On 13 November last year, a report was released by the International Monetary Fund (IMF) on the state of consumer subsidies in Sudan. It received scant media coverage but the report predicted future economic stagnation should Sudan’s central government continue to subsidise fuel and basic commodities.
Moreover, the IMF report argued that providing subsidies which cut bread prices and lowered fuel costs to protect low income families was expensive, ineffective and counterproductive. It said that the current economic policy benefited as many as 68 per cent of richer families in contrast to just 2 per cent of poorer ones. Furthermore, it argued that subsidies have a lower impact on rural areas where sorghum rather than wheat is the preferred staple diet. Whilst the sorghum consumed is almost entirely produced in Sudan, most of the country’s wheat is imported and subsidised by the government.
The IMF concluded that devaluing the Sudanese currency would avoid preferential access in an overvalued exchange rate to importers of subsidised commodities and would save Sudan at least 5 per cent of GDP which could better be used to stimulate economic growth. Unifying the bank and black market foreign exchange rates would remove the 216 per cent disparity between the official rate and the actual commodity price. According to the IMF, the move would “imply either substantial increase in the budget cost of subsidies or an increase in the retail prices of these commodities.”
In December, Sudan’s 2018 budget was passed by the National Assembly. It contained promises to exempt industrial products from customs duty and to remove taxes on locally produced foods. However, the country’s most important economic decision to devalue its currency was announced separately, significantly without the phasing-in of the subsidy reductions recommended by the IMF.
In fact, reports suggest that the government in Khartoum did not expect the private sector to pass the 216 per cent price difference on to the consumer. The shock increases immediately brought calls from opposition groups for demonstrations dubbed the “bread protests”. Although limited, the prolonged display of public dissent prompted the African Union’s mediator, Thabo Mbeki, to invite Sudanese opposition leaders Saadiq Al-Mahdi of the Ummah Party and Omar Al-Dukir of the Communist Party to talks in Addis Ababa to discuss the unrest.
In the past week, the protests have stopped but seem certain to return should the economic situation not improve. Social media has been flooded with reports of “seemingly” peaceful crowds being dispersed by riot police with tear gas; according to the opposition groups at least 300 protestors have been arrested. Online media outlets have reported the detention of international journalists who were later released. Not so well reflected are the government’s emergency decisions to break-up unofficial cartels that keep the prices of basic goods artificially high, to introduce penalties for traders who overcharge and to open some 21 retail stores selling products at ten to fifteen per cent discount directly to the public.
Ironically, the demonstrations have fuelled fears that a belated “Arab Spring” might overtake Sudan, reminiscent of the popular uprisings seven years ago in Tunisia, Egypt, Syria, Libya and Yemen. Diplomat Dr Khalid Mubarak argues in a recent opinion piece published in the Arabic press that, “The alternative to relative peace and stability in Sudan is mayhem and destruction of the kind experienced in Syria, Libya and Yemen since 2011.” He suggests that the country’s difficulties post the lifting of US sanctions served the interests of the international critics of Sudan.
In part Al-Mubarak is right. It could be argued that fear of the country’s disintegration into chaos has tempered calls to replace the government. The feeling of collective injustice, the loss of partitioned South Sudan and the conflicts in Darfur border towns have kept the Sudanese occupied with the task of defending the nation’s honour and dignity rather than protesting about everyday hardship.
In contrast, the need for economic policies and political reforms to bring about economic prosperity has, overwhelmingly, become the top public demand. The IMF suggests the introduction of public information campaigns to explain the uneven nature of subsidies and recommends issuing direct grants to 50 per cent of the population via the social security Zakat system. This week, plans to introduce additional corrective fiscal measures to the foreign currency market are expected to be announced. For now, though, whilst the protests have subsided, the desire for improved standards of living has intensified substantially.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.