July 22, 2020 / 7:15 PM / 22 days ago

UPDATE 2-Sudan's Hamdok says currency to be adjusted as he unveils reforms

(Recasts with prime minister and civilian government)

By Khalid Abdelaziz

KHARTOUM, July 22 (Reuters) - Sudanese Prime Minister Abdalla Hamdok announced long-awaited economic and political reforms on Wednesday aimed at rescuing the country’s economy and keeping its civilian transition on track after the ouster of Omar al-Bashir last year.

Sudan’s economy is at risk of freefall, hammered by an annual inflation rate of more than 100% and shortages of electricity, bread, fuel and medicine. The currency recently hit a record low of 150 Sudanese pounds to the dollar on the black market compared with 55 at the official rate, though it is now at 140 to the dollar.

Hamdok said Sudan would start a currency adjustment plan and lift subsidies on diesel and gasoline, following amendments to the 2020 budget in order to mitigate the impact of the coronavirus pandemic.

The pandemic has hit the economy hard, causing a loss 40% of public revenues, acting Finance Minister Hiba Mohamed Ali said.

A government source told Reuters the currency adjustment programme would begin in August aiming to reach a full float in two years. The amended budget would be approved in the coming days, the source added.

Fuel and bread shortages were the initial spark that led to mass protests against Bashir’s three-decade rule.

Ali said the private sector would be allowed to import fuel in unlimited quantities through a newly created trade finance fund, which Hamdok said has a portfolio of $1 billion for imports.

The government source told Reuters that fuel importers would be allowed to start buying fuel using dollars at a free market price in August.

Hamdok said that while subsidies on diesel and gasoline will be lifted, the government would continue to bear the brunt of the cost of flour, medicine and cooking gas. Subsidized fuel can still be sold to sectors like agriculture, Ali said.

The removal of costly subsidies is often a key requirement of donors such as the International Monetary Fund, which signed a staff-level agreement on policies and reforms that can underpin a staff-monitored program subject to board’s approval.

Foreign donor nations in June pledged $1.8 billion to help Sudan. Ali said $484.7 million of that money has been set aside for a cash transfer programme to support poor families as the subsidies are being phased out.

Separately, Hamdok, who has run Sudan for three years with the military which helped remove Bashir, announced the appointment of civilian governors for Sudan’s 18 states, which for more than a year had been ruled by military officers.

The appointment was a key demand from protesters. (Reporting by Khalid Abdelaziz in Khartoum; Editing by Leslie Adler Writing by Nafisa Eltahir in Dubai and Nadine Awadalla in Cairo Editing by Mark Heinrich and Ulf Laessing)

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