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Sudan Tribune

Plural news and views on Sudan

Low inflation or no inflation: economic situation in Sudan

Al Arabi Market, Kahrtoum

Al-Arabi Market in Khartoum (photo Pedro Ribeiro Simões)

October 3, 2022 (KHARTOUM) – Sudan’s Central Bureau of Statistics in released its monthly report which showed another drop in the inflation rate from 125.41% in July to 117.42% in August.

Why is that important? The military junta and their allies in Sudan have a continuous drop in inflation levels as a sign that the post-coup economy is flourishing.

What they said – The Managing Director of the Sudanese Mineral Resources Company Mubarak Ardol wrote on Twitter “Did you know that the annual inflation rate in 2021 was 359.09% and after ten months in August 2022 it became only 117%, with a difference of (242.09%) along with a stabilizing exchange rate and availability of dollars in the banks and foreign exchanges and the disappearance of the parallel market for the dollar, the availability of fuel and the disappearance of its parallel market, the availability of bread, the availability of gas, the continuation of the electric supply without scheduled interruptions, and the disappearance of queues”.

Ardol went on to say: “Isn’t this a gigantic act that must be attributed to economic agencies now?”

Not so fast – The professor of Economics Esam Bob casts doubt over these figures, saying he doesn’t have faith in them because “they aren’t grounded in authentic statistical surveys and given the stormy political climate they may not be true”.
“I have come to believe that no one cares about the truth or the importance of these metrics. They are talking about declining inflation, but any eyewitness will say otherwise” he added.

A new kind of inflation:
Inflation was traditionally known to be the diminishing ability of a unit of currency to buy goods and services, but it could occur while the economy is still growing.

However, these days and globally there is increasing talk of inflation coupled with low growth rates, high unemployment, depressed wages, and a growing deficit in the balance of payments. This phenomenon was prevalent in the 1970s and was known as stagflation.

“I have been warning for some time about stagflation and its devastating effects,” Professor Bob said.

Is Sudan already suffering stagflation?
Sudan Tribune toured the markets to get a sense of whether stagflation is a thing. Businessmen from various trade lines have all agreed that meager sale activities point towards a recession.

Mustafa, who works in the area of solar energy, said, “In 2019, we were selling our smallest system for the equivalent of $700. Today it is worth $3,000, and we suffer from a recession. But we rather keep the devices in our warehouses than lower their prices because this would mean incurring heavy losses and the demise of our business”.

Another dealer in iron and steel factory working at Al-Sajana market in Khartoum by the name of Hatem said: “The prices of construction skewers went through the roof towards the end of 2019 from 50,000 Sudanese pounds per ton to 670,000 before settling at 450,000. He stressed that the prices of construction skewers are closely linked to the dollar exchange rate.

How much does the average price of bread cost in Sudan?

Despite the bragging by Ardol about the availability of bread compared to the past, this may also be another example of the impact of stagflation, where the unaffordable price discouraged large swaths of the population from buying.

In calculating the average price of bread in Sudan (numbeo.com) website which calculates the cost of living for each country reported that the price of a bundle of bread in Sudan is $0.85.

In the same regard, farmers interviewed by {Sudan Tribune} complained about the sharp increase in the electricity prices in the agricultural sector, as the cost has risen from 1.6 pounds per kilowatt to 17 pounds in local agricultural investment projects.

Reuters quoted Energy Minister Mohamed Abdullah Mahmoud as saying “It is difficult for the government in the current circumstances to provide support in the old format”.

Salman Abu Zaid, who is the owner of an agricultural project, says that the cost of irrigation with electricity has increased exponentially in addition to the increase in the prices of turbines, which led to an increase in the prices of agricultural products that he produces.  Like his peers, he faces a severe slump in sales that leads to severe losses as a result of damage to his agricultural merchandise.

Khalid al-Tigani who has written extensively on Sudan’s economy and its interlink with politics warned that “the economy does not work in a vacuum, so its perversion necessarily means the perversion of the political system, and its integrity is evidence of its health”.

(ST)