Sudan Democracy First Group
On November 3, 2016, the Sudanese government announced new economic measures that led to an immediate increase in the prices of fuel, electricity, and other essential merchandise. The lifting of subsidies saw the prices of medicines and pharmaceutical products rise by about 75%. In addition, the rising prices of fuel led to an increase in the cost of public transportation and transport of goods by 75% to 100%, causing a further surge in living costs. Previous measures such as the devaluation of the Sudanese Pound were also impacted: the exchange rate deteriorated by over 100% immediately after the announcement of the new economic measures.
The government announced these measures two months before revealing the annual budget for the new year. The Minister of Finance promised, however, that 2016 would not witness any further austerity measures nor hike in prices.
According to officials, the measures aim to reduce the inflation rate by 15%. However, economic experts disagree. Instead of floating the exchange rate of the Sudanese Pound, the government announced promotional prices for hard currency in official commercial money exchanges equivalent to the rate of the black market. The aim was to try to attract hard currency from the black market to the official system. However, this has effectively set three different values for the Sudanese Pound:
On November 3, 2016, the Sudanese government announced new economic measures that led to an immediate increase in the prices of fuel, electricity, and other essential merchandise. The lifting of subsidies saw the prices of medicines and pharmaceutical products rise by about 75%. In addition, the rising prices of fuel led to an increase in the cost of public transportation and transport of goods by 75% to 100%, causing a further surge in living costs. Previous measures such as the devaluation of the Sudanese Pound were also impacted: the exchange rate deteriorated by over 100% immediately after the announcement of the new economic measures.
The government announced these measures two months before revealing the annual budget for the new year. The Minister of Finance promised, however, that 2016 would not witness any further austerity measures nor hike in prices.
According to officials, the measures aim to reduce the inflation rate by 15%. However, economic experts disagree. Instead of floating the exchange rate of the Sudanese Pound, the government announced promotional prices for hard currency in official commercial money exchanges equivalent to the rate of the black market. The aim was to try to attract hard currency from the black market to the official system. However, this has effectively set three different values for the Sudanese Pound:
- The Bank of Sudan official price which all banks adhere to in dealing with investors and companies that need to transfer their profits abroad or need hard currency for importing goods.
- The price at commercial money exchanges which deal with citizens.
- The price on the black market which fluctuates daily based on demand and supply.
Consequently, the implementation of these measures will lead to a significant increase in the burden of livelihood in Sudan without contributing to a real solution to the dire economic crisis.
It is not the first time for the government to announce such measures. Since the adoption of the Economic Liberalisation Policy in 1992—identical to the economic recipe of the World Bank at the time—the Government of Sudan has continued to announce similar austerity measures from time to time. The last time in September 2013 led to a wave of public unrest during which government security forces killed over 200 peaceful protesters.
Nevertheless, the imbalance of payments and the failure to increase or even attain revenues from export continues to be the major marks of the Sudanese economy. For over 25 years, these measures have been valueless in the absence of any genuine effort to correct the structural problems of the Sudanese economy. In fact, the current ruling regime has aggravated these structural problems. The government has ignored productive sectors such as industry and agriculture and abandoned expenditure on essential social services like education and health, resulting in huge negative economic and social consequences.
On the other hand, there was an uncontrolled increase in expenditure in non-productive and state sectors such as the military and security, exacerbated by widespread official and institutional corruption. This led to the escalation of the economic crisis across the country for years. This also explains the persistence of economic hardship in the country even during the times the state had reasonable revenues from exporting raw natural wealth materials like oil and gold.
For example, the government attempted to compensate its loss of oil revenues after the independence of South Sudan by depending on the export of raw gold. However, the control of gold prospecting activities by pro-government militias, such as the Rapid Support Forces (RSF), eliminated all hopes of proper economic utilization of the revenue. Instead, revenues were used as the fuel of war in Sudan. For instance, the Sudanese Government announced the production of 62 tons of crude gold in 2015, and announced a 22% increase of this production in 2016. However, official records show revenues for only 7 to 10 tons of gold. This substantiates reports that gold export revenues are being utilized to arm militias and buy the allegiance of its leaders (like the RSF leader, Mohammad Hamdan Dalgu – Hemiditi). This is being done outside the state official accounts and budget.
Furthermore, the skewed priorities within government expenditure continue to be a major factor in creating livelihood hardships in Sudan. The government directs around 70% of its announced annual budget to the army, security sector and the presidential palace. Meanwhile expenditure on social service does not exceed 8% to 10% annually, including healthcare, education, and other core social services). Expenditures on development and productive sectors like agriculture and industry are almost non-existent.
A wave of public protest followed the announcement of the economic measures. Several demonstrations took place in Khartoum, Madani, Atbra, Gadarif and other cities. Security forces responded to these demonstrations with excessive force, terrorising protesters and reminding them of the massacre of September 2013. Security authorities also detained many in the leadership of the political opposition – including most of the leading cadre of the Sudanese Congress Party and several members of the National Umma Party, the Communist Party and the Ba’ath Party—in an obvious attempt to stop any new protests from taking place.
In conclusion, the Government of Sudan does not have a viable solution for the current economic crisis which is an inevitable result of its policies for the last two decades.
It is not the first time for the government to announce such measures. Since the adoption of the Economic Liberalisation Policy in 1992—identical to the economic recipe of the World Bank at the time—the Government of Sudan has continued to announce similar austerity measures from time to time. The last time in September 2013 led to a wave of public unrest during which government security forces killed over 200 peaceful protesters.
Nevertheless, the imbalance of payments and the failure to increase or even attain revenues from export continues to be the major marks of the Sudanese economy. For over 25 years, these measures have been valueless in the absence of any genuine effort to correct the structural problems of the Sudanese economy. In fact, the current ruling regime has aggravated these structural problems. The government has ignored productive sectors such as industry and agriculture and abandoned expenditure on essential social services like education and health, resulting in huge negative economic and social consequences.
On the other hand, there was an uncontrolled increase in expenditure in non-productive and state sectors such as the military and security, exacerbated by widespread official and institutional corruption. This led to the escalation of the economic crisis across the country for years. This also explains the persistence of economic hardship in the country even during the times the state had reasonable revenues from exporting raw natural wealth materials like oil and gold.
For example, the government attempted to compensate its loss of oil revenues after the independence of South Sudan by depending on the export of raw gold. However, the control of gold prospecting activities by pro-government militias, such as the Rapid Support Forces (RSF), eliminated all hopes of proper economic utilization of the revenue. Instead, revenues were used as the fuel of war in Sudan. For instance, the Sudanese Government announced the production of 62 tons of crude gold in 2015, and announced a 22% increase of this production in 2016. However, official records show revenues for only 7 to 10 tons of gold. This substantiates reports that gold export revenues are being utilized to arm militias and buy the allegiance of its leaders (like the RSF leader, Mohammad Hamdan Dalgu – Hemiditi). This is being done outside the state official accounts and budget.
Furthermore, the skewed priorities within government expenditure continue to be a major factor in creating livelihood hardships in Sudan. The government directs around 70% of its announced annual budget to the army, security sector and the presidential palace. Meanwhile expenditure on social service does not exceed 8% to 10% annually, including healthcare, education, and other core social services). Expenditures on development and productive sectors like agriculture and industry are almost non-existent.
A wave of public protest followed the announcement of the economic measures. Several demonstrations took place in Khartoum, Madani, Atbra, Gadarif and other cities. Security forces responded to these demonstrations with excessive force, terrorising protesters and reminding them of the massacre of September 2013. Security authorities also detained many in the leadership of the political opposition – including most of the leading cadre of the Sudanese Congress Party and several members of the National Umma Party, the Communist Party and the Ba’ath Party—in an obvious attempt to stop any new protests from taking place.
In conclusion, the Government of Sudan does not have a viable solution for the current economic crisis which is an inevitable result of its policies for the last two decades.
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