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Sudan: International financial backing is key to boosting its transition

Jonas Horner
By Jonas Horner

International Crisis Group Horn of Africa Project Deputy Director

Posted on Wednesday, 24 June 2020 18:30

A woman flashes the victory sign during the first anniversary of the start of the uprising that toppled long-time ruler Omar al-Bashir, at the Friendship Hall in Khartoum
A woman flashes the victory sign during the first anniversary of the start of the uprising that toppled long-time ruler Omar al-Bashir, in Khartoum, Sudan December 25, 2019. REUTERS/ Mohamed Nureldin Abdallah

Sudan’s transitional government is being buffeted by dangerous economic headwinds. When Sudan’s international partners meet at a conference on Thursday 25 June, they should offer further financial support to Khartoum’s civilian cabinet, or risk reigniting economic frustrations and stoking new instability.

The price of bread, tripling overnight at the end of 2018, was the trigger for an uprising. A staple for many Sudanese, bread became the symbol of the myriad economic struggles facing a country unable to provide basic necessities to its people, and the catalyst for street protests that eventually led to the fall of Omar al-Bashir in April 2019 in a military coup.

READ MORE Sudan’s military triumvirate takes over and arrests Omar al-Bashir

Just over a year after Bashir’s ouster, the hybrid civilian-military transitional government tasked with steering the country to democratic elections in 2022 barely hangs together. Worse, the civilian cabinet led by popular Prime Minister Abdalla Hamdok has struggled to meet the street’s high expectations. A March assassination attempt on Hamdok and sporadic protests by the former-government’s backers point to continued dangers ahead.

No longer insulated by the profits of its own oil production, Sudan’s subsidies are a devastating drag on the government’s budget.

Though Bashir is gone, life has only grown tougher for Sudan’s poorest, as the country experiences crippling shortages of basic commodities like bread, petrol and cooking gas, as well as extended power outages and soaring inflation. Government measures in response to COVID-19, including a lockdown and market closures, have exacerbated deteriorating economic conditions and disproportionately impacted the millions of Sudanese who work in the informal sector and rely on daily subsistence wages.

READ MORE Coronavirus: Sudan’s economy and pandemic threaten revolutionary gains

The equation is brutally simple for Hamdok and his cabinet. Either it manages to alleviate the economic squeeze, or it risks reigniting the frustrations that were at the core of the uprising. But it can’t fix the situation alone.

A devastating drag

With public finances deep in the red – and debt arrears preventing it from accessing international loans – Hamdok’s cabinet can only prevent a collapse of the economy if international partners provide financial support.

This is especially true as the government has taken the much-needed step of lifting costly fuel subsidies inherited from the Bashir era, resulting in unpopular price rises at the pump. For now, subsidies on key commodities including wheat, cooking gas, diesel and electricity remain in place.

Subsidies were affordable for the government until South Sudan’s secession in 2011 deprived it of 75 per cent of its crucial oil revenue. Until recently, the price of fuel in Sudan was the second lowest in the world after Venezuela at just 9 cents per litre. No longer insulated by the profits of its own oil production, Sudan’s subsidies are a devastating drag on the government’s budget.

They have also contributed to skyrocketing inflation and perpetuated corruption. Unable to borrow money on the international market and with little access to donor assistance, the government resorted to printing money to finance the subsidies.

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With the amount of cash in circulation increasing while the amount of goods remained the same, inflation soared. A well-oiled system of corruption also meant that certain goods were purchased at a low price on the local market and then smuggled out of the country to be sold for much more.

While the lifting of fuel subsidies was necessary, the short-term price surge is set to cause significant economic pain for ordinary Sudanese. The cost of fuel in Sudan is now close to the global market rate. And while few people actually own vehicles in the country, an increase in fuel prices means an increase in transport prices which is reflected in the cost of basic goods in the market.

Balance of power

Against this backdrop, the upcoming Sudan Partnership Conference – co-hosted by the EU, Germany, the UN and Sudan and held virtually – represents a critical opportunity to mobilise financial support for the transitional government.

International failure to financially support the government will jeopardise Sudan’s transition to civilian rule through elections in 2022.

Sudan’s partners should provide support for a government cash transfer program to help cushion the effects of the lifting of subsidies on the nation’s poorest. Accompanied by pledges of better bookkeeping from Hamdok’s cabinet to reassure donors, and an adequate public communication campaign on the short-term effects of lifting subsidies, this funding would only be a first step in the right direction. But it is an essential one if donors want to help Sudan undertake deeper structural and political reforms that can lead the country towards greater economic self-sufficiency.

Western countries have so far been broadly cautious in their approach to Sudan since Bashir’s ouster, while Saudi Arabia and the United Arab Emirates have slowed down their initial financial and in-kind support. Riyadh and Abu Dhabi provided some $750m in total to Sudan since April 2019, but most of this money was channelled to military actors in the days before Hamdok took office.

Those Gulf countries, along with Egypt, have demonstrated greater confidence in the military, reflecting their hope and belief that it can act as a bulwark against political Islam in Sudan and beyond.

Yet, while the balance of power within the hybrid transitional authority clearly tilts towards the military, Hamdok’s civilian cabinet is responsible for addressing the Sudanese people’s economic hopes. To fulfil public expectations of improved economic fortunes and roll back the potential for destabilising protests, it will need strong international financial support.

Bottom line: International failure to financially support the government will jeopardise Sudan’s transition to civilian rule through elections in 2022. It will also further embolden military actors – wholly unacceptable as political actors to a significant portion of the population – to expand their political footprint, taking advantage of the government’s fragility. This could precipitate unrest, endanger Sudan’s transition and return the country to the upheaval of the past few years. Such an outcome would serve none of its foreign partners’ interests.

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