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Sudan to Approve First Budget of the Transitional Government

Sudan to Approve First Budget of the Transitional Government

Wednesday, 25 December, 2019 - 13:00
People queue to withdraw money from an automated teller machine, ATM, in Khartoum, Sudan (File Photo: Reuters)

The Sudanese government discussed the report of the committee studying gradually scaling back fuel subsidies in the 2020 budget, before its approval on Thursday, said government spokesman Faisal Mohamed Saleh.

The cabinet held two meetings with six ministers and several experts from the Finance Ministry to evaluate the budget set before issuing final decisions.

Saleh noted that the ministers made several considerations on the report, and indicated that the government will hold a final meeting on Thursday to approve the final budget form and then present it to the media and citizens.

The forces of the Declaration of Freedom and Change, the political reference of the transitional government, confirmed that they do not plan to lift subsidies of fuel and bread.

On Sunday, the government formed a committee to discuss options for gradually phasing out state’s fuel subsidies.

The budget proposes gradually scaling back fuel subsidies. It does not include cutting subsidies for bread. The poorest people will receive direct social and monetary support in 2020, Saleh said.

In 2013, Sudan witnessed widespread protests because of the lifting of fuel subsidies, which led to the death of about two hundred people.

The cabinet pledged to hold talks with all segments of society and listen to the different views on the gradual phasing out of subsidies.

A recent report by the International Monetary Fund (IMF) recommended the liberalization of the exchange rate, revenue mobilization, and gradually phasing out fuel subsidies. A substantial increase in social transfers will be needed to mitigate the impact of adjustment on vulnerable groups

The Fund issued its report after a group of experts visited Sudan from 4 to 17 December, concluding that the economic conditions in Sudan remain challenging on the dropback of persistent fiscal deficits, high inflation, and low access to financing.

The report admitted that the challenges facing the new government are daunting, warning that the economy is shrinking, fiscal and external imbalances are large, inflation is high, the currency is overvalued, and competitiveness is weak.

“The political change provides Sudan with a window of opportunity to implement critical reforms that address major macro imbalances and create the conditions for sustained inclusive growth.”

The Fund admitted that Sudanese authorities made strong progress in developing a comprehensive reform package and initiated dialogue with the public. They had candid and productive discussions with the IMF team on the main challenges ahead.

It welcomed the authorities’ engagement with international partners to secure comprehensive support for debt relief and the de-listing Sudan from state sponsors of terrorism list (SSTL), which would pave the way for foreign investment and financing for growth and poverty reduction.

“The team also welcomed Sudan’s efforts to strengthen cooperation with the IMF on policies and payments.”

An expanded front-loaded social safety net will be key to help mitigate the impact of potentially difficult reforms on the vulnerable sectors of society, noted the Fund.

“Limited access to external financing continues to constrain the economy. Large arrears block financing from international donors while prospects for securing large external financing from bilateral donors remain uncertain,” it warned.

Sudan is in debt distress and is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative, but Sudan remains on the SSTL, which blocks progress toward HIPC debt relief and the clearance of debt arrears.

“The large external debt and arrears hinder access to external financing and weigh heavily on development,” IMF concluded.

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