Sudan Forced to Rely On Failing Subsidy Scheme

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Sudan's transitional government may have to continue with the controversial subsidy programme after a planned conference on the economy failed to kick-off due to the coronavirus pandemic.

The conference would have provided binding recommendations and decisions on commodity support issues, financial policies, exchange rates, banking sector conditions, aspects related to people's pension and macroeconomic policies, as well as ways to recover looted funds from the previous regime.

Commodity subsidy is one of the most controversial programmes, which takes more than $300 million annually as a way to cushion poor people from exorbitant food prices.

Already, the country faces a shortage of basic commodities such as fuel, wheat flour, cooking gas and some medicines due to lack of foreign exchange for importing them, and from an imbalance in trade in excess of $4 billion. Now, the pandemic has ruined all rescue plans.

Sudan Minister of Finance Ibrahim al-Badawi said that the country will be affected more economically by the COVID-19 pandemic.

Cash support

In a briefing to the media last week, the minister said that his ministry will provide cash support amounting to 210 million Sudanese pounds ($379,5752) for the groups that were affected by the lockdown measures that included the forceful shutdown of businesses.

But Mr al-Badawi had indicated in previous statements that the current subsidies on fuel and basic foods were unfair and ineffective as only the rich benefited. The new proposals included distributing cash to the poor to give them purchasing power and in turn eliminate the subsidy.

Sudan's exports are estimated at about $3 billion, and imports at $7 billion, according to the Finance ministry.

The virus spread could also affect the Friends of Sudan conference of donors scheduled for June, which seeks to support the Sudanese economy. That could ultimately delay the completion of new investment projects covered by the 2020 budget, especially related to external support based on donor pledges.

South Sudan's current budget has a deficit of $1.6 billion.

The Sudanese pound recorded a sharp decline last week, exchanging at 124 units per dollar, contrary to the expectations of observers who predicted it would recover amid low oil prices.

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