Aus­ter­ity and protests as Su­dan econ­omy crum­bles

Slew of sub­sidy cuts pushes prices up

Kuwait Times - - BUSINESS -

Mo­hamed Yassin’s min­i­mar­ket oc­cu­pies a prime spot in Khar­toum but its shelves are largely empty as a plum­met­ing cur­rency and slew of sub­sidy cuts pushes prices up and cus­tomers away. “Prices rise daily af­ter the gov­ern­ment de­ci­sions and what we sell, we can no longer com­pletely re­place be­cause our cap­i­tal is los­ing value,” 44-year-old Yassin told Reuters.

“Sales have dropped sig­nif­i­cantly ... We don’t know how long we can han­dle it. We’re afraid we’ll go out of busi­ness.” In­fla­tion ap­proach­ing 20 per­cent and gov­ern­ment aus­ter­ity have fu­elled grow­ing dis­con­tent and rare protests in Su­dan in re­cent weeks.

Protests have so far been small but, mind­ful of pop­u­lar anger that swept away sev­eral Arab au­to­crats in 2011, the gov­ern­ment of Pres­i­dent Omar Has­san Al-Bashir has been quick to si­lence me­dia crit­i­cism over its han­dling of the cri­sis. Su­dan’s eco­nomic prob­lems have been build­ing since the south se­ceded in 2011, tak­ing with it three-quar­ters of oil out­put, the main source of for­eign cur­rency and gov­ern­ment in­come.

Its rev­enues dwin­dling, the gov­ern­ment be­gan re­duc­ing fuel and power sub­si­dies in 2013 and an­nounced a new round of cuts in early Novem­ber that saw petrol prices rise about 30 per­cent.

At the same time, Su­dan has sought to al­le­vi­ate a dol­lar short­age by in­tro­duc­ing a sec­ond ex­change rate along­side the of­fi­cial peg of 6.4 Su­danese pounds per dol­lar. The so-called in­cen­tives rate al­lows the cen­tral bank to buy dol­lars from Su­danese ex­pa­tri­ates for about 16 pounds and is meant to boost for­eign cur­rency flows into the bank­ing sys­tem.

To re­duce dol­lar de­mand and pro­tect lo­cal in­dus­try, Su­dan also banned im­ports of meat and fish and raised im­port tar­iffs on other goods. But the re­stric­tions have fu­elled in­fla­tion in a coun­try that re­lies heav­ily on im­ported goods. “Life has be­come un­bear­able. Prices of veg­eta­bles, meat, sugar and trans­port are al­ways ris­ing and the gov­ern­ment doesn’t feel for us. We don’t know what to do,” said Fa­tima Saleh, 39, a state em­ployee and bread­win­ner in a fam­ily of five.

Grow­ing dis­con­tent

As more Su­danese feel the pinch, un­rest is grow­ing. In the past week, Khar­toum and other cities have seen rare protests. On Wed­nes­day, more than 150 lawyers held a sit-in in cen­tral Khar­toum. Else­where in the cap­i­tal, po­lice used tear gas to dis­perse pro­test­ers who blocked a road.

A call by ac­tivists for three days of civil dis­obe­di­ence also meant the streets of Khar­toum were much qui­eter than usual this week as some teach­ers, phar­ma­cists and oth­ers stayed home.

Au­thor­i­ties have ar­rested four dis­si­dents, closed a tele­vi­sion chan­nel and seized the print runs of four news­pa­pers over the past week to si­lence crit­i­cism of re­forms. Gov­ern­ment of­fi­cials were not avail­able for com­ment but Rabih Ab­del Fat­tah, a se­nior of­fi­cial in Bashir’s rul­ing party, told Reuters the gov­ern­ment had to scrap the con­sumer sub­si­dies.

“The sub­sidy poli­cies will re­sult in a dis­as­ter and a bur­den on the econ­omy,” he said. “The call for civil dis­obe­di­ence failed be­cause those who called for it were sus­pect and those who backed it have no po­lit­i­cal weight in the coun­try.”

The mount­ing cri­sis is tak­ing place in an econ­omy al­ready hob­bled by US sanc­tions. Im­posed in 1997 against a gov­ern­ment ac­cused of sup­port­ing ter­ror­ism, the sanc­tions were tight­ened in 2006 over Bashir’s role in the Dar­fur con­flict. Com­pa­nies strug­gle to ob­tain dol­lars from banks, which are barred by sanc­tions from re­ceiv­ing for­eign trans­fers, forc­ing them to re­sort to the black mar­ket where rates are higher. “Like all im­porters, we buy for­eign cur­rency from the black mar­ket in some Gulf coun­tries - and it’s sold at higher prices there than in Khar­toum due to the US sanc­tions that pre­vent trans­fers into Su­dan,” said a fi­nan­cial of­fi­cer at a firm that im­ports agri­cul­tural prod­ucts.

“We re­vise the prices of our prod­ucts daily in re­la­tion to the price of the dol­lar ... we’ve been in busi­ness for many years but this is the most dif­fi­cult pe­riod in our history.”

The iso­la­tion of Su­dan, whose pres­i­dent is wanted for war crimes by the In­ter­na­tional Crim­i­nal Court, lim­its its op­tions. Un­like neigh­bor­ing Egypt, whose eco­nomic re­forms helped it clinch last month a $12 bil­lion IMF loan, Su­dan is on its own. — Reuters

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