Exclusive: Sudan needs up to $5 billion in budget support to prevent collapse

© Reuters. Sudan's Finance Minister Ibrahim Elbadawi speaks during an interview with Reuters in Khartoum © Reuters. Sudan’s Finance Minister Ibrahim Elbadawi speaks during an interview with Reuters in Khartoum

By Khaled Abdelaziz, Ulf Laessing and Michael Georgy

KHARTOUM (Reuters) – Sudan needs up to $ 5 billion in budget support to avert economic collapse and launch reforms after the ouster of veteran ruler Omar al-Bashir, its finance minister told Reuters.

The country, in crisis since losing most of its oil wealth with South Sudan’s secession in 2011, has only enough foreign currency reserves to fund imports for a few weeks, said Ibrahim Elbadawi, part of a transitional government formed in August.

Sudan has had some support for fuel and wheat imports but about 65 percent of its 44 million people live in poverty and it needs up to $ 2 billion in development funding along with a hoped-for $ 2 billion from Arab development funds, he said.

Outlining reform plans in detail for the first time, Elbadawi said public salaries would need to be increased and a social support network established to prepare for the painful removal of fuel and food subsidies.

Months of demonstrations over price hikes for fuel and bread and cash shortages triggered the uprising against Bashir, who was toppled in April by the military. Protests have continued since, with people killed in clashes with security forces.

“We have started the process (of reforms),” Elbadawi said in an interview on Thursday. “The people of Sudan deserve to be seen in a radically different prism than the international community used to see Sudan, as a country ruled by a pariah state.”

“Now we have a revolution,” he said. Asked how much budget support was needed for 2020 he said: “Some estimates say between three to four billion (US dollars), maybe even five billion.”

The civilian government Elbadawi is part of has taken over for three years under a power-sharing deal with the military. It has drawn slightly more than half of $ 3 billion in support for imports of wheat and fuel offered by Saudi Arabia and United Arab Emirates in April, he said.

A “friends of Sudan” donor meeting is planned for December and the government had agreed with the United States it could start engaging with international institutions while still on a list of countries deemed sponsors of terrorism, Elbadawi said.

The designation, which dates from allegations in 1993 that Bashir’s Islamist government supported terrorism, makes it technically ineligible for debt relief and financing from the IMF and World Bank. Congress needs to approve a removal.

CURRENCY

The first experts from international institutions had arrived in Khartoum to help with reforms and a delegation of the International Monetary Fund (IMF) would come this month for Chapter IV discussions, Elbadawi said. There was no immediate comment from the IMF, World Bank or U.S. State Department.

Part of a roadmap agreed with the IMF and World Bank was that Sudan did not have to pay back $ 3 billion in arrears from international institutions.

“We don’t need to pay anything. What we need to … deliver really is policy,” he said. Sudan is one of the most indebted countries, owing $ 60 billion, which needs to be settled separately.

Sudan would start to increase its tax base and overhaul the civil sector, Elbadawi said. Salaries — eroded by double digit inflation rates — could be raised as much as 100 percent by April.

In the second half of next year a social support network would be set up to allow the lifting of subsidies by June or later. Some donor funding would be used to collect data to allow cash transfers for the needy.

Sudan also wanted to produce bread based on sorghum, a local cereal, to import less wheat. He said he hoped a spread between official and black market would be ended by June. But this week the local pound dropped to 80 for a dollar on the black market versus the official rate at 45.

He said the 2020 budget would have sustainable development targets for education, health care and social spending, suggesting Sudan might move away from the dominant military spending choking development.

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Sudan central bank strengthens currency to 45 Sudanese pounds to dollar: agency

© Reuters.  Sudan central bank strengthens currency to 45 Sudanese pounds to dollar: agency © Reuters. Sudan central bank strengthens currency to 45 Sudanese pounds to dollar: agency

CAIRO (Reuters) – Sudan’s central bank on Sunday strengthened the Sudanese pound to 45 pounds to the dollar from 47.5, state news agency SUNA reported.

It said the measure coincided with the sharp rise in the price of the pound against the dollar on the parallel market. Saudi Arabia and the United Arab Emirates (UAE) on Sunday said they had agreed to send Sudan $ 3 billion worth of aid, including a $ 500 million central bank deposit to ease pressure on the pound.

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Currency Chaos That Felled Sudan Leader Is Lesson for Maduro

&copy Bloomberg. Omar Hassan Ahmed Al Bashir, Sudan's president, shakes hands with Yasuo Fukuda, Japan's prime minister, not seen, prior to their meeting at the Tokyo International Conference on African Development (TICAD) in Yokohama City, Japan, on Wednesday, May 28, 2008.  &© Bloomberg. Omar Hassan Ahmed Al Bashir, Sudan’s president, shakes hands with Yasuo Fukuda, Japan’s prime minister, not seen, prior to their meeting at the Tokyo International Conference on African Development (TICAD) in Yokohama City, Japan, on Wednesday, May 28, 2008.

(Bloomberg) — For autocratic leaders seeking lessons from the toppling of Sudanese President Omar al-Bashir, avoiding a currency crisis may be the key to survival.

It’s the same problem that did for long-standing rulers from Angola to Zimbabwe and may yet claim Venezuela’s Nicolas Maduro.

Al-Bashir, who the military ousted on Thursday to end 30 years of rule, faced months of protests against the government’s economic mismanagement, repression and corruption. One of the root causes of the 75-year-old’s downfall was his inability to manage a shortage of foreign exchange that sent inflation soaring and hammered living standards.

Sudan’s woes can be traced back to the secession of South Sudan in 2011, which saw it lose almost all its oil fields and 60 percent of fiscal revenue, according to the Institute of International Finance. But the government’s decision to ramp up spending while pegging its currency only exacerbated the situation.

“With the loss of oil revenue, the government monetized the deficit, causing inflation to spiral and reserves to dwindle as the central bank maintained an overvalued exchange rate,” Jonah Rosenthal and Garbis Iradian, economists at the Washington-based IIF, said in a note Thursday.

The central bank devalued the pound almost 40 percent to 47.5 per dollar in October. But it was too little, too late. The currency’s black-market rate tumbled again and now stands at around 75 against the greenback. Inflation is almost 120 percent, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.

Al-Bashir is far from the only strongman to come unstuck in recent years thanks to a balance-of-payments crisis. Robert Mugabe was pushed out by Zimbabwe’s army in 2017 as a dollar squeeze and political tension caused havoc in the southern African nation, while the ruling party in Angola pressured President Jose Eduardo dos Santos to resign earlier than he wanted in the same year. Tellingly, one of the first things his successor, Joao Lourenco, did was devalue the kwanza to try and end a dire scarcity of hard currency.

And Algeria’s Abdelaziz Bouteflika, who was forced out of power this month, faced his own currency problems. The 2014 crash in oil and gas prices crimped the Arab nation’s dollar earnings. While it avoided the kind of economic pain seen in Sudan, it spent more than $ 100 billion of reserves to prop up the dinar and avoid tough measures such as a major devaluation or turning to the International Monetary Fund for a bailout.

In Venezuela, where inflation is more than 1 million percent, making the bolivar all but worthless, Maduro has managed to hold on thanks to continued support from the military and outside powers such as Russia. But if Sudan and Zimbabwe are a guide, he’ll also need to solve the currency chaos.

“Nobody survives hyperinflation,” Daniel Osorio, president of New York-based Andean Capital Advisors, which advises money managers on Latin America, said Thursday at a debt conference in Washington. “Sooner or later, it pushes you out.”

(Updates paragraph under chart with political tension in Zimbabwe.)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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