POST-PARTITION SUDAN: FINDING WAYS TO OVERCOME THE CRISIS

S. V. KOSTELYANETS

Candidate of Political Sciences

Institute of Africa, Russian Academy of Sciences

Keywords: Sudan, South Sudan, economic crisis, political conflicts, oil, gold, Persian Gulf countries

The political landscape of the Republic of Sudan is characterized by instability, armed conflicts on the periphery of the country and difficult relations with its new neighbor, South Sudan. At the same time, this state is experiencing a severe economic crisis, which arose primarily as a result of the reduction in oil revenues after the separation of the south of the country.

Secession was preceded by a nearly continuous civil war between the North and South since independence (in 1956), the main cause of which was the struggle for access to natural resources: South Sudan has approximately 75% of oil reserves (oil accounted for 70% of exports of a single Sudan), and both sides tried to maintain control of them for the rest of the world. by yourself. At the same time, all export capacities belong to Khartoum, and Juba* cannot yet export "black gold" without using oil pipelines laid through the territory of the North1. The division of Sudan into two States-the Republic of Sudan (often referred to as North Sudan) and the Republic of South Sudan (RUC) - was officially proclaimed on July 9, 2011. It ended a period of rapid economic growth that began when Sudan entered the global oil market as a major exporter in 1999 (oil exports peaked at $12 billion in 2008). Reduction of oil exports in 2012 to $2 billion. it caused a "fiscal cliff" and a skewed balance of payments: the loss of almost 60% of total tax revenues and most of foreign trade revenues. In 2012, there was a 61% drop in export revenue and a 74% drop in export volumes compared to 2010.2

According to the World Bank, Sudan's GDP declined by 3.3% in 2011 and 10.1%in 2012.3 The printing press had to be turned on to finance the budget deficit, which in turn led to high inflation, which peaked at 50% year-on-year in April 2013 d. Inflation also affected the exchange rate of the national currency. The last devaluation took place in September 2013, when the official exchange rate dropped from 4.4 Sudanese pounds to 5.7 per $1, and on the black market the exchange rate dropped to 9.3.

The huge gap between the official and unofficial exchange rates reflects the high level of instability in the Sudanese economy and a serious trade imbalance.4 Given that Sudan imports a significant portion of its food (more than 2 million tons of wheat worth $900 million were imported in 2013.5), food prices in the country have increased markedly.

Another blow to the economy was caused by the decision of banks in Saudi Arabia, Egypt and some other countries to suspend settlements with Sudanese banks under the anti-money laundering program. According to Sudanese experts, the US sanctions against Sudan, imposed back in 1997, also played a role. * * Saudi Arabia and Egypt are not only the largest trading partners of Sudan: it is from here that money transfers from Sudanese working abroad mainly come. In Saudi Arabia alone, there are more than 500 thousand of them. 6 Although the Sudanese authorities promised to quickly resolve the situation, the ban on making payments remains in force since February 2014.

The move is particularly worrisome in view of Sudan's massive external debt. According to the IMF, in 2013 it reached almost $45 billion, or 88% of GDP and 800% of annual exports. For many decades, the external debt was only partially serviced. To date, 85% of its payments are overdue, 7 which cuts off the country's access to most external sources of financing, including IMF resources. Sudan's strained relations with the West and some Gulf states, most notably Saudi Arabia and the United Arab Emirates, make debt relief unlikely. Part of the payments should be taken by South Sudan, but the North and South are still unable to agree on a debt-sharing agreement.

* Juba is the capital of South Sudan.

** In 1997, the United States imposed economic sanctions against the ruling National Islamic Front in Sudan, due to the willingness of the Sudanese Government to offer safe haven and support to Arab terrorist groups.

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Finally, it should be noted that the crisis in Sudan is compounded by large-scale corruption. In 2013, the Corruption Perception Index, published annually by Transparency International, ranked Sudan 174th (out of 175) (the country with the lowest perception of corruption is ranked 1st). For comparison, South Sudan is one step higher - at 173rd, and only Somalia, North Korea and Afghanistan are below Sudan, which share the last place 8.

The problem has become so glaring against the backdrop of widespread poverty (real GDP per capita fell from $1,200 in 2007 to $500 in 2013,9) that a number of parliamentarians in the spring of 2014 openly declared that some ministries were involved in corruption schemes. In response, pro-government lawmakers accused opposition parties of collaborating with Transparency International against the country's interests and providing this international organization with information about corruption.10
ANTI-CRISIS MEASURES

In mid-2012, the Government adopted an anti-crisis program aimed at generating new sources of income, primarily from gold mining and increased agricultural production, as well as reducing imports and government spending. It has also implemented austerity measures, including eliminating food and fuel subsidies and raising a number of taxes. The authorities have established an interagency committee to monitor the coordination of fiscal and monetary policies and the implementation of the anti-crisis program. The program has somewhat stabilized the economy, but its overall success has been rather limited.

The economy grew by 2.9% in 2013, and a similar result is expected in 2014. In the first quarter of 2014, inflation fell to 35% and the budget deficit to 0.2% of GDP, down from 0.5% in 2013.11 However, in a March 2014 report to members of Parliament, the Sudanese Finance Minister acknowledged stagnation in all export - oriented sectors of the economy, with the exception of oil and gold mining. The Minister noted that Sudan's trade deficit has reached $1.6 billion, and economic sanctions imposed by the United States have led to an almost complete freeze in foreign aid. During the same meeting, the Minister of Foreign Trade informed parliamentarians that non-oil exports in 2013 fell to $3.07 billion. (from $3.11 billion) in 2012), despite all the measures taken by the government to diversify the economy 12.

The Central Bank of Sudan does not disclose data on the volume of its gold and foreign exchange reserves. The IMF estimates them at $1.6 billion, down from $1.7 billion in 2012, and they continue to decline. This covers the import payment for just two months 13. As a measure to stabilize the foreign exchange market, the Central Bank of Sudan has banned foreign companies from repatriating their profits abroad. The Central Bank also restricted the sale of foreign currency to individuals who currently need to prove their need for foreign currency to travel abroad. Businesses and individuals who cannot officially buy dollars are resorting to the black market. On the one hand, this measure helps to preserve foreign exchange reserves, on the other - it significantly limits the attractiveness of Sudan for foreign investors.

As a result of the implementation of this monetary policy, fewer international air carriers fly to Khartoum, as it is not profitable for airlines to receive income in devalued Sudanese pounds. The last European carrier to fly to Khartoum, Lufthansa, has stopped flying since 2014. A number of Gulf airlines are also expected to suspend flights to Sudan during 2014.14 In 2014, the Central Bank of Sudan ordered private banks to stop issuing car loans and mortgages to all but special categories of applicants.15 This decision was made in order to redirect resources to manufacturing sectors of the economy, but it can lead many car dealers and mortgage banks to bankruptcy.

OIL AND GOLD MINING INDUSTRIES

Khartoum still hopes to partially restore oil production by taking advantage of the existing well-developed oil and gas infrastructure. In May 2014, the Sudanese Oil Minister unveiled a plan to significantly increase oil production in the coming years. 16 The IMF expects Sudan's oil exports to reach $3.5 billion by 2016, which is only 30% of the 2008 figure, but will reach $1 billion. above the current level.

Currently, Sudan produces 133 thousand barrels of oil per day. Production is concentrated in the south of the country, along the border with the RUS. Following the secession of South Sudan, several foreign companies, including those from Saudi Arabia and Canada, began exploring for new oil fields, including in Eastern Sudan and near the border with Libya.17
However, the oil industry faces serious challenges that block its potential: lack of sufficient security and political instability in South Kordofan and Darfur, where oil fields with relatively large oil reserves are located. Against the background of the general deterioration of security conditions, periodic vor-

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Table

Countries that are Sudan's main trading partners

2010

2012

A country

Share in total turnover

A country

Share in total turnover

China

48,2

United Arab Emirates

20,4

United Arab Emirates

10,5

China

13,7

Japan

4,5

Saudi Arabia

8,3

Saudi Arabia

3.5

India

6,7

Egypt

3,4

Egypt

6,0

India

2,9

Australia

2,7

Germany

2,7

Turkey

2,7

Australia

1,7

Japan

2,6

Source: International Monetary Fund. Sudan. Selected Issues, p. 25.

Armed clashes between Government army units and insurgents are only one of the factors of destabilization. More serious is the increase in claims from local communities that want to have their share of the revenue from the sale of oil pumped from their land. It has become common practice to prevent oil companies from operating until they meet the requirements of local communities, provide them with any services or jobs. As a result, management companies are less enthusiastic about investing in projects in remote areas of Sudan.

The growth in gold exports has undoubtedly been Sudan's greatest economic success since 2011, but the gold sector cannot become the engine of the economy and replace oil production in this role. In 2012, Sudan became the third largest gold producer in Africa after South Africa and Ghana. The figures are impressive: in 2008, Sudan exported $112 million worth of gold; in 2010, $1 billion; in 2012, the figure reached $2.2 billion.

The World Bank and the IMF forecast that exports will level off at $2 billion. Over the next 5 years, it will not be of key importance for the long-term economic growth of Sudan 18. In addition, the sector faces serious security and logistical challenges, as the main production sites are located in Darfur, a conflict-ridden region. They are also approximately 900 km from the Khartoum Gold Processing Complex. However, the development of the industry has helped improve Sudan's balance of payments.

It should be noted that changes in the export structure have led to changes in the list of major trading partners of Sudan. The main consumers of Sudanese gold, which became the country's largest export item in 2012, were the countries of the Persian Gulf, primarily the United Arab Emirates and Saudi Arabia.

The UAE ranked first among Sudan's trading partners (10.5% in 2010 and 20.4% in 2012), behind China (48.2% in 2010 and 13.7% in 2012) (see Table).

Saudi Arabia (3.5% - in 2010 and 8.3% - in 2012) rose to the 3rd place, moving ahead of Japan (4.5% - in 2010 and 2.6% - in 2012), which is now second even to Turkey (1.1% - in 2010 and 2.7% - in 2012 Moscow), which increased its presence in the region only in the late 1990s. 19

China, despite a sharp drop in trade turnover, continues to consider Sudan one of its key partners on the African continent and remains among the few countries willing to continue lending to this country. In 2013, China approved a $700 million loan to Sudan for the construction of a new international airport in Khartoum, 20 and in March 2014, it agreed to open a new credit line to Sudan and invest in the construction of a sugar factory in Blue Nile State and road infrastructure.21
At the same time, the PRC also cooperates with the RYUS, which is richer in oil. Even before the conflict in South Sudan broke out, China was considering providing Juba with a $2 billion infrastructure loan.22 It can be assumed that the expansion of cooperation with the RUC will to some extent be carried out at the expense of reducing investment in the Sudanese economy.

An important source of hard currency for Khartoum is the transit of oil from South Sudan. In 2012-2013, Khartoum proved to be a tough negotiator and negotiated very favorable terms for oil transit, but the ongoing conflict in the RUS threatens the stability of oil supplies. Sudan was expected to raise more than $1.4 billion. for oil transit in 2014, but some of the oil fields in South Sudan were seized by the rebels. Oil production in RYUS fell by 50% in the first quarter of 2014. While in the short term, this source is still-

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The situation is even more worrisome in the long run, because South Sudan is planning to build alternative oil pipelines to the Kenyan port of Lamu (first of all), as well as to the port of Djibouti via Ethiopia and westward through Chad to the Atlantic Ocean. 23 Consequently, all oil transit through Sudan will be diverted, and the country will be able to reach the South African it will lose one of the most important sources of foreign exchange earnings.

The Government is also taking active steps to attract foreign capital (mainly from Egypt, Saudi Arabia and the United Arab Emirates) to the agricultural sector and cattle breeding, mainly in the North and Nile states, as well as in the eastern regions of the country. Sudan has approximately 150 million hectares of agricultural land, and its crops include wheat, sugar cane, rice, sesame, gum arabic, corn, legumes, lentils, sunflower, peanuts, and cotton.24
While the agricultural sector is promising, some aspects of government policy call into question the sector's ability to improve the country's economic situation in the short or medium term. For example, foreign investors in agriculture are exempt from taxes for up to 10 years, enjoy the right to export products duty-free, and are also free to hire foreign labor. As a result, the local population receives little benefit from such enterprises, on the contrary, often facing food shortages (all products are usually exported) and unemployment .25 Popular protests against the sale of agricultural land to foreign investors are gaining momentum. The authorities disperse these protests by force, arresting local leaders. However, if the government finds an opportunity to attract investors on fairer terms, the development of the agro-industrial complex can be the most promising way to improve the country's economy.

POLITICAL INSTABILITY AND ITS IMPACT ON THE ECONOMY

The impact of politics on the economy in Sudan is extreme. Conflicts in the region are certainly the main reason for poor economic performance. The war with the South, in which about 1 million people died as a result of fighting, ethnic cleansing and starvation, and about 5 million became refugees, led to the division of the country and an economic crisis.26
The key to future development now remains conflict resolution in the Darfur region and South Kordofan and Blue Nile States. Currently, 70% of the Sudan's budget is allocated to items related to defense and national security issues. In March 2014, Salem al-Safi Hajir, chairman of the Parliament's economic affairs sub-committee, said that if Sudan does not stop the war, it will not achieve economic stabilization and will not be able to solve its problems. Hajir also noted that the anti-crisis economic program is not able to achieve its goals, because millions of dollars are allocated for conducting armed operations. He did not mention that the resolution of conflicts in the country largely depends on Khartoum's comprehensive political and economic reforms.

While the Sudanese Government is aware of the need for change, its steps so far have been quite controversial. On the one hand, President Omar al-Bashir initiated the national dialogue, which managed to attract the two largest opposition parties-the Umma and the Popular Congress Party.

The stated goals of the dialogue include ending the war, restoring political freedoms, fighting poverty, and reviving national identity. There is talk of creating an interim coalition Government to hold general elections, form a constituent assembly, and prepare the country for a "new democratic era." 27 In this regard, Sadiq al-Mahdi, the leader of the Umma party, said that the regime has only two options: to face a popular uprising or to continue the national dialogue, which will eventually lead to the dismantling of the regime.

On the other hand, the reconciliation process has already suffered some setbacks. First, Khartoum has been unable to engage any rebel movements in dialogue. As a result, the army began to talk about preparing a large-scale offensive against the positions of the Darfur and Kordofan rebels. Given the limited financial resources available, the security forces have placed a heavy emphasis on arming and training the Rapid Support Forces paramilitary force, which is based on the notoriously violent Janjaweed militia.

In May 2014 Sadiq al-Mahdi stated that the DIS has already committed serious violations in the conflict zones of Darfur and Kordofan, including raping, looting and burning villages. 28 In response to these charges, al-Mahdi was arrested in the same month and charged with subverting the constitutional order. Accordingly, the Ummah prios party-

* The Janjaweed, an Arab militia that participated in armed clashes with insurgents and in raids on mostly non-Arab tribal lands during the main phase of the Darfur conflict, from 2003 to 2010. (author's note).

page 34
resumed its participation in the national dialogue 29.

It should be noted that violence continues or even increases both in the periphery and in the center. The UN describes the situation in Darfur as seriously deteriorating, with the number of refugees from the region growing rapidly.30 Student protests against censorship, the conflict in Darfur, and economic hardships take place in the capital and other major cities of the country almost every month, culminating in clashes with police and mass arrests.31 The bloodiest events were observed in September 2013 after the abolition of fuel subsidies, as a result of which gasoline prices almost doubled. According to some reports, hundreds of people were killed during the suppression of the protests.

Another destabilizing factor was the statement of the ruling party, the National Congress Party, that nothing will prevent the current head of state from participating in the presidential elections in 2015. Last year, al-Bashir, who has been in power since 1989, promised that he would not run for president again, and this seemed to be the beginning of the country's democratization.32
Lifting the ban on rallies and marches can be considered a step towards liberalizing the political scene. At the same time, the new law requires political parties to obtain permission to organize any political events outside the party offices.33 This half-measure has attracted a lot of criticism from the opposition.34
All this shows that the ruling party is still unable to formulate and implement a consistent policy. The government seems to be waiting for an economic miracle to avoid the need to democratize the country. However, the situation cannot be improved without a significant infusion of external resources, access to which depends on solving many political conundrums, including reaching a political compromise between the main political parties, ending violence in Darfur and elsewhere through demarginalization and political integration, implementing comprehensive political system reform, and pursuing a more cautious foreign policy.

In our view, the longer the ruling party delays in implementing reforms and changing policies, the more likely it is that it will lose control of the democratization process that it initiated.

Kostelyanets S. V. 1 Sudan after the separation of the South: economic decline and growth of political instability // God planety: ezhegodnik, Moscow, IMEMO RAS, 2013, p. 409. (Kostelyanets S. V. 2013. Sudan posle otdeleniya Yuga: ekonomicheskiy spad i rost politicheskoy nestabilnosti / / God planety: ezhegodnik. M.) (in Russian)

2 International Monetary Fund. Sudan. Selected Issues -http://www.imf.org/external/pubs/ft/scr/2013/crl3320.pdf

3 World Bank - http://www.worldbank.org/en/country/sudan

4 International Monetary Fund. 09.05.2014 - http://www.imf.org/ external/np/sec/pr/2014/prl4214.htm

5 Sudan Tribune. 19.01.2014 - http://www.sudantribune.com/ spip.php?article49642

6 Sudan Tribune. 10.05.2014 - http://www.sudantribune.com/ spip.php?article50950

7 International Monetary Fund. Sudan. Selected Issues...

8 Transparency International. Corruption Perceptions Index 2013 -http://cpi.transparency.org/cpi2013/results

9 International Monetary Fund. Sudan. Selected Issues...

10 Sudan Tribune. 29.04.2014 - http://www.sudantribune.com/ spip.php?article50824

11 International Monetary Fund. 09.05.2014...

12 Sudan Tribune. 07.05.2014 - http://www.sudantribune.com/ spip.php?article50925

13 International Monetary Fund. Sudan. Selected Issues...

Reeves E. 14 Khartoum: A Criminal Regime in Its Death Throes Lashes Out With More Violence - http://sudanreeves.org/2014/03/14/ khartoum-a-criminal-regime-in-its-death-throes-lashes-out-with-more-violence

15 Sudan Tribune. 13.05.2014 - http://www.sudantribune.com/ spip.php?article50999

16 Ibidem.

17 Sudan Tribune. 23.04.2014 - http://www.sudantribune.com/ spip.php?article50756

18 International Monetary Fund. Sudan. Selected Issues...

Kostelyanets S. V. 19 Turkey and Africa: cooperation is developing / / Asia and Africa today. 2012, N 10, с. 36. (Kostelyanets S.V. 2012. Turtsiya i Afrika: sotrudnichestvo razvivaetsya // Aziya i Afrika Segodnya. N 10) (in Russian)

20 KHL Group. 09.07.2013 - http://www.khl.com/magazines/ international-construction/detail/item86646/China-approves-US$700-million-loan-for-Sudan- airport

21 Sudan Tribune. 24.04.2014 - http://www.sudantribune.com/ spip.php?article50416

22 http://www.gurtong.net/ECM/Editorial/tabid/124/ctl/Article View/mid/519/articleId/12879/China-In-Talks-To-Offer-2-BiIIion-Loan-To-South-Sudan.asp x

Mezentsev S. V. 23 South Sudan: independence, what's next? // Asia and Africa today. 2012, N 8, с. 46 (Mezentsev S.V. 2012. Yuznyi Sudan: nezavisimost, chto dalshe? // Aziya i Afrika Segodnya. N 8) (in Russian)

24 Geopolitical Monitor. Investment Opportunities in Sudan's Agricultural Sector - http://www.geopoliticalmonitor.com/investment-opportunities-in-sudans-agricultural-sector-4 872

Hassan Ali Gadkarim. 25 Will the Sudanese paradox continue? Insecure investment climate and substantialforeign direct investment inflows - http://www.cmi.no/publications/file/4595-will-the-sudanese-paradox-continue.pdf

Zhukov A. E., Miftakhova S. A. 26 Sudan: Peace in exchange for secession? // Asia and Africa today. 2012, N 3, с. 19. (Zhukov A.E., Miftakhova S.A. 2012. Sudan: mir v obmen na otdelenie? // Aziya i Afrika Segodnya. N 3) (in Russian)

27 Sudan Tribune. 20.04.2014 - http://www.sudantribune.com/ spip.php?article50722

28 Al Jazeera. 19.05.2014 - http://www.aljazeera.com/news/ middleeast/2014/05/sudan-arrest-threat-national-dialogue-2014519 54542981274.html

29 Gulf Times. 19.05.2014 - http://www.gulf-times.com/region/216/ details/392623/

30 United Nations. 25.04.2014 - http://www.un.org/apps/news/ story.asp?NewsID=47429#.U51qsfl_uUU

31 Sudan Tribune. 04.04.2014 - http://www.sudantribune.com/ spip.php?article50539

32 Sudan Safari. 25.04.2014 - http://english.sudansafari.net/ index.php?option=com_content&view=article&id=5856

33 Sudan Tribune. 19.04.2014 - http://www.sudantribune.com/ spip.php?article50713

34 Africa Review. 16.04.2014 - http://www.africareview.com/News/ Sudan-opposition-rejects-presidential-decree-on-meetings/-/979180/2282164/-/15eu570z/-/in dex.html

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Article title POST-PARTITION SUDAN: FINDING WAYS TO OVERCOME THE CRISIS
Author S. V. KOSTELYANETS
A source Asia and Africa Today, No. 10,31 October 2014
Pages 31-35

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