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Sudan declares an economic state of emergency

By Morris Kiruga
Posted on Tuesday, 15 September 2020 18:44

Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum
Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum, Sudan June 11, 2019. REUTERS/Mohamed Nureldin Abdallah

Battered by worsening inflation, Sudan declared an economic state of emergency on 10 September, triggered by what it called a “systematic vandalism” of its currency.

The declaration follows months of accusations by the transitional government that its opponents have been actively sabotaging the economy by artificially inflating currency exchange rates and gold prices.

Continued decline of the Sudanese pound

The result has been a near-uninterrupted decline in the Sudanese pound’s worth on the foreign exchange markets, accompanied by fast rising inflation. The country’s inflation rate crossed the 100% mark in May, then escalated to 143.78% in July, and then to 166.83% in August.

READ MORE Why protesters are fed up with Sudan’s tricky transition

“We are able to simply say what happened is an open war against the revolution, the economy, the government,” said the country’s information minister Faisal Saleh during a news conference. Khartoum is hoping to stem the tide by cracking down on the black markets and illegal traders.

Special economic court

As part of the economic state of emergency, the transitional government will set up special economic courts and institute stronger currency controls as well as tighter security at border points and airports to curb smuggling.

Its justice department is also pushing for the passing of the Foreign Exchange Bill, which would see illegal traders of the country’s mineral wealth face between one month and ten years imprisonment.

READ MORE Sudan: International financial backing is key to boosting its transition

The markets rallied for a time in June after the vice chair of the Sovereignty Council, Mohamed Hamdan Dagalo ‘Hemeti’ threatened action against players in the black currency markets. By mid-August, Sudanese experts warned that the continued decline would lead to an economic collapse.

Obstacles galore

Sudan’s one year old transitional government has been battling multiple crises in 2020, and the new economic state of emergency is just one of several such declarations in the recent past.

In March, Khartoum declared a state of medical emergency after the COVID-19 pandemic landed in the country. In July, it declared a state of emergency in North Darfur State due to increasing violence.

Then, on 5 September, it declared a nationwide three-month state of emergency due to massive flooding which has claimed 102 lives and displaced tens of thousands of people.

READ MORE US decision to halt aid to Ethiopia over GERD risks complicating talks

It has also been caught up in finalising the transition by negotiating with rebel groups. In July, several ministers including the Finance Minister Ibrahim Al-Badawi resigned to pave way for the admittance of the rebel groups into the transitional government.

Its major hope of getting Sudan de-listed from the US’s state sponsors of terror classification, which would give it access to external financing from Bretton Woods institutions, might not be a priority for Washington as President Donald Trump campaigns for reelection.

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

Sudan expects to be de-listed once it settles $335m in compensations to hundreds of victims of twin bombings in Kenya and Tanzania in 1998, a deal currently under threat due to a split among US Senate Democrats.

Latest complication

In late August, the Trump administration added another hurdle to the deal, during a visit by  US Secretary of State Mike Pompeo who was on a shuttle diplomacy to get Arab states to normalise relations with Israel.

Secretary Pompeo  reportedly prodded Sudanese Prime Minister Abdalla Hamdok out of the blue, to place a call to Israeli Prime Minister Benjamin Netanyahu and kickstart the normalisation of relations between the two countries,” while discussing the de-listing during a visit in August. PM Hamdok declined, saying that his transitional government did not have the mandate to make such a major move.

Bottom line

With two years and three months to go before the end of its term, Sudan’s transitional government’s handling of the economic crisis will determine its survival or demise. The country’s economic crisis and rising food and commodity prices played a major role in the ousting  of former president Omar el-Bashir, and presents the new government with its biggest existential crisis.

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