ABU DHABI (Reuters) - Sudan has secured a $1.5 billion (936.2 million pounds) loan guaranteed by Chinese state oil firm China National Petroleum Corp, its finance minister said, throwing a lifeline to the African country battling its worst economic crisis for decades.
Sudanese Finance Minister Ali Mahmoud said the loan, agreed on December 31, would come from a Chinese bank, which he declined to identify. It comes at a crucial time for Sudan which has been unable to stop a slide in its currency since losing three-quarters of its oil production when South Sudan seceded in 2011.
Oil was the main revenue source for the budget and for dollars needed to buy basic food imports such as wheat and sugar.
China is the country’s biggest trading partner apart from Gulf Arab oil producers and China National Petroleum Corp (CNPC), which was not immediately available to comment, is the biggest investor in the oil industry in Sudan and South Sudan.
Sudan has avoided an “Arab spring” revolution that toppled the rulers of Egypt, Tunisia and Libya but annual inflation running at 46.5 percent in November has sparked small protests against the government.
“The $1.5 billion loan will be used to bridge the fiscal gap and enhance our balance of payments,” Mahmoud told Reuters in Abu Dhabi on Wednesday.
He said the loan would help stabilise the Sudanese pound which has more than halved in value on the key black market since southern secession in July 2011.
In July, Sudan devalued the official dollar exchange rate to around 4.4 pounds to end a differential with the black market rate. But the pound fell further, to 7 pounds to the dollar in December on the black market, which has become the reference for import firms as the central bank struggles to supply dollars.
China has stayed out of recent tensions between both African countries which came close to war in April. But Beijing has an interest in Sudan overcoming its crisis given that it has been the biggest buyer of South Sudanese oil which has to be exported through Sudan.
Landlocked South Sudan shut down its output of 350,000 barrels a day a year ago after failing to agree with Sudan over export fees. Both countries now plan to resume cross-border flows but need to secure their disputed border first.
CNPC is also helping Sudan to boost its own oil production, last estimated by the oil ministry at almost 140,000 bpd, but the output only serves domestic consumption.
An oil industry source said CNPC, China’s biggest oil and gas producer, had done some exploration work in Sudan’s Red Sea but had not found it promising in terms of reserves.
Sudan has been expanding exports of minerals and agriculture products to offset the loss of oil revenues. It has forecast it would sell $2.5 billion worth of gold last year, up from $1.5 billion in 2011. China is also a big player in the gold industry.
“With most of our oil exports gone, we are enhancing agricultural products exports. This year we are expecting to export edible oil and will cut imports of sugar by half,” Mahmoud said.
Last year, Sudan opened a new sugar factory, funded by Gulf countries, to lower its dependency on imports. But analysts are sceptical the country will be able to expand its agricultural exports soon due to mismanagement, outdated technology and corruption. Much of Sudan’s food needs come from abroad.
Mahmoud spoke after the signing ceremony for a $45 million loan for Sudan from the Arab Monetary Fund (AMF), a pan-Arab fund based in Abu Dhabi. Since 1997 the fund has granted Sudan $650 million in total, including the latest loan.
Additional reporting by Aizhu Chen; Writing by Stanley Carvalho and Ulf Laessing; Editing by Susan Fenton