Sudan fuel subsidy not fully lifted until end 2013

KHARTOUM Sun Jul 22, 2012 12:22pm BST

Related Topics

KHARTOUM (Reuters) - Sudan will not fully remove fuel subsidies until the end of 2013 since austerity measures worth 7 billion Sudanese pounds ($1.5 billion) are sufficient to turn around the ailing economy, a senior ruling party official said on Sunday.

The Arab African country is struggling with a worsening economic crisis after losing much of its oil wealth - the main source for revenues and dollars needed for imports - when South Sudan became independent last year.

Last month, President Omar Hassan al-Bashir said Sudan would gradually lift fuel subsidies and increase customs duties and taxes to bridge a ballooning finance gap.

The austerity measures have sparked small protests but activists inspired by an "Arab Spring" trying to end Bashir's 23-year rule have failed to mobilise the masses of protesters seen in Egypt or Yemen.

Ibrahim Ghandour, a senior leader in Bashir's National Congress Party (NCP), said the government would keep in place some fuel subsidies until the end of 2013 to minimise social pressures.

"I don't think the government will go and fully lift subsidies to oil. That would be a very unwise political and economic decision," Ghandour said in an interview.

He said the austerity measures would generate savings of 7 billion pounds, enough to close a financing gap of around 6.5 billion pounds stated by Finance Minister Ali Mahmoud and due to the loss of oil revenues.

"The goodies... of those economic arrangements are expected to start coming out at the end of the year provided that the Bank of Sudan (central bank) was able to support the pound," he said.

Inflation that rose to 37.2 percent in June -- double the level in June 2011 -- would ease after the holy Muslim month of Ramadan that started on Friday, he said. Demand for food usually increases during Ramadan and tapers off afterwards.

CURRENCY SLIDE

But Ghandour acknowledged that the central bank has been unable to stop a slide of the pound against the dollar, despite a hefty devaluation this month.

One dollar currently buys around 6 pounds on the black market, close to a historic low and well above the devalued official rate of around between 4.3 and 4.7. The previous official rate was 2.7.

"Until now they managed (to stabilise) to a degree but now the dollar is coming up in the equivalent (black) market," he said.

"The Bank of Sudan (central bank) cannot in my opinion continue to support the pound against the dollar. They need new measures," he said.

To stop the slide Ghandour said the central bank should license more foreign currency exchange bureaus to attract more dollars from Sudanese using the black market.

"Why don't we open exchange offices for whoever wishes to sell and buy?" he said. "There are few very exchange offices."

He ruled out a total liberalisation of the exchange rate, saying this would be a "disastrous" move.

Ghandour dismissed hopes by the opposition of bringing an "Arab spring" to Sudan, a country that saw two uprisings ending military rule since independence in 1956.

"Of more than 5,000 mosques in Khartoum only two protested (after Friday prayers). That can give you the size of the whole thing," he said.

(Reporting by Ulf Laessing; Editing by Michael Roddy)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.