Sudan’s economic uncertainty grows ahead of secession
June 15, 2011 (KHARTOUM) – The Sudanese government announced that it has crafted an economic plan to weather the effects of the separation of the oil-rich south next month.
A number of key issues remain outstanding however, particularly the post-secession sharing formula for the oil wealth that is stationed mostly in the South.
The Comprehensive Peace Agreement (CPA) states that the North and South shall equally split the revenue from oil exports during the six years following the signing of the accord.
While most of Sudan’s proven daily output of 500,000 oil barrel is extracted from oilfields in the south, the pipelines infrastructure and refineries are based in the north. The South will therefore be required to pay a fee to transport its oil and ship it abroad from Port Sudan terminal.
The minister of finance and national economy Ali Mahmood Hassanein in an address before the national assembly said that 73% of the country’s oil lies in the South, 26% in the North and 1% in the contested region of Abyei.
Speaking to reporters afterwards the Sudanese official unveiled a 3-year plan that will emphasize maintaining the economic gains achieved so far, balancing revenue and expenditure, stabilizing macroeconomic demand and supply through increased production of strategic goods and combating factors that contribute to lower standards of living.
Furthermore, Khartoum will press ahead with restructuring the government and curtailing federal spending, Earlier this year an austerity package was passed that partially removed subsidies on petroleum products and sugar. It also reduced allowances and salaries for government officials.
Hassanein said that the North will lose a third of its income and will see lower inflows of hard currency.
“Sudan will lose 36.5 percent of its income from July 9 because this is the percentage of oil revenue that the government gets from the oil produced in the south,” he said.
However he said that the North will compensate for the loss through expanding tax umbrella, oil infrastructure it has, attracting foreign investments, developing talents and reducing unemployment rate.
He gave an example of gold production which generated $1.2 billion to the state so far.
The International Monetary Fund (IMF) in a report released last April said that the North “will need to adjust to a permanent shock” particularly given the limited access to external financing. Sudan is under comprehensive economic sanctions since 1997.
In a related issue, the top finance official in the country disclosed that they have sent a letter to the South informing them that they will close the oil pipelines unless a deal is reached on fees for transporting the crude.
“We have sent a letter to south Sudan, to inform them that they cannot use the pipelines or the refinery or the [Red Sea] port after July 9 unless we reach a deal about the price of renting this infrastructure,” Hassanein said.
The New York Times (NYT) say that much of Sudan’s oil is so thick that the pipelines could get clogged, causing hundreds of millions of dollars in damage, if the flow of oil is suddenly stopped.
(ST)
Janafil
Sudan’s economic uncertainty grows ahead of secession
We will find our own place to drill and refine our oil in East africa border,so don’t see as an other way of increasing your income.
Deng Ateny Lueth
Sudan’s economic uncertainty grows ahead of secession
i knew it, i told a friend of mine almost six month ago to be axact. i asked him why is South so slow to see into the issue of pipeline or start laying down train tracks as soon as of now. i assured him that Khartoum will demand closing its pipline unless South will offers reasonable rental percentage for the use of Northern pipline. my friend gave me blund answer, saying khartoum will not do that so long it gets rental benefit. i assured him again that khartoum was trying in anyway to trangle our economy given the fact that the entire system of our government is functioning because of oil proceeds, and khartoum doesnot want us suceed or Southern government establish. Khartoum has been investing in lethal activities that could disrupt the establishment of our governmennt, and closing down of the pipline is the sole agent of distruction they could capitalize on it. a friend said we should borrow from the world bank and then run the government untill we find an alternative or solution. i believe there are people in government’s positions with the same mindset of borrowing money to run the government in the event of pipline close down. unless we learn from those warning signs otherwise South will befriended a lot of problems. unless leaders have a sense of quick foreward-looking to solve this issue of pipeline beforehand.
Jay
Sudan’s economic uncertainty grows ahead of secession
I think it’s so sad that Khartoum is banking on Southern Sudan oil transportation and facilities fees!
Base on the animosity we have between ourselves, Khartoum should be thinking wisely not to bank their future on South Sudan.
Any oil company that expect the oil from the South should come to South and build refineries otherwise their contract would be terminated.
I hope the oil contractors should be smart enough not to be told to that.
Young
Sudan’s economic uncertainty grows ahead of secession
Khartoum should think wisely or else they will be surprise because whatever income of the Sudan is from the South which is some weeks away to be own state.what will happened to the pipes which were used to transport the oil form the South to port sudan?well,if Khartoum does not rent it away to South with reasable price it will either dry up or else they will use it for transporting water..