OPINION: Sudanese MPs say finance minister must go

PUBLISHED: Thu, 27 Oct 2016 13:46:05 GMT
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On October 18, Radio Dabanga reported that members of Parliament (MP) had called on the minister of finance and his team to resign over mismanagement of the currency. This latest call comes after news on October 6 that lawmakers from the ruling National Congress Party (NCP) had threatened to withdraw their support for the government due to the faltering economy. 

In addition to highlighting what they believe to be the manipulation of the currency, MPs decried the low salaries of employees of the State, which they argue are not enough to cover more than 20% of daily living costs. They called on the government to curb spending on vehicles and real estate and to reduce the country’s diplomatic missions abroad.

The timing of the calls appears strange as there has not been a radical change in the economic environment of late nor signs of wider social unrest related to escalating prices. Indeed, there have been no notable protests in Khartoum since the student uprisings earlier this year.

The MPs said that 30 individuals were involved in the manipulation of the currency (supposedly referring to dealings in the parallel market), but they did not name those responsible nor outline the method used.

The manipulation they refer to is likely a notable reason for the substantial weakening of the Sudanese pound on the parallel market in recent months, which has breached a premium of 163% over the official market rate in September. Most recently, the parallel market rate eased for the first time this year from SP16/$ in mid-September to SP15.5/$ in mid-October.

The reasons given by MPs for the resignation of the finance minister and his colleagues are not new developments. In fact, wide macroeconomic imbalances – which were largely triggered by the secession of South Sudan and the loss of three-quarters of its oil exports – have been ongoing for the past five years.

These imbalances have actually improved over the past few years as a result of prudent policies to contain the fiscal deficit, slow money growth, reduce inflation, and support an economic recovery.

Indeed, International Monetary Fund (IMF) data indicate that the fiscal deficit narrowed from 3.3% of GDP in 2012 to 1.9% of GDP in 2015, while the current account deficit narrowed from 9.3% of GDP in 2012 to 7.9% of GDP in 2015. Moreover, consumer price inflation dropped from over 44% in December 2012 to 13% in December 2015.

More recently, the Sudanese economy is in the doldrums this year as a result of protracted low international oil prices, shortfalls in oil revenue related to the ongoing conflict with South Sudan, US sanctions, breakdown of correspondent relations and limited access to official external financing.

Meanwhile, there have been further signs that the US may be considering lifting economic sanctions in the not-too-distant future which would make a considerable difference to the economic outlook.

Finance Minister Badr el-Din Mahmoud recently returned from Washington, USA, where he met with the Deputy Assistant Secretary of Treasury for Africa and the Middle East Eric Meyer on the sidelines of the annual meetings with the IMF and the World Bank.

The outcome of those talks was the lifting of restrictions on non-commercial bank transactions with Sudan. Mr Din Mahmoud said that he expected the US to ease restrictions on the importation of spare parts for planes and trains and that economic sanctions would be lifted in December.

We wrote about the US’s changing policy towards Khartoum in September and noted that it comes after relations between the NCP regime and the European Union (EU) had warmed considerably due to the EU needing Sudan’s help to stem the flow of migrants from the region (Eritrea in particular) to its shores.

However, since then Amnesty International has released a damning report accusing the regime of using chemical weapons on civilians in Darfur which was recently followed up by reports by Integrated Regional Information Networks (IRIN) that chemical weapons may have also been used in the conflict in South Kordofan.

The idea that the US would lift sanctions when such serious accusations of war crimes are coming to light and shortly after a new administration is elected in the US in November seems surprising – to say the least. 

It is not clear whether there is a link between the sudden, unruly behaviour of MPs and the growing sense that economic sanctions will finally be lifted.

Being one of the main constraints on Sudan’s economy, the lifting of the sanctions will provide a much needed reprieve in an economy plagued with unsustainable external debt levels, wide fiscal and current account shortfalls and volatile economic growth.

The economic environment would change considerably (though the timeline is uncertain), and this would undoubtedly cause a like shift in the political environment as politicians reposition themselves in order to take advantage of the change.

Contestation for power within the NCP should become more heated in the run-up to 2020 when President Omar Al-Bashir has said he will step down.

It is likely that the US is also looking toward 2020, and its reengagement with the regime, apart from supporting its EU and Israeli allies, could be interpreted as a way for the super power to have more of an influence on the impending transition.

In all of this, it is difficult to see where the chemical weapons allegations fit in. The US may still be forced by popular sentiments against the regime to put the rapprochement on ice. 

Written by: Jared Jeffery (Political Analyst) and Nadene Johnson (Economist) from NKC African Economics.

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