Sudan needs swift structural reforms to revive ailing economy
KHARTOUM - Sudan must undertake swift structural reforms to revive its ailing sanctions-hit economy, including devaluing the Sudanese pound against the dollar, the World Bank said on Sunday.
Rising inflation and the loss of nearly 75 percent of oil earnings following the north-south split in 2011 have led to a steady decline in Sudan's economic growth.
The decline comes on top of an economy already damaged by US trade sanctions imposed since 1997, making international banking transactions cumbersome when it comes to doing business with Sudan.
"It is essential that Sudan undertakes a combination of institutional, macro-economic and sectoral reforms to reach a stable growth path," said a World Bank report on the country's economy released in Khartoum.
"While the authorities have succeeded in reducing inflation and slightly recovering from the negative growth rates of 2011 and 2012, more must be done to ensure a more stable medium-term outlook," said the report's lead author, Michael Geiger.
Sudan's average gross domestic product growth between 1998 to 2008 was above six percent, after which it steadily declined to around three percent in recent years.
Previous efforts at economic reform have proven controversial. An attempt in September 2013 by Sudan to cut fuel subsidies had led to bloody confrontations between anti-austerity protesters and security forces that left dozens dead in Khartoum.
The World Bank report said that removing exchange restrictions to unify official and black-market rates of the Sudanese pound to the US dollar could help revive the east African country's sluggish economy.
The official rate of the Sudanese pound is 6.50 to the dollar, but it trades for about 15.50 on the black market.
"Given the ever-changing black market rate... gradual and ongoing devaluation" is a key to help growth, the report said.
It said a stable exchange rate will help in formulating monetary and fiscal policies that support economic stability and competitiveness.
Sudan has been subject to a US trade embargo since 1997 and the conflict in its Darfur region has been given as a reason against lifting sanctions.
More than 300,000 people have died in Darfur and 2.5 million been displaced since 2003, according to UN figures.
A deadly conflict erupted in 2003 in Darfur -- a region the size of France -- when ethnic minority groups took up arms against President Omar al-Bashir's Arab-dominated government in Khartoum, accusing it of marginalising the region.
Geiger suggested that although decisions on whether to lift sanctions were "political and the World Bank had no role in it," the easing of these measures could certainly help Sudan's economy.
"There is an issue in access to foreign exchange... there is an issue in transferring money to different countries through the formal banking system... all this certainly plays a role" in slowing the economy, Geiger said.