Sudan’s economic crisis gets more critical amid liquidity problems
CAIRO - The economic crisis engulfing Sudan deteriorated before Eid al-Fitr, with banks across the country unable to meet the demand for cash amid a liquidity crunch.
Sudanese citizens queued for hours in front of automated-teller machines to withdraw money but cash was in short supply. Sudan’s monetary authorities refused to inject liquidity into the country’s financial system.
The Sudanese government said a huge amount of counterfeit banknotes had been injected into the market in recent months, causing an unprecedented rise in inflation that has proven devastating to the national economy.
The inflation rate reached 54% in the first quarter of this year, compared to 33% in the corresponding quarter in 2016, Finance Minister Mohamed Osman al-Rikabi said.
Rikabi promised to work to ensure money would be available to pay salaries of hundreds of thousands of civil servants. He blamed the crisis on the decline in revenues from the oil sector, especially after the 2011 independence of South Sudan.
Sudan’s oil production, Rikabi told parliament, fell to 75,000 barrels a day from 350,000 barrels before South Sudan’s independence.
Sudanese economists, however, said the crisis was caused by more than a drop in oil revenues. They also blamed economic mismanagement, rampant corruption and the lack of a clear economic blueprint from authorities.
“The government does not have a road map for getting the country out of the crisis,” said economist Mohamed al-Nayer. “All the solutions presented by the government have but exacerbated the problem and made the people suffer even more.”
Measures by the Central Bank of Sudan to solve the problem have not paid off. The bank’s initiative to stop injecting cash into the financial system led to a liquidity crisis and pushed some institutions to the edge of bankruptcy.
Sudanese importers are going out of business because the central bank and foreign exchange offices fail to provide necessary foreign currencies. This is depriving hundreds of factories from production requirements that need to be imported from other countries. Some factories in Sudan are closing.
Sudan had to shut down some of its foreign missions in May because there was not enough money to pay the diplomats’ salaries.
Sudanese President Omar al-Bashir sacked Foreign Minister Ibrahim Ghandour in April for telling parliament that dozens of Sudanese diplomats had not received their salaries for months.
Sudan Airways declared bankruptcy in April and laid off its 2,000 workers, citing the lack of money for upgrades and continual losses on most routes.
Rikabi described the country’s economic crisis as having reached the “point of no return.” Sudanese citizens took to the streets in Port Sudan on June 13 to protest commodity price hikes, electricity cuts and the lack of fuel and drinking water. The demonstrators torched petrol stations and government offices.
Apart from recommending a more serious crackdown on corruption, a reduction of government spending and an easing of money transfer procedures for a more facile arrival of remittances from millions of Sudanese nationals working outside the country, Sudan’s economists called for an economic Marshall Plan by other countries, especially in the Arab Gulf.
Saudi Arabia sent 458 tonnes of humanitarian aid, including food and medicine, to Sudan on June 12.
Al-Bashir was visiting Saudi Arabia to perform the umrah and was expected to raise the issue of financial support with Saudi officials during his visit.
“Support from other Arab countries will be a quick solution to the crisis,” said Sudanese economist Abdullah al-Ramadi. “This will, however, be a temporary fix, which means that the Sudanese economy must go back on track and this will not happen if production is not stimulated, government spending is not reduced, and more measures are not taken to attract foreign investments.”