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Sudan to Tackle Fuel Subsidies as Economy Hangs on the Edge

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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.

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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.

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IMF Boss Says 'All Eyes' on US Amid Risks to Global Economy – Financial Post

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The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.

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(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency. 

“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday. 

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The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”

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The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last. 

“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”

Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry. 

Read More: A Resilient Global Economy Masks Growing Debt and Inequality

Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year. 

“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”

The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.

China Overcapacity

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“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.

“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.

A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.

US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.

Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.

(Updates with additional Georgieva comments from eighth paragraph.)

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Poland has EU's second highest emissions in relation to size of economy – Notes From Poland

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Poland has EU’s second highest emissions in relation to size of economy  Notes From Poland

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IMF's Georgieva warns "there's plenty to worry about'' in world economy — including inflation, debt – Yahoo Canada Finance

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WASHINGTON (AP) — The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.

Inflation is down but not gone,” Kristalina Georgieva told reporters at the spring meeting of the IMF and its sister organization, the World Bank. In the United States, she said, “the flipside” of unexpectedly strong economic growth is that it ”taking longer than expected” to bring inflation down.

Georgieva also warned that government debts are growing around the world. Last year, they ticked up to 93% of global economic output — up from 84% in 2019 before the response to the COVID-19 pandemic pushed governments to spend more to provide healthcare and economic assistance. She urged countries to more efficiently collect taxes and spend public money. “In a world where the crises keep coming, countries must urgently build fiscal resilience to be prepared for the next shock,” she said.

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On Tuesday, the IMF said it expects to the global economy to grow 3.2% this year, a modest upgrade from the forecast it made in January and unchanged from 2023. It also expects a third straight year of 3.2% growth in 2025.

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The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8% from 2000 to 2019.

One reason for sluggish global growth, Georgieva said, is disappointing improvement in productivity. She said that countries had not found ways to most efficiently match workers and technology and that years of low interest rates — that only ended after inflation picked up in 2021 — had allowed “firms that were not competitive to stay afloat.”

She also cited in many countries an aging “labor force that doesn’t bring the dynamism” needed for faster economic growth.

The United States has been an exception to the weak productivity gains over the past year. Compared to Europe, Georgieva said, America makes it easier for businesses to bring innovations to the marketplace and has lower energy costs.

She said countries could help their economies by slashing bureaucratic red tape and getting more women into the job market.

Paul Wiseman, The Associated Press

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