Paris conference is key to Sudan’s transition and unblocking its economy
Yet the difficulties of transitioning from an authoritarian regime to democracy are enormous. Success will ultimately depend on the ability of the civilian government to cope with the persistent economic crisis, which has caused widespread daily hardship to millions of Sudanese, as well as hampering sustainable development and the implementation of the peace.
To achieve these goals, Sudan will have to rely heavily on its international partners.
The challenges of the transition
Sudan’s democratic transition is moving in the right direction, although more slowly than many Sudanese had hoped, especially the women and youth who led the revolution and those who suffered from decades of war, displacement and marginalization in the conflict zones of Sudan.
One of the government’s main priorities is to stabilize the economy. Over the past three years, Sudan has experienced severe economic deterioration, with poverty doubling, crippling inflation reaching over 300%, persistent shortages of essential commodities such as fuel, electricity and medicines and frequent blackouts. These challenges have been exacerbated by the Covid pandemic.
The dismantling of the Islamist deep state, the reform of the civil service and the security sector and the satisfaction of the demands for justice are essential if the government is to have the institutional capacity and the popular support necessary to implement its program of justice. transformation
Another priority is the achievement of comprehensive peace. However, the implementation of the Juba Peace Agreement (JPA) is progressing slowly due to lack of resources and spoilers from the old regime that want Sudan’s transition to fail.
Prime Minister Abdallah Hamdok walks a fine line between responding to the demands of the street to accelerate change and accommodate the interests of the military, with whom the civilian leaders coexist in the transitional government.
He stressed the need to make the civil-military partnership work, but it is also essential to form the transitional legislature as soon as possible to ensure accountability and oversight.
The government is further constrained by the fact that it has inherited a civil service and other institutions dominated by sympathizers of the Bashir regime.
The assassination of two young peaceful demonstrators and the wounding of others by the security forces just before Eid caused great anger. Dismantle the Islamist deep state, reform the civil service and the security sector, and implement the demands for justice are essential if the government is to have the institutional capacity and popular support to implement its transformation agenda.
Stabilize the economy
One of the government’s most urgent tasks is to address persistent commodity shortages – which have led to frequent protests across the country – and are caused by various problems, including a lack of foreign exchange to pay for essential imports, years of underinvestment in basic infrastructure and alleged manipulation of the distribution network by supporters of the old regime.
Provide rapid and tangible socio-economic benefits to the Sudanese people, as well as better public communication of the government’s concrete plans for corrective measures, is essential to create the political space and time to implement the structural economic reforms necessary to put Sudan on the path to growth. inclusive economy.
In accordance with a IMF Staff Monitored Program (SMP), important reforms were introduced to promote economic stabilization and create fiscal space for more social spending, including the removal of fuel subsidies, exchange rate unification and liberalization, and tariff increases. electricity.
Fuel subsidies had encouraged large-scale smuggling and weighed heavily on the budget, contributing to a large budget deficit that had to be covered by printing banknotes, thus causing high inflation.
The impact of subsidy reductions was cushioned by the family support program, a social safety net system that aims to provide cash payments to 80% of the population. This ambitious program has attracted significant donor support, with efforts to scale it up and expand access underway.
Since the formation of the new Cabinet in February, the pace of economic reform has accelerated. The unification of exchange rates reduced the risk of corruption, opened the door to international aid transfers and encouraged Sudanese in the diaspora to begin channeling their remittances through the formal banking system, thereby helping to build up reserves. exchange rate of the country.
Steps have also been taken to improve transparency by publishing more economic data, including the names of 600 state-owned companies, and placing military companies involved in civilian activities under the supervision of the Ministry of Finance.
Towards debt relief
Sudan, which has more than 50 billion dollars of foreign debt, is making progress in implementing key reforms under the IMF’s SMP and may be eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
If it maintains a credible reform record and clears its arrears to international financial institutions, Sudan could reach the HIPC Initiative decision point to launch the debt relief process by June 2021.
Thereafter, it will probably take two or three years to reach the completion point of full debt relief, subject to further reform. This would allow Sudan, the largest country eligible for HIPC relief, to erase almost all of its external debt and to access large-scale financing for infrastructure and social spending.
Thanks to bridging loans from the United States, United Kingdom, Sweden and Ireland, Sudan has already cleared its arrears to the World Bank and the African Development Bank (AfDB), giving it access to 2 billion dollars in conditional funding over two years from the World Bank. Bank and over $ 200 million in ADB grants. With the help of France, the clearance of Sudan’s debts to the IMF should be announced at the Paris conference.
The government is also trying to create a more favorable business environment, having promulgated laws on investment and public-private partnership and the establishment of an anti-corruption commission.
Sudan was once one of the few countries with a fully Islamic banking system, but Sudanese banks are now able to operate a conventional bank teller, which will make loans cheaper and expand the range of banking products available. . To increase the confidence of foreign investors, further reforms are needed to improve governance and the resilience of the banking sector.
Ensuring inclusive economic growth
Sudan has enormous untapped potential, including 10% of the world’s unused arable land, the waters of the Blue Nile and White Nile, abundant extractive resources, especially gold, and proximity to important markets such as the Gulf.
But the economy has major structural problems caused by 30 years of economic mismanagement and corruption, a lack of investment in productive sectors and low competitiveness, resulting in a large balance of payments deficit.
The possibilities for modernizing agriculture are immense and the increase in value-added production and the need for significant investments in integrated infrastructure in strategic areas, notably through digital transformation and renewable energies.
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However, to ensure inclusive and equitable growth, much will depend on governance reform and a more balanced development and investment strategy that tackles inequalities between the center and regions and facilitates the growth nodes to across Sudan.
The APP crucially calls for significant fiscal decentralization and increased support for peripheral development, while an upcoming national governance conference will define the powers of the new regional system.
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A poverty reduction strategy, which is being prepared as part of the HIPC process, should increase spending on essential basic services, in particular health and education, and devote more resources to vulnerable groups.
The government will also have to honor its commitments to increase women’s political participation and to give higher priority to the economic empowerment of women as well as to expanding education and employment opportunities for young people who represent women. two thirds of the Sudanese population.
At the end of the line
The Paris conference will offer a taste business opportunities available in Sudan. International support to Sudan has yet to translate into the level of external funding needed to meet its development and peace implementation challenges.
But if the economic reform agenda stays on track – along with the debt relief process and growing interest from foreign investors – it could be a game-changer by supporting Sudan’s democratic transition.