October 8, 2012 (KHARTOUM) – The recent deal with South Sudan over oil transit fees will not be reflected in the 2013 budget, the country’s finance and national economy minister said.
- Sudan’s finance minister Ali Mahmood Abdel-Rasool (Getty)
In statements carried by Sudanese local media, minister Ali Mahmood explained that the agreement, by which Khartoum will receive payments from landlocked South Sudan for every oil barrel exported, will be built into the budget only once the crude starts flowing and figures can be calculated with a degree of certainty.
Sudan’s economy took a strong hit when oil-rich South Sudan became an independent state in July 2011 leaving the north suffering from dollar shortages, soaring budget deficit and high inflation.
The government in Khartoum was hoping that the fees collected from Juba for exporting its oil should cover part of the budget hole left by the country’s breakup. However, South Sudan suspended its oil production earlier this year over disagreement with its northern neighbor on the fair charge for transporting the oil.
Khartoum’s 2012 budget had assumed it would receive around $36 per barrel in oil transit fees from South Sudan. The stalemate in oil talks between the two sides put economies of both nations in a bind.
Under the final deal signed last month, South Sudan will pay between $9.10 and $11 a barrel to export its crude through the north. Juba will also pay $3.08 billion to help Sudan overcome the loss of three quarters of oil production due to southern secession.
The Sudanese finance minister stressed that the main guideline governing the 2013 budget will be increasing the GDP through production and providing basic commodities for the people. He added that the government made one of its main goals to cut imports and attain self-sufficiency in sugar, wheat and cooking oil.
The implementation of austerity figures and expanding the social safety net will also continue next year, Mahmood added.
The minister made no mention of any further spending or subsidy cuts in the upcoming budget.
Last month the International Monetary Fund (IMF) called on Sudan to initiate further reforms including reforming the civil service and continue the privatization program.
Sudan took a number of steps such as downsizing its bureaucracy through reducing the number of constitutional post holders in both federal and regional governments from 572 to 318. It also announced elimination of five ministries, mergers between others, sacking of six presidential advisers and reductions in official perks.
The Sudanese finance minister however, complained that the government is facing a number of obstacles in slashing its spending as planned primarily due to non-responsiveness by state governments in adopting the measures and suggested that this may require an intervention by the central government to force compliance.
IMF figures project a sharp drop in revenue to 12.9% of GDP in 2012 compared to 18.7% last year. Expenditures however fell at a slower rate from 20.0% to 16.6% during the same period leaving a negative net balance that is expected to continue throughout 2013.