Sudan retains basic subsidies despite $1.62bn deficit in budget
Tuesday December 31 2019
Sudanese hold a banner of Sudan's Prime Minister Abdalla Hamdok during a ceremony marking the first anniversary of the uprising that toppled Omar al-Bashir, in Khartoum on December 25, 2019. PHOTO | ASHRAF SHAZLY | AFP
Sudan’s post-revolution transitional government is retaining basic subsidies, for now, even as a new budget faced a massive deficit of 73 billion local pounds ($1.62 billion).
The 2020 budget, the first since Omar al-Bashir was toppled in April, proposes double spending on education and health, key areas for the economy where it has raised by 100 per cent the allocations for the public health insurance coverage.
The budgetary proposals were approved on Sunday after a series of horse-trading between the key stakeholders in the transitional government; that amounted to the temporary retention of subsidies.
The new budget is allocating 9 billion Sudanese pounds ($200 million) to the Peace and Development Fund, as well as seven 7 percent of revenue to regions affected by wars and conflicts; part of efforts by the transitional government to rebuild the country.
The approval by the Transitional Sovereign Council and the cabinet in Sudan, who temporarily assumed the authority to legislate, followed revisions from earlier suggestions by the Finance Ministry to drop fuel subsidies.
The local Finance Ministry initially withdrew the draft budget that had included retention of subsidies on wheat and gas, but raising fuel subsidies. The Forces of Freedom and Change (FFC), a coalition of activists and other opponents of Bashir, had opposed arbitrary removal of subsidies, arguing the poor were still burdened by the economic situation.
The ultimate decision on whether to remove, amend or retain subsidies could be made in March next year once a national economic conference is held, officials said.
But Government Spokesperson, and Minister of Culture and Information, Faisal Muhammad Saleh, told a press conference on Sunday evening that the approval this time had followed what he called fruitful discussions between stakeholders.
A number of accompanying laws were also passed touching on revenues and expenditures for the fiscal year 2020—the VAT Law, and the amendment of the Capital Gains Tax Law—which officials said would be key in implementing the budget.
According to Sudanese Minister of Finance Ibrahim al-Badawi, the approved budget will now have total revenue estimates of 568.3 billion Sudanese pounds ($12.6 billion), with an expenditure of 584.4 billion Sudanese pounds ($12.94 billion). Development expenses were tagged at 58 billion Sudanese pounds ($1.28 billion) and a deficit of 73 billion pounds ($1.62 billion).
The government said it was reducing sending on defence from 9 per cent to 7 per cent; but will focus more on investments on education and health; perhaps signalling the direction of the government of Prime Minister Abdalla Hamdok.
Minister Al-Badawi said that the budget proposed the launch of a social protection programme targeting in its first stage 900,000 families (about 4.5 million people) of the poor, who would be chosen scientifically to provide direct cash support to them – 1,500 Sudanese pounds ($33.25) per month for each family, which is projected to increase with time.
The move to endorse the budget came as Sudan completes a year that saw turmoil, both before and after Bashir was removed from power last April. The local economy had shrunk in 2018 by 2.3 per cent, and the IMF predicted it could shrink further this year by 2.5 per cent. Inflation increased to 60 per cent in November, while the parallel exchange rate continues to decline rapidly, according to a bulletin by the World Bank.
The budget, in its first unmodified version, had been rejected by the Forces of Freedom and Change that share power with the military, part of the three-year transitional arrangement.
The Council of Ministers had announced on Saturday that it will back down from the previous decision to gradually lift subsidies on fuel during the 2020 budget. This came after a meeting held between the Central Council for Freedom and Change Forces and the Council of Ministers.
Mr Madani Abbas Madani, the Minister for Industry and Trade, praised the approved budget, especially on its focus on supporting health, education and sustainable development services. He argued the proposals could provide 250,000 job opportunities during the year 2020, improve revenue collection, combat smuggling and increase production. The budget also seeks to review the operations of state-owned companies and recover money looted.