North Sudan On the Verge of Economic Collapse; Govt Pleads for Help

The Sudanese economy faces collapse unless the international community steps in to provide assistance in the area of debt relief, the foreign minister Ali Karti said on Thursday.

“We are working also on debt relief with France and others, because debt servicing incurs more than $1 billion annually,” Karti told reporters in Paris following a meeting with his French counterpart Alain Juppe.

He said that the world could not simply stand back and watch the economy collapse describing the economy’s woes as “really serious”.

Kart’s grim economic warning marks a departure from his peers in the government who sought to downplay the magnitude of Sudan’s troubled finances.

The Sudanese south became an independent nation last July and took with it 75% of the country oil wealth which meant that the north lost billions of dollars in revenues that have helped fuel an economic boom particularly since a peace agreement was signed between Khartoum and the SPLM in 2005.

Analysts and critics say that the Sudanese government failed to use the oil money to diversify the economy and help non-petroleum sectors such as agriculture. They also accuse the government of overspending and mismanaging the country’s resources with special focus on defense and security.

Khartoum is hoping that fees it wants to charge the landlocked south for transporting its oil through the infrastructure in the north will partially offset the economic impact of the country’s breakup. But to date negotiations between the two countries on how much the fee should be per barrel failed to yield results.

Sudanese president and indicted war criminal Omer Hassan al-Bashir said in an interview published last week that unless a deal is reached on this item by end of October, Khartoum will resort to other unspecified options.

In the meanwhile, food prices in Sudan have skyrocketed to unprecedented levels with rare but small demonstrations breaking out in protest over the last few days that were quickly crushed by the police.

The Sudanese pound on the other hand continued its sharp deterioration with the dollar selling for 5 pounds in parts of Sudan and close to that figure in Khartoum, according to a local pro-government newspaper.

The official exchange rate is around 2.7 pounds for the dollar.

The Bank of Sudan (BoS) issued a statement on Saturday stressing that the slide in the pound’s exchange rate is a result of “temporary” factors including the leakage of Sudanese pounds from South Sudan during the currency conversion process and disbursement of severance pay recently to Southerners who worked in the federal government.

BoS added that this led to an increased demand for hard currency and urged citizens to refrain from resorting to the black market. The central bank reiterated its commitment to supplying the market with the needed forex.

The statement however did not promise any special Forex injections into the market in the coming period.

BoS governor Mohamed Khair al-Zubeir told reporters this month that he asked his Arab peers to make deposits into the central bank and other commercial banks. He said that Sudan needs around $4 billion which would boost the country’s ability to contain the exchange rate.

Sudan’s foreign minister suggested that the world did not properly reward his country for facilitating the secession of the south.

“We knew and now know that the secession of the south would be a great cost to the north and, in spite of that fact, we were determined to help the process and leave it to go its own way and respect that” Karti said.

The Sudanese top diplomat was in Paris to promote his country and the argument for relief on a $38-billion debt pile that remains a bone of contention with the now separate South Sudan.

The World Bank has said Khartoum would need to introduce wide economic reforms to qualify for relief of multilateral debt. Nearly 90 percent of Sudan’s external debt is owed to bilateral and commercial creditors, with their own requirements, and would take at least three years to clear, according to the Center for Global Development, a Washington think tank.

“These were debts of one country and now there are two countries, so the question of debt and how to resolve it must be done jointly,” Karti said. However Karti failed to mention that during the years of conflict the Arab minority government spent almost nothing on development in the south or other regions such as Darfur which was one of the main reason for conflict, instead the majority of the country’s wealth was spent on wars and providing outdoor air conditioning for the Arab controlled capital Khartoum.

Legal experts say that until a deal is reached on splitting up national debt, Khartoum is liable for making the necessary payments.