Sudan pleads for help to avert economic collapse; pound continues its free fall
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September 30, 2011 (KHARTOUM) – The Sudanese economy faces collapse
unless the international community steps in to provide assistance in
the area of debt relief, the foreign minister Ali Karti said on
Thursday.
JPEG - 26.5 kb
A man counts notes after receiving the new Sudanese currency at a
central bank branch in Khartoum July 24, 2011 (Reuters)
"We are working also on debt relief with France and others, because
debt servicing incurs more than $1 billion annually," Karti told
reporters in Paris following a meeting with his French counterpart
Alain Juppe.
He said that the world could not simply stand back and watch the
economy collapse describing the economy’s woes as "really serious".
Kart’s grim economic warning marks a departure from his peers in the
government who sought to downplay the magnitude of Sudan’s troubled
finances.
The Sudanese south became an independent nation last July and took
with it 75% of the country oil wealth which meant that the north lost
billions of dollars in revenues that have helped fuel an economic boom
particularly since a peace agreement was signed between Khartoum and
southern rebels in 2005.
Analysts and critics say that the Sudanese government failed to use
the oil money to diversify the economy and help non-petroleum sectors
such as agriculture. They also accuse the government of overspending
and mismanaging the country’s resources with special focus on defense
and security.
Khartoum is hoping that fees it wants to charge the landlocked south
for transporting its oil through the infrastructure in the north will
partially offset the economic impact of the country’s breakup. But to
date negotiations between the two countries on how much the fee should
be per barrel failed to yield results.
The Sudanese president Omer Hassan al-Bashir said in an interview
published last week that unless a deal is reached on this item by end
of October, Khartoum will resort to other unspecified options.
In the meanwhile, food prices in Sudan have jumped to unprecedented
levels with rare but small demonstrations breaking out in protest over
the last few days that were quickly crushed by the police.
The Sudanese pound on the other hand continued its sharp deterioration
with the dollar selling for 5 pounds in parts of Sudan and close to
that figure in Khartoum, according to the pro-government al-Rayaam
newspaper.
The official exchange rate is around 2.7 pounds for the dollar.
The Bank of Sudan (BoS) issued a statement on Saturday stressing that
the slide in the pound’s exchange rate is a result of “temporary”
factors including the leakage of Sudanese pounds from South Sudan
during the currency conversion process and disbursement of severance
pay recently to Southerners who worked in the federal government.
BoS added that this led to an increased demand for hard currency and
urged citizens to refrain from resorting to the black market. The
central bank reiterated its commitment to supplying the market with
the needed forex.
The statement however did not promise any special forex injections
into the market in the coming period.
BoS governor Mohamed Khair al-Zubeir told Reuters this month that he
asked his Arab peers to make deposits into the central bank and other
commercial banks. He said that Sudan needs around $4 billion which
would boost the country’s ability to contain the exchange rate.
Sudan’s foreign minister suggested that the world did not properly
reward his country for facilitating the secession of the south.
"We knew and now know that the secession of the south would be a great
cost to the north and, in spite of that fact, we were determined to
help the process and leave it to go its own way and respect that"
Karti said.
The Sudanese top diplomat was in Paris to promote his country and the
argument for relief on a $38 billion debt pile that remains a bone of
contention with the now separate South Sudan.
The World Bank has said Khartoum would need to introduce wide economic
reforms to qualify for relief of multilateral debt. Nearly 90 percent
of Sudan’s external debt is owed to bilateral and commercial
creditors, with their own requirements, and would take at least three
years to clear, according to the Center for Global Development, a
Washington think tank.
"These were debts of one country and now there are two countries, so
the question of debt and how to resolve it must be done jointly,"
Karti said.
Legal experts say that until a deal is reached on splitting up
national debt, Khartoum is liable for making the necessary payments.
(ST)
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