Sudan to Tackle Fuel Subsidies as Economy Hangs on the Edge – VOA News
KHARTOUM, SUDAN – Sudan hopes to cut fuel subsidies over the course of 18 months, starting as early as March, and replace them with direct cash payments to the poor, the country’s finance minister said, laying out a timetable for sweeping economic reforms sought by international lenders.
The plan comes as Sudan’s fragile democracy is slowly taking shape after the ouster last year of the country’s long-time autocrat Omar al-Bashir.
In an interview with The Associated Press on Tuesday, Finance Minister Ibrahim Elbadawi said the decision was a “no brainer.” The government has previously said it will not change bread and flour subsidies.
Elbadawi’s comments are the first to reveal a planned timeline since the Sudanese government skirted the issue of slashing subsidies late last year, after the country’s pro-democracy movement rejected the move. The government included subsidies in the 2020 budget.
In the interview with the AP, Elbadawi said the plan now is to gradually lift fuel subsidies, which take up 36% of the nation’s budget, as early as March and following an economic conference with civil society groups, and continue into the next year. A former World Bank economist, Elbadawi was appointed to the country’s interim government last year. He said gasoline subsidies would be removed first, before tackling those related to diesel in mid-year.
Sudan’s new leadership is navigating a treacherous transition to civilian rule. Two-thirds of the country’s more than 40 million people live in poverty, and slashing the fuel subsidies could lead to destabilizing protests reminiscent of the large-scale demonstrations that ended al-Bashir’s 30-year rule in April. At the same time, sweeping economic reforms are required to re-integrate Sudan into the international economy and win support from international lenders.
Since al-Bashir’s ouster, an interim government made of civilian and military representatives has been leading the country and the economy — already in a severe downturn and battered by a weakening currency, shortages and inflation — has become the lynchpin of the fragile transitional period.
Sudan has been an international pariah after it was placed on the United States’ list of states that sponsor terror, more than two decades ago. This largely excluded it from the global economy and prevented it from receiving loans from international institutions like the International Monetary Fund.
Sudan’s interim government has also inherited a debt of 60 billion dollars and a rapid inflation rate, and badly needs an injection of funds from foreign donors. The nation’s currency, the Sudanese pound, is trading on the black market for double its official rate of 45.3 pounds to the dollar.
The uprising against al-Bashir began as protests over rising prices of key staples such as bread and frustration among the youth over unemployment and the brutality of the nation’s security forces. Many in the country’s civil society movement fear that lifting subsidies now could make the country’s most vulnerable even poorer.
Elbadawi said a direct cash payment to poor families, through banks or mobile phone transfers, could help ease the shock of the reforms. Such a program could be off the ground in six months, he said, though the government still needs better data to reach all those in need. As part of a pilot group, said that some 4.5 million people would start receiving the money soon, Elbadawi added.
“We think that if we manage to do this, it will be a very viable and credible alternative,” he told the AP. “It will target the poor, it will promote the cause of peace and it will actually change the social contract.”
Because of the longstanding subsidy program, Sudan has been one of the cheapest countries in the world to fill up a tank. Cheap gasoline prices have also encouraged fuel smuggling out of the country. If things were to stay as they were — with no changes to the 2020 budget — the government would be spending more on subsidies than on health, education and internal security combined, Elbadawi said.
To pave the way for international loans, Sudan has been in talks with the U.S. to remove it from the list of terrorism sponsors —something Elbadawi hopes will be only a matter of weeks or a few months. In the meantime, he said the government is in talks with the IMF and is working on a reform program that could lay the groundwork for future debt relief.
The government is also launching a national dialogue to explain the necessity of the subsidy reforms but will tread carefully, aware of likely popular opposition, Elbadawi said. The Sudanese Professionals Association, the main organizer of demonstrations during last year’s uprising, has threatened to mobilize protesters if the transition goes astray.
That means Sudan’s civilian stakeholders would have to be on board with the program.
“If, for whatever reason, we are unable to reach a consensus, then I think it will be incumbent upon the government to explain the consequences and to allow the Sudanese people to take whatever decision and course they want to take,” Elbadawi said.
Markets can accelerate the transition to a low-carbon economy – World Economic Forum
- Prices shape the behaviours of individuals and companies alike.
- Insurers are incentivizing customers to tackle climate change.
- A carbon tax would encourage users to put less of it into the atmosphere.
The World Economic Forum’s Annual Meeting in Davos is changing. After the financial crisis in 2008, the event was dominated by the urgent need to stabilize the global economy, with a focus on the immediate future.
Things are different now. The challenges discussed in Davos have become more complicated because they are longer term. The climate emergency requires us to talk about the next 30 years.
We need to think in such a long timeframe because, even if we stopped emitting carbon today, thermal inertia means that temperatures will go on rising for years to come.
And rising temperatures are already changing our way of life. They are altering weather patterns and intensifying floods, storms and wildfires. They are depleting coral reefs and marine life. They are melting glaciers, altering water patterns and impacting where we can grow crops. As an insurer, we see these impacts first-hand every day.
Prices shape behaviour
But preparing today for changes whose full effects will only be felt in 30 years or more is a huge challenge. Experience tells us that warnings are not enough to inspire action, because people are averse to change.
One of the great strengths of market economies is the way in which prices shape the behaviours of individuals and companies alike. We should use this strength to accelerate the transition to a low-carbon economy and to build up the ability of our communities and businesses to withstand the effects of climate change.
Insurers have a long history of incentivizing good behavior, including the development of better safety standards in factories and vehicles. At Zurich, we are incentivizing our customers to tackle climate change and adapt to its impacts.
Among other measures, we are engaging with customers who have high-carbon activities about their plans to change their business mix. We will no longer insure them if their plans fall short of our commitment to combating global climate change.
Successfully combating climate change will take much more than the efforts of one company or even one industry. We need measures that impact prices across entire economies, and only governments are in a position to do that.
At the moment, the price of emitting carbon into the atmosphere doesn’t reflect the long-term consequences. By introducing carbon taxes, governments can set the balance right and influence behaviour. A price on carbon would encourage users to put less of it into the atmosphere.
An ideal outcome would be a global agreement. However, given the current geopolitical climate, a localized solution is more realistic. The EU’s recent work in this area shows there is potential if governments step up and work together on a regional basis.
Pricing climate risks
Similarly, a suitable pricing of climate-related risks is needed for them to be taken more seriously. Climate and environmental issues are the top risks facing the world over the next decade, according to the World Economic Forum’s Global Risks Report 2020, published earlier this month. But in a survey just a few months ago for the WEF’s Regional Risks of Doing Business Report, businesses didn’t even cite environmental risks among the top 10.
For a better pricing of climate risks, we need to agree on how to measure and report these risks, and encouraging progress was made on this front in Davos this week. Pricing climate risks would give businesses a powerful incentive to fund investments to prepare our economies for a warmer and potentially very different future, for example protecting coastal communities from rising sea levels.
The UN’s latest climate change report suggests $3.5 trillion of investments are needed globally each year until 2050, to meet the Paris Agreement targets. This level of investment cannot be achieved without also mobilizing governments, and they have a unique opportunity. With interest rates at record lows, governments can raise the money needed to fund the creation of a sustainable infrastructure at little or no cost.
The discussion on climate change at this year’s WEF meeting made headlines for the confrontations between believers and non-believers, optimists and pessimists. In reality, we have moved beyond such polarization. There is widespread recognition that climate change is real.
As Ursula von der Leyen, President of the European Commission, said in her keynote address in Davos: “The WEF’s Global Risks Report identifies that the top 5 risks for our economy are all climate related. There is still scope to address these risks but the window of opportunity is rapidly closing. We have to act now”. I fully agree with that view.
Most serious debate is now about how to fund a complex transition and manage multiple interconnected risks. Getting the incentives right will go a long way towards speeding up the behaviours and actions needed to ensure a sustainable and brighter future.
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