Home | News    Thursday 12 June 2014

Sudan says oil production falls short of target, blames currency decline on speculators

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June 11, 2014 (KHARTOUM) – Sudanese finance minister Badr al-Din Mahmoud made a rare acknowledgment on Wednesday by telling the parliament that the government is finding it increasingly difficult to control the markets which has seen a steady rise in prices coupled with a continuous deterioration in the exchange rate of the pound against the US dollar and other major currencies.

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Sudanese finance minister Badr al-Din Mahmoud

Mahmoud nonetheless pledged to the Sudanese people that they will be more lenient in their undertaking of the economic reform measures, revealing that tough steps have silently been taken to force government institutions to stop the practice known as retaining money earnt without sending it to the finance ministry as required.

Sudanese ministries say they are forced to do this to meet their needs as opposed to requesting money from the finance ministry which tends to impose stringent requirements for approving disbursement of funds.

The minister who presented Q1 budget to the parliament disclosed that they froze the accounts of some government institutions which refuses to implement decisions of the president and the ministry of finance on sending money they earn to the treasury.

He also announced that they reached an agreement with some of these bodies to send money in their possession to the finance ministry while allowing them to keep a portion of it as a form of “motivation” to comply.

Mahmoud said that they witnessed an improvement in Forex inflow obtained from the South Sudan oil transit fees of $830 million. Despite this, the exchange rate of the pound continued to plunge because of speculators, he said as well as the economy still reeling from the effect of the economic shock.

He also said that Sudan’s local oil production fell short of the 140,000 barrels per day (bpd) target and is currently at 124,000 bpd.

He urged the Ministry of Foreign Affairs to put efforts to lift economic sanctions imposed on Sudan due to its significant impact.

But lawmakers chided the government’s “miserable” economic policies, accusing it of causing prices to rise and inflicting harm on the living conditions of citizens.

The minister announced that they privatized 139 government-owned corporations during the period from 1990 to 2012, describing them as worthless companies that used up a lot of money but produced nothing in return.

Mahmoud defended the policy of privatisation, saying that it has not displaced workers, but opened up new business opportunities and pointed out that workers who lost their jobs during over the 20-year period totaled 38,742, but that more than 70,000 jobs were created.

He said that his ministry disburses money according to priorities and not based on urgency, adding that the main problem is in resources, not in rationalising spending, noting that the main challenge is increasing revenue stream.

The minister pointed to the lack of flexibility in the structure of spending and said salaries accounted for 40% while health and education accounted for 20%. He emphasised the need to increase production and noted that inflation was now 41% because of increased funding for the agricultural sector.

The International Monetary Fund (IMF) in a meeting last month said that Sudan’s macroeconomic outlook remains poor. It noted that diversification of the economy from oil-oriented to agriculture- and industry-oriented has been slow and that the shortage of hard currency remains acute.

Late last September, the Sudanese government agreed to scale back fuel subsidies which caused prices of gasoline and diesel to increase by almost 100%.

Violent clashes erupted between the demonstrators and security forces in different parts of the country as a result leading to the death of several hundreds.

Senior Sudanese officials including president Omer Hassan al-Bashir have defended the measures, saying the only alternative would be an economic collapse as the state budget can no longer continue offering the generous subsidies on petroleum products to its people.

Sudan asked the IMF to devise a program that would help in its efforts to secure debt relief.

Sudan’s external debt is estimated to have grown by 27% since 2008 from $32.6 billion to $41.4 billion in 2011.

The IMF said that Sudan’s debt will hit $44.7 billion in 2013 which amounts to 85% of its Gross Domestic Product (GDP).

Analysts say that without political backing of western countries, it would be near impossible for Sudan to convince creditors of cancelling its debts even if it fulfils all other technical requirements.

(ST)

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