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Sudan government allows sugar prices to go up further as labor union warns on cutting subsidies

November 19, 2012 (KHARTOUM) – The Sudanese finance ministry on Monday quietly issued a decision hiking the price of sugar as part of its ongoing effort to cut subsidies on basic commodities to stop the bleeding in the country’s budget.

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FILE - A man selling eggs waits for customers at the market in Khartoum, Sudan May 12, 2011 (REUTERS/Mohamed Nureldin Abdallah)

Decree number (83) signed by the finance ministry undersecretary Abdel-Rahman Dirar itemized several increases in fees and taxes associated with 50 kilogram (110 pounds) sugar bags bought by wholesale merchants.

This would be the second time this year that the government increased the price of sugar through partially removing the subsidies. This has led the price of a 50 kg sugar bag to rise from 156.5 Sudanese pounds (SDG) to 225 SDG last summer. Following today’s decision it is estimated that this figure would go higher by at least 30 SDG.

The country is one of the biggest African sugar producers but needs to import at least 400,000 tonnes annually.

Last July the government inaugurated a $1 billion sugar plant plans which aims to reach an annual output of 450,000 tonnes of white sugar within the next three years.

Sudan has gradually started eliminating commodity subsidies which the government asserts that it costs billions of dollars to maintain. This has posed an enormous drain on the budget which is suffering from the impact of South Sudan breaking away last year and taking with it around three quarters of the oil reserves.

A recent report by the International Monetary Fund (IMF) showed that oil now accounts for 3%-5% of Sudan’s gross domestic product, down from around 15%, while providing a much-reduced 20%-25% of revenue.

The first round of austerity measures, rolled out by the government last summer, impacted sugar as well as petroleum products which sparked rare small anti-government protests across the country including the capital.

But Sudanese officials as well as the IMF argue that more cuts are needed to rein in the deficit, despite staunch resistance by the parliament and labour union.

Today, the Sudanese labour union warned the government against any attempt to increase prices of basic commodities such as bread, sugar and electricity in the 2013 budget.

The union also slammed the finance minister labeling him "non-cooperative" on issues related to workers’ dues and reiterated its demand for bumping the minimum monthly wage to 425 SDG.

Earlier this year Sudanese president Omer Hassan al-Bashir urged the labour union to agree on lifting subsidies in return for raising wages. He also warned that raising wages without careful review of its implications could further fuel inflation and that the economic situation may not allow for immediate increase in pay.

Ordinary Sudanese are seeing large increases in prices eating into their incomes making it increasingly difficult for them to maintain their current living standards without cutting spending.

Analysts say that the fast deterioration in the value of SDG relative to the dollar, decline in national income, shortage in foreign currency and inability to borrow is restricting Khartoum’s ability to buy food on the international market.

Last month Sudan’s inflation was estimated to be at 45.3% compared to 41.6% in September driven mainly by food prices.