Sudan's President Omar al-Bashir cancelled his planned visit to the United Nations General Assembly last week, amid demonstrations at home and a level of unrest not experienced since he assumed power in 1989.
In the past week thousands of protestors have rallied on the streets of Khartoum and other Sudanese cities against the government's decision to cut subsidies, which have caused fuel prices to rise and inflation to peak.
Demonstrators have burnt petrol services, banks, police cars and stations, targeting property belonging to the ruling National Congress Party (NCP). Internet connectivity went down and activists were unable to use social media to organize and report on protests. Sudan's interior ministry claimed that clashes between protestors and security forces in one incident led to 33 deaths, including of policemen, and that so far security forces had arrested 600 people over acts of vandalism and violence. On Saturday, a message from 31 NCP officials urged the president to reverse the recent economic measures, put an end to killings and ensure the right to peaceful demonstrations.
Sudan has suffered an economic downturn since South Sudan became independent in 2011, taking 75% of the oil reserves and 20% of the consumer population ‒ key drivers of growth and hard currency. Sudan's oil output was reduced from 350 to 200 thousand barrels per day. Both Sudans were affected when oil flow was shut down for 16 months from January 2012, when they were unable to reach agreement over transit fees and ongoing border disputes. The countries are interdependent: oil from South Sudan can only reach the market through Sudan's pipelines, refineries and port.
An IMF report in 2012 argued that the removal of fuel subsidies would save Sudan $1.24 billion annually. It asserted that fuel subsidies are 'costly, inefficient and inequitable', recommending that 'their removal would deliver substantial gains to Sudan.' Khartoum introduced an austerity budget in 2012 to adapt to the new economic reality; lifting fuel subsidies was one of the new measures, but they were later reversed after anti-regime demonstrations and comparisons with the Arab spring.
President al-Bashir has tried to convince the public that fuel subsidies prevent spending on sustainable development projects, and that nearly half the subsidy benefits the richest 20% of households. A substantial increase in tax revenues, resulting from national and state level reforms, has emboldened the government. Large parts of the national budget are devoted to the salaries of a bloated civil service, and supporting military spending on battles with Sudanese rebel groups and confrontations with South Sudan, stymying economic progress. The population is increasingly impatient with the lack of development and basic services. Economic stagnation has raised the cost of basic goods in Sudan, and over 45% live below the poverty line.
The reduction of subsidies on household commodities is highly contentious and dangerous, but arguably much needed. Yet the government's reasoning that the rich benefit more from fuel subsidies than the poor has done little to comfort the less privileged. Neither has the promise to significantly raise the minimum wage. Prices of gasoline and cooking gas cylinders have almost doubled, along with hikes in the cost of basic foodstuffs.
Relations with South Sudan
The economic situation makes steps towards rapprochement with South Sudan politically expedient. Ensuring the continued flow of oil from South Sudan lifts some of the pressure from domestic struggles, providing both economies with much needed foreign currency. Positive signs include the visit of President Kiir to Khartoum last month, which followed President al-Bashir's trip to Juba in April. And the African Union's High-Level Implementation Panel, led by Thabo Mbeki, Ethiopia and China continue negotiating implementation of the joint cooperation agreement signed in September 2012.
The Sudanese economy is forecast to grow at a stable 3% in 2013 and 2014, contingent on regular transit fees from South Sudanese oil, as well as profits from increased taxes, oil production, economic diversification and agriculture. However, economic and political stability are symbiotic and issues of contention with the South that could plunge Sudan into further economic uncertainty, remain. Support for opposition forces on each other's territory and the status of Abyei are potential flashpoints. In both countries the rhetoric of war has often been a distraction from the economic realities.
The challenge before President al-Bashir is to develop a stable government that is more inclusive of political opposition and peaceful dissent. Despite pledges of a reshuffle by Bashir and other senior NCP officials, the ruling party has yet to include fresh government faces that could help tackle the economic and political challenges the country faces. Escalating unrest shows that the government is ultimately beholden to the Sudanese people. If subsidy cuts are to be accepted, the president and the NCP have to demonstrate that savings will be used to ensure prosperity and peace for the many. The fight is for prudent fiscal management.
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