Sudan’s economy: setting the scene and delivering on the potential
Sudan experienced seismic change in 2019. The fall of President Omar al-Bashir’s regime in April, and the eventual appointment of a new transitional government in August, have given rise to the hope and expectation that Sudan can break with the past and build a more peaceful, inclusive and prosperous nation.
Peaceful pro-democracy protests began in December 2018. Triggered by a deteriorating economic situation, including the rising cost of essential food and other basic commodities, the protests were the mass expression of anger that had built up for the people of Sudan over three decades of repression and mismanagement by President Bashir and the National Congress Party. Eight months later, on 17 August 2019, Sudan’s Transitional Military Council (TMC) and the opposition coalition of the Forces for Freedom and Change (FFC) signed a political agreement and constitutional declaration, leading to the establishment of a transitional administration that is intended to govern until democratic elections are held in 2022. The transitional institutions include the Sovereign Council, the Council of Ministers and the Legislative Council. The Council of Ministers, led by Prime Minister Dr Abdalla Hamdok, is tasked with ending internal wars and building peace, implementing a reform programme, and finding durable solutions to Sudan’s pressing economic and political difficulties.
The transitional government will have to overcome enormous challenges. Sudan’s politics are acutely fragile, and the economy – in need of both immediate stabilization and fundamental long-term structural reform – is on the verge of collapse. Sudan lost 75 per cent of its oil revenues with the secession of South Sudan in 2011:2 previously, oil had accounted for 95 per cent of the country’s exports and more than half of government revenue.3 The removal of US sanctions in 2017 was expected to lead to economic recovery, but government debt continued rising, while the trade deficit and levels of foreign reserves all worsened, compounded by soaring inflation and a consistent slide in the currency value, with several devaluations unable to bridge the gap between official and black-market rates.
A key imperative will be to forge lasting peace in Sudan’s conflict-affected regions, including by addressing the causes and consequences of marginalization, and encouraging rehabilitation and growth across the whole country. The near-term action plan must prioritize fiscal reforms, as well as measures to contain inflationary pressures and boost productivity in critical sectors. Sudan’s former leaders indulged in heavy off-budget spending, which needs to be accounted for and ended. The budget, which has long been heavily weighted towards subsidies, state transfers and security expenditure, needs to be restructured to prioritize health, education and social welfare.
The biggest challenge facing the government over the medium to long term will be to dismantle the entrenched patronage networks that came to control all institutions and key sectors of the Sudanese economy under President Bashir, including businesses owned by the military-security apparatus. This will be a complex undertaking, requiring difficult political and governance reforms to promote increased public accountability, transparency and the strengthening of anti-corruption efforts. Sudan needs a comprehensive transformation programme that gets the economy moving and creates jobs. This will require a banking system able to provide the private sector with access to finance; support for Sudan’s productive sectors, especially agriculture and industry; and meeting infrastructure needs, including energy, transport and communications.
Notwithstanding these challenges, Sudan’s transitional government has a unique opportunity to develop a long-term economic vision, as part of a new national narrative of an inclusive and equitable system. Such a vision will be vital to building legitimacy, not least given the reality that the economic situation is likely to decline further before it improves. Without public buy-in, painful short-term reforms – such as possible changes to subsidies – will be met with resistance. Moreover, the transitional government must put in place adequate provisions to protect the most vulnerable citizens and ensure that they are not even more adversely affected than they have been. Ensuring that the political and economic reform agenda is broad-based and collaborative – including women and young people, disadvantaged groups and peripheral areas of the country – will be the best way to build an enduring system of civilian-led governance founded on equal citizenship and representative institutions.
A coherent vision will also be vital to building international confidence. Shortly after his appointment as prime minister, Dr Abdalla Hamdok stated that Sudan will need some $8 billion in foreign assistance over the next two years to cover import costs and stimulate economic recovery, and an additional $2 billion in foreign reserves deposits to halt the currency decline within three months.4 If the Sudanese authorities continue to engage meaningfully, international partners should work with them on key initiatives to build a social safety net, making resources available to protect the most vulnerable and mitigate the worst impacts of reform, and look to progressively tackle issues such as the US designation of Sudan as a sponsor of terrorism, as well as providing debt relief and investment. Coordination of external support will be essential.
2 Wallis, W. (2011), ‘Sudan’s economy reels from loss of south’, Financial Times, 17 October 2011, https://www.ft.com/content/ce7f675a-f8c9-11e0-ad8f-00144feab49a (accessed 23 Sept. 2019).
3 Suliman, K. M. (2012), Understanding and Avoiding the Oil Curse in Sudan, Economic Research Forum Working Paper 735, December 2012, http://erf.org.eg/wp-content/uploads/2014/07/735.pdf (accessed 23 Sept. 2019).
4 Sudan Tribune (2019), ‘Hamdok says he plans to make Sudanese economy productive’, 24 August 2019, http://www.sudantribune.com/spip.php?article67991 (accessed 25 Aug. 2019).