next time and we end up in a worse situation” al-Mahdi said.
He acknowledged that the NCP leadership is in disagreement over the issue but stressed that the majority believes that this has to be done at some point.
Al-Mahdi pointed out that the only solution to the crisis is an “economic and comprehensive renaissance” that would transform Sudan from a state of underdevelopment to prosperity.
He also accused some opposition parties of seeking to exploit the difficult economic situation for political gain and urged the government to be honest with the people.
“We must explain to the citizens with transparency and clarity what it entails if subsidies are not lifted and strong reasons which prompted it to make this difficult choice,” al-Mahdi said.
In the same context, the NCP Economic Secretary Hassan Ahmed Taha, denounced the overall focus on lifting fuel subsidies and pointed that it is one piece of the economic package.
Taha, who was speaking at a seminar on the future of economic reforms on Monday, said that the government imports the gallon of gasoline at a price of 28 pounds and sells it for 8.5 pounds, stressing that it could not continue offering such a significant subsidy indefinitely.
He added that Sudan’s oil production doesn’t exceed 130,000 barrels per day at its best, saying that 50% of oil revenues goes to the producing companies.
The NCP official further called for adopting a comprehensive economic reform program which seeks to restructure the economy and reduce the government spending.
He also denied that any additional taxes will be imposed, but rather broadening the tax base and stressed the need for setting development priorities by focusing on agriculture.
The Sudanese government postponed the removal of subsides on several basic commodities as the NCP said its lift should come into force after concluding consultations with the political forces and civil society groups.
But a parliamentary committee headed by speaker Ahmed Ibrahim Al-Tahir approved on Tuesday the government’s move to lift subsidies which would mean that it would go into effect before the next parliamentary session in October.
The former state minister at the Ministry of Finance, Abda Al-Mahdi, said that the current economic crisis led to a 50% decrease in the Gross Domestic Product (GDP), significant increase in the gap between the official and black market exchange rates, growing trade deficit and an increase in foreign debt to around $50 billion.
The Sudanese pound is now trading at 7.5 to the dollar on the black market which sharply contrasts the official exchange rate of 4.4.
She also called for a comprehensive economic reform program and described the government’s reforms as “partial”, pointing that government spending increased by 18% following the announcement of the austerity measures last year.
The former state minister added that reducing government spending would only be recognized through political reform and stressed that removal of subsidies on strategic commodities would further burden on the ordinary citizens, calling for reaching a consensus on a set of priorities and implementing them.
The former governor of the central bank, Saber Mohamed Al-Hassan, for his part, called for the immediate implementation of the reform program and adopting social policies to protect the vulnerable groups in society.
He stressed that the resource gap could be overcome through the implementation of the cooperation agreements signed with South Sudan and predicted that it will provide $2 billion annually and added that re-opening the borders with South Sudan would lead to a $1.5 billion increase in trade balance in favor of Sudan, pointing that those revenues in addition to gold revenues would compensate for the loss of oil.
Sudan’s economy was hit hard since the southern part of the country declared independence in July 2011, taking with it about 75% of the country’s oil output.
In a related issue, the state minister at the finance ministry and head of the high committee for preparing the 2014 budget, Mohamed Youssef, called in the first meeting of the committee to find ways to increase financial resources.
He demanded that customs authorities develop the financial resources at the state and federal levels in order to support the national economy, pointing that the preparation of the 2014 budget involves reviewing the positive and negative aspects of the previous budget in order to overcome obstacles that prevent production increase and resources development.
Youssef, added that the meeting discussed the guidelines for the 2014 budget including increasing the total supply, encouraging production and productivity, encouraging domestic and foreign investment and developing industries.
The state minister at the finance ministry, Magdi Hassan Yassin, said that the 2014 budget calls for both optimism and caution. He urged the budget commission for the allocation of resources to prepare a paper showing how subsidies will be dealt with in the 2014 budget.
The representative of the private sector pointed that the 2014 budget is facing exceptional circumstances which necessitates the clarity of vision in the budget guidelines, calling for offering measures to address the negative effects of the removal of subsidies on the productive sector.
(ST)