Economic Briefing: With Sudan facing fuel and bread shortages, how can the government solve Sudan's economic crisis?

With Sudan facing fuel and bread shortages, how can the government solve Sudan’s economic crisis?

 This briefing note will cover the causes of, and reactions to, Sudan’s fuel and bread shortages. Then, we will summarise criticisms directed at the transitional government by Sudanese economic experts, before concluding with a range of policy recommendations put forward by the same economists.

A mark of Sudan’s deteriorating economic condition, civilians have reportedly spent entire days in queues spanning several miles in search of both bread and fuel. With fuel imports and distribution already restricted by foreign currency shortages, the lack of road transport and weak port capacity, Sudanese officials have attributed the current fuel shortage crisis to a broken refinery pipeline. Consequently, the government has been forced to introduce a rationing system. (February 12, Reuters)

 Bread shortages have also left “a weak civilian government struggling to respond,” with Reuters (February 19) noting that bread is a symbol of the Sudanese uprising, as raised prices triggered the first major protests against Omar al-Bashir’s regime.

 The Sudanese government has yet to negotiate its plans to implement its proposal to replace fuel and bread subsidies with cash transfers, with technical challenges remaining in administering payments (February 12, Reuters). Leading Sudanese economic analyst Hafiz Ismail has also expressed concern that social security provisions are being obstructed by Sudan’s “corruption machine.” (25 February, Radio Dabanga).

 Economic analysts have blamed the transitional government for the crisis, and its perceived mismanagement. However, they have also provided solutions for Sudan’s economic issues.

1. Fuel shortages

Radio Dabanga (February 11) reports that the shortage of fuel has become a national crisis that has crippled movement in several cities in Sudan, with demonstrators blocking major roads and bridges in Khartoum and North Kordofan.

 According to sources in Sudan’s oil ministry, the government will raise the price of fuel sold commercially at some petrol stations, although it will remain subsidised at 50% of its cost. However, cheaper fuel will be subject to rationing (12 February, Reuters).

 Across Darfur, high fuel prices have been blamed for water shortages, with water well pumps in camps for internally displaced persons reportedly not functioning. (19 February, Radio Dabanga).

 2. Bread shortages

Radio Dabanga (13 February) reported that Sudan’s Minister of Industry and Trade Madani Abbas Madani apologised to the Sudanese people for the lack of a solution to the bread shortage, and affirmed the state’s commitment to continue subsidising bread until the end of the transitional period. Madani attributed the shortage to half of the flour subsidised by the government being smuggled or sold to restaurants and sweet-makers.

 Sudanese activists have developed their own solutions to the bread smuggling crisis. Reuters (19 February) reported that Sudanese activists were monitoring bakeries in Khartoum, revealing a cases whereby 2,000 loaves of bread were sold at triple the price outside Khartoum, with bread sold to restaurants at a 20% mark-up.

 Technology is also playing a role in solving Sudan’s bread shortage. Madani Abbas Madani said that the Ministry of Trade and Industry is launching an electronic monitoring system to control wheat, flour, and bread in the import, production and distribution phases. (13 February, Radio Dabanga). Reuters (19 February) reported that Sudanese civilians developed a mobile application which collects data in order to monitor smuggling.

 To challenge smuggling, Madani said that a special police department and a hotline are to be established to secure supplies and receive public complaints respectively. He also threatened to revoke the licenses of agents and bakeries that hoard bread and flour. (13 February, Radio Dabanga). However, the civilian-led transitional government has also been criticised for its handling of the fuel and bread crisis.

3. Criticisms of the transitional government

 Professor Hasan Bashir, an economist and Director of the Red Sea University, criticised the transitional government’s slowness in addressing the hoarding of basic commodities by companies affiliated to Omar al-Bashir’s regime (28 February, Radio Dabanga).

 Indeed, Professor Hamid Eltigani, an economist at the American University in Cairo, accused the Forces for Freedom and Change (FFC), which dominate the transitional government, of “politically manipulating economic issues,” alleging that the FFC has only been interested in political, rather than economic, solutions to the problems facing Sudan (26 February, Radio Dabanga).

 Furthermore, leading Sudanese economic analyst Hafiz Ismail has also blamed the transitional government for the economic crisis, citing a perceived “lack of vision and plan to manage the crisis.” Ismail warned that economic failure would increase the growing trend of public rejection of the government (25 February, Radio Dabanga).

 Nonetheless, the three economists have also proposed a range of solutions to be implemented in order to solve Sudan’s economic issues.

Solutions for the economic crisis

1. Subsidies: to keep or remove?

Two of the aforementioned economists diverge on the issue of subsidies. On one hand, Professor Eltigani of the American University in Cairo disputes that fuel subsides help the poor, arguing that subsidies encourage smuggling. Instead, Eltigani suggests that subsidies be directed the poor through ration cards (26 February, Radio Dabanga).

 On the other hand, Professor Hasan Bashir of the Red Sea University warned that the lifting of subsidies on basic commodities will lead to political, economic and social instability.

Professor Bashir said that the “irrational” and “dangerous” lifting of subsidies on petrol will culminate in higher inflation and collapsed purchasing power, citing Sudan’s low indicators of growth and savings, absence of social security systems and that most Sudanese live in extreme poverty and are reliant on government funding. (28 February, Radio Dabanga).

2. Dominate strategic sectors

To solve the crisis, Professor Bashir calls for public-private sector partnerships in production fields, and greater control of key export sectors such as oil seeds, cotton, gum Arabic and livestock. Similarly, leading economic analyst Hafiz Ismail also called on the government to focus investment on agriculture (25 February, Radio Dabanga).).

All three economists agree that the Sudanese government should command greater control of the gold sector, in the public interest. Bashir proposed the establishment of a gold exchange market, whereas Eltigani called for state-owned companies to control gold exploration and production.

 3. Security sector reform

Professor Eltigani also suggests that security sector reform and the integration of the Rapid Support Forces into the army would reduce military spending, thereby tackling the economic crisis (26 February, Radio Dabanga).

 4. Financial reform

Eltigani and Ismail both provided solutions to curb the accelerated deterioration of the Sudanese Pound. Eltigani has recommended the immediate cessation of printing Sudanese pounds, as well as the lifting of banking restrictions. (26 February, Radio Dabanga).

 Ismail has called for a unified currency exchange rate, and a programme to stabilise commodity prices which entails changes at managements and the Ministry of Finance at all levels, as well as comprehensive tax reform to prevent tax evasion (25 February, Radio Dabanga).