The current wave of protest taking place in various Sudanese cities started in mid-June 2012, as female university students in Khartoum demonstrated against the increase in cost of accommodation and the general inflationary pressure that has steadily eroded purchasing power.
However, the protest movement widened, and public demonstrations spread to other Khartoum neighbourhoods and other Sudanese cities following the president’s announcement of a far-reaching fiscal austerity programme aimed at trimming down the budget deficit from $2.4bn (about 4 per cent of GDP) by increasing taxes and eliminating fuel and other subsidies.
The fiscal crisis that prompted the austerity measures was caused by the loss of 75 per cent of Sudan’s oil revenue as a result of the secession of the South in July 2011 and the country’s failure to diversify the economy away from its overreliance on oil.
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Sudan witnessed similar public discontent fuelled by economic pressure in the mid-1990s. However, the discovery of oil and the commencement of oil exports by the end of the 1990s gave the government and the economy a powerful boost, with oil revenue providing the government with massive revenues and relieving pressure on the Sudanese currency as oil’s share in Sudanese exports climbed from 81 per cent in 2001 to more than 95 per cent in 2007. Furthermore, the growing oil industry encouraged significant foreign and domestic investment that generated a boom of sorts in Khartoum in the first decade of the 21st century. However, instead of harnessing oil resources to develop Sudan’s industrial sector and utilise its vast agricultural potential, these sectors were neglected.
The independence of South Sudan in July 2011 set the stage for the current economic crisis and its political fallout. The revenue loss was made worse by the failure of the governments of the two Sudans to agree on the fee to be charged for exporting South Sudan’s oil using the pipeline and Red Sea port facilities of Sudan. Despite the fact that it is in the best interest of both countries to reach a revenue-sharing deal, as both face severe economic and fiscal crises, mistrust and deep-rooted historical animosity has instead prevailed. Accordingly, the South Sudanese government shut down its oil production and began the waiting game with its northern counterpart.
The Sudanese had hoped that the reduction of oil revenue would be mitigated by improved access to external financing from bilateral and multilateral institutions as a reward for allowing the South to secede peacefully. These hopes were dashed with the renewal, in November 2011, of economic sanctions and Sudan’s diplomatic isolation.
In response to the worsening fiscal crisis and the dearth of foreign loans to cover the budget deficit and secure badly needed foreign exchange, the government sought support from the IMF. In response, an IMF mission visited Sudan from May 13-25, 2012 to conduct a consultation. The mission discussed the appropriate policies to address the economic challenges and reached an agreement with the government on “reform” measures to stabilise the economy, including “fiscal consolidation, and in the medium-term, a comprehensive structural reform programme”. The mission also welcomed the government’s policy efforts and encouraged it to “expeditiously implement the appropriate policies to address the challenges ahead”.
Subsequently, Sudan’s National Assembly, in late May, endorsed a plan proposed by the Ministry of Finance and National Economy to save $2bn annually by raising taxes and reducing fuel and other subsidies. The new economic orientation included the elimination of 350 “constitutional posts” and the roll-back of senior officials’ perks.
Sceptics were quick to oppose the new economic measures, arguing that inflation, running at about 25 per cent, the deteriorating exchange rate, the increase in import duties and the rise in the value-added tax would compound the suffering of the impoverished and already stretched population. However, opposition to the new fiscal programme did not so much question the need for cuts, but instead focussed on where the cuts should fall; suggesting that what needs to be cut is spending on the police, security, armed forces and presidency, which together account for about 70 per cent of total wages and salaries and nearly 60 per cent of the 2012 budget. The new economic measures were also criticised on counts of the proposed privatisation of state-owned corporations, the extremely low spending on health and education, and neglect of the debilitated agricultural and industrial sectors.
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The latest politico-economic configurations are eerily reminiscent of the late 1970s and early 1980s, when two negative oil shocks resulted in similar macroeconomic imbalances to which the then-military government responded with an IMF-sponsored programme similarly featuring higher taxes, currency devaluation, phasing out of food and fuel subsidies, a wave of privatisation and economic liberalisation. The resulting hardship and erosion of real incomes led to a series of demonstrations that ultimately toppled the military government and restored parliamentary democracy in 1985. This democratic episode lasted for just four years.
Even though the ongoing political confrontation was triggered by the economic crisis, the role of longstanding demands for political rights and a return to democratic rule cannot be discounted. As in other Arab protests, the Sudanese youth have been the engine of the protest movements while established opposition political parties played catch-up. Fridays, the official day of rest, are also earmarked for greater mobilisation, with last Friday dubbed “sandstorm Friday”. Mobilisation for the peak protest to take place on Friday, June 29 will take place under the name “elbow-licking” – a Sudanese metaphor for achieving the impossible. However, unlike the Arab street protests, Sudanese protests are not concentrated in one area such as the telegenic Tahrir Square. They are scattered, multi-centred, and taking place in different neighbourhoods, reflecting the horizontal sprawling of Khartoum residential areas and a desire to confuse the government.
There is no easy way out of the current impasse of economic collapse, runaway inflation and massive unemployment. Besieged internally, and isolated externally, Sudan is unlikely to be able to attract foreign investment or foreign aid. Nor can it afford to rechannel its budget outlays away from security towards development. And thus Sudan enters, yet again, into a turbulent and unpredictable phase.
Mutasim Elagraa is an economist with the United Nations Conference on Trade and Development (UNCTAD), in Geneva. His views do not represent those of the United Nations secretariat.