Sudan to Tackle Fuel Subsidies as Economy Hangs on Edge

In this Sunday, Jan. 28, 2020 photo, Ibrahim Elbadawi, Sudan's interim minister of finance, speaks in an interview in Khartoum, Sudan. (AP)
In this Sunday, Jan. 28, 2020 photo, Ibrahim Elbadawi, Sudan's interim minister of finance, speaks in an interview in Khartoum, Sudan. (AP)
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Sudan to Tackle Fuel Subsidies as Economy Hangs on Edge

In this Sunday, Jan. 28, 2020 photo, Ibrahim Elbadawi, Sudan's interim minister of finance, speaks in an interview in Khartoum, Sudan. (AP)
In this Sunday, Jan. 28, 2020 photo, Ibrahim Elbadawi, Sudan's interim minister of finance, speaks in an interview in Khartoum, Sudan. (AP)

Sudan hopes to cut fuel subsidies over the course of 18 months, starting as early as March, and replace them with direct cash payments to the poor, the country’s finance minister said Wednesday, laying out a timetable for sweeping economic reforms sought by international lenders.

The plan comes as Sudan's fragile democracy is slowly taking shape after the ouster last year of the country's long-time president Omar al-Bashir.

In an interview with The Associated Press, Finance Minister Ibrahim Elbadawi said the decision was a “no brainer." The government has previously said it will not change bread and flour subsidies.

Elbadawi's comments — the first to reveal a planned timeline — came after the Sudanese government skirted the issue of slashing subsidies late last year, after the country's pro-democracy movement rejected the move, and instead included them in the 2020 budget.

In the interview with the AP, Elbadawi said the plan now is to gradually lift fuel subsidies, which take up 36% of the nation's budget, as early as March and following an economic conference with civil society groups, and continue into the next year.

A former World Bank economist, Elbadawi was appointed to the country's interim government last year. He said gasoline subsidies would be removed first, before tackling those related to diesel in mid-year.

Sudan's new leadership is navigating a treacherous transition to civilian rule. Two-thirds of the country's more than 40 million people live in poverty, and slashing the fuel subsidies could lead to destabilizing protests reminiscent of the large-scale demonstrations that ended Bashir's 30-year rule in April. At the same time, sweeping economic reforms are required to re-integrate Sudan into the international economy and win support from international lenders.

Since Bashir's ouster, an interim government made of civilian and military representatives has been leading the country and the economy — already in a severe downturn and battered by a weakening currency, shortages and inflation — has become the lynchpin of the fragile transitional period.

Sudan has been an international pariah after it was placed on the United States' list of states that sponsor terror, more than two decades ago. This largely excluded it from the global economy and prevented it from receiving loans from international institutions like the International Monetary Fund.

Sudan's interim government has also inherited a debt of 60 billion dollars and a rapid inflation rate, and badly needs an injection of funds from foreign donors. The nation's currency, the Sudanese pound, is trading on the black market for double its official rate of 45.3 pounds to the dollar.

The uprising against Bashir began as protests over rising prices of key staples such as bread and frustration among the youth over unemployment and the brutality of the nation's security forces. Many in the country’s civil society movement fear that lifting subsidies now could make the country's most vulnerable even poorer.

Elbadawi said a direct cash payment to poor families, through banks or mobile phone transfers, could help ease the shock of the reforms. Such a program could be off the ground in six months, he said, though the government still needs better data to reach all those in need. As part of a pilot group, some 4.5 million people would start receiving the money soon, he added.

"We think that if we manage to do this, it will be a very viable and credible alternative," he told the AP. "It will target the poor, it will promote the cause of peace and it will actually change the social contract."

Because of the longstanding subsidy program, Sudan has been one of the cheapest countries in the world to fill up a tank. Cheap gasoline prices have also encouraged fuel smuggling out of the country. If things were to stay as they were — with no changes to the 2020 budget — the government would be spending more on subsidies than on health, education and internal security combined, Elbadawi said.

To pave the way for international loans, Sudan has been in talks with the US to remove it from the list of terrorism sponsors —something Elbadawi hopes will be only a matter of weeks or a few months. In the meantime, he said the government is in talks with the IMF and is working on a reform program that could lay the groundwork for future debt relief.

The government is also launching a national dialogue to explain the necessity of the subsidy reforms but will tread carefully, aware of likely popular opposition, Elbadawi said. The Sudanese Professionals Association, the main organizer of demonstrations during last year's uprising, has threatened to mobilize protesters if the transition goes astray.

That means Sudan's civilian stakeholders would have to be on board with the program.

“If, for whatever reason, we are unable to reach a consensus, then I think it will be incumbent upon the government to explain the consequences and to allow the Sudanese people to take whatever decision and course they want to take,” Elbadawi said.



Oil Extends Climb on Supply Fears, Trade War Concerns Cap Gains

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Extends Climb on Supply Fears, Trade War Concerns Cap Gains

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices inched higher on Tuesday after threats by US President Donald Trump to impose secondary tariffs on Russian crude and attack Iran, though worries about the impact of a trade war on global growth capped gains.

Brent futures rose 21 cents, or 0.3%, to $74.98 a barrel at 0645 GMT, while US West Texas Intermediate crude futures climbed 22 cents, or 0.3%, to $71.70.

The contracts settled at five-week highs a day earlier.

"Near-term risks are skewed to the upside, with US threats of secondary tariffs on Russian and Iranian oil leading market participants to price for the risks of tighter oil supplies," said Yeap Jun Rong, market strategist at IG, Reuters reported.

However, broader themes still revolve around concerns of upcoming tariffs weighing on global demand, along with prospects of increased supply from OPEC+ and the US, said Yeap.

A Reuters poll of 49 economists and analysts in March projected that oil prices would remain under pressure this year from US tariffs and economic slowdowns in India and China, while OPEC+ increases supply.

Slower global growth would dent fuel demand, which might offset any reduction in supply due to Trump's threats.

After news of Trump's threats initially boosted prices on Monday, traders told Reuters they viewed the president's warnings to Russia, at least, as a bluff.

Trump, on Sunday, told NBC News that he was very angry with Russian President Vladimir Putin and would impose secondary tariffs of 25% to 50% on Russian oil buyers if Moscow tries to block efforts to end the war in Ukraine.

Tariffs on buyers of oil from Russia, the world's second largest oil exporter, would disrupt global supply and hurt Moscow's biggest customers, China and India.

Trump also threatened Iran with similar tariffs and bombings if Tehran did not reach an agreement with the White House over its nuclear program.

"For now, it appears to be just a threat to Russia and Iran. However, if it becomes a reality, it creates plenty of upside risk to the market given the significant oil export volumes from both countries," said ING commodities strategists on Tuesday.

The market will be watching for weekly inventory data from US industry group the American Petroleum Institute later on Tuesday, ahead of official statistics from the Energy Information Administration on Wednesday.

Five analysts surveyed by Reuters estimated on average that US crude inventories fell by about 2.1 million barrels in the week to March 28.