Sudan pins hopes on Berlin donor meeting as economy nears collapse

Customers queue to buy bread at a bakery in Khartoum, Sudan on February 19, 2020. PHOTO | REUTERS 

In Summary

•  New financing, however, has been held up by the need to settle decades of arrears to the IMF and
Sudan’s listing, while under Bashir’s rule, by the United States as a state sponsor of terrorism.
•  Inflation topped an annual 100 per cent last month as the government printed money to fund bread and fuel subsidies.
•  Sudan’s currency has fallen to 150 to the dollar on the black market compared to 55 at the official rate, due to hard currency shortages.

By REUTERS
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With Sudan’s economy at risk of freefall, hammered by inflation exceeding 100 per cent and plagued by shortages of bread, fuel and medicine, the government is pinning its hopes on a conference of potential donors in Berlin this week.

The crisis has been compounded by the coronavirus pandemic, which has diverted the resources of many donors, and the spectre of swarms of locusts breeding in neighbouring Kenya and poised to migrate north to Sudan and Ethiopia within weeks. 

Prime Minister Abdalla Hamdok, running the country under a precarious, transitional power-sharing deal with the military since the overthrow of veteran autocrat Omar al-Bashir in a popular uprising last year, is desperate for foreign support. 

Unless he gets quick funds, Sudan’s first civilian premier since the 1980s might face unrest from people tired of chronic shortages or even a military takeover in a country with a history of coups, analysts say. 

New financing, however, has been held up by the need to settle decades of arrears to the International Monetary Fund (IMF) and Sudan’s listing, while under Bashir’s rule, by the United States as a state sponsor of terrorism.

 “You have an unfinanced transition which is being hammered by a pandemic and a potential plague” of locusts, said a Western diplomat.

“It puts pressure on the international community to put more money up front quickly to ameliorate the degradation.”

At stake ultimately is the stability of a major African country that has seen multiple internal conflicts. Hamdok launched peace talks with rebels in Darfur and other restive regions to end years of fighting but missed a deadline to wrap up a deal this month.

Inflation topped an annual 100 per cent last month as the government printed money to fund bread and fuel subsidies. Sudan’s currency has fallen to 150 to the dollar on the black market compared to 55 at the official rate, due to hard currency shortages.

Demand for reform

Western governments, international financial institutions and wealthy Gulf oil producers are among those scheduled to participate in a one-day teleconference in Berlin on Thursday.

Many welcomed the power-sharing deal between the civilians who staged mass protests and the powerful military that helped remove Bashir, an Islamist wanted by a UN tribunal on charges of genocide and crimes against humanity in Darfur. 

Yet donors have held back, delaying the “Friends of Sudan conference” several times to demand reforms such as the removal of fuel subsidies estimated to cost over $3 billion annually.

Analysts and diplomats say Khartoum needs to deliver more substantial steps to overhaul an economy where key companies earning foreign currency such as gold exporters are controlled by military figures.

The government said last week it would begin rolling out a plan to give poor families direct cash payments, a scheme Hamdok hopes will ease the plight of impoverished Sudanese as his government cuts spending on subsidies.

The government needs an estimated $1.9 billion to cover the cash payment programme.

A preparatory document for the conference calls for “a pathway for Sudan’s re-engagement with international institutions” leading to eventual debt relief.

“The government is bankrupt effectively,” said Magdi el-Gizouli, a Sudanese academic and a fellow of the Rift Valley Institute. “They don’t have the funds for the cash programme.”

The Berlin conference describes participants as “partners” rather than donors, to recognise that Sudan has its own resources and needs political and economic support rather than financial handouts, said Aisha al-Barir, a Sudanese government coordinator for the conference.

“Sudan is working on economic reform to take advantage of its own resources,” she said, pointing to a gold sector reform announced last week. Sudan also plans to liquidate or privatise many dysfunctional state firms.

State finances have been in crisis since South Sudan seceded in 2011, taking with it most of Sudan’s oil. Smuggling networks have prevented the government from tapping gold exports.