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Sudan cut off from $650 million of international funding after coup -Breaking



Aidan Lewis, Khalid Abdelaziz, and NafisaEltahir

KHARTOUM, Reuters – In November 2011, Sudan lost $650 million of international aid due to a coup. The finance minister of the dissolved government stated that the freeze had halted assistance. This put into doubt the future of basic import payments as well as the outcome of economic reforms.

Jibril Ibrahim said that the financing consisted of $500 million in World Bank budget support and $150 million special drawing rights from International Monetary Fund. He was also appointed to the civilian transitional government.

Funding from abroad was essential in Sudan’s emergence from years of isolation, and for supporting the transition to democracy which started with Omar al-Bashir’s overthrow in 2019.

This transition was halted by the Oct. 25 coup. After the coup, $700,000,000 in US economic aid was put on hold. Additionally, $2B in grant promises by the World Bank has been halted.

The military has announced on November 21 a plan to reinstate Prime Minister Abdalla Hamdok. The task of forming a technocrat government is his, but he will face opposition.

“Sudan enjoyed tremendous international support. “Donors will now be more cautious,” stated a former official in the dissolved government.

It will now fall to the military or government to demonstrate that they don’t want to return to the Bashir-era model, the ex-official stated.

The U.S. Treasury did not respond to requests for comment. According to the U.S. Treasury, it declined to comment on the $2.5 billion loan program for 39 months that was approved by IMF in June. It is still subject to periodic review and will continue to monitor “increasing developments”.

The inflation rate was one of the highest worldwide and had fallen before the coup. In February, the currency had stabilised after a sharp decline.

Bankers and diplomats from the West say that these reforms are at risk. It is not clear how Sudan will be able to finance imports without printing banknotes. This policy, which fueled a prolonged economic crisis and was stopped in the middle of its transition, has been criticized by Western bankers and diplomats.

A second ex-official said that Sudan’s reserves were sufficient to provide enough funds for just two months worth of strategic imports at the time the coup took place.

GOLD REVENUES

Ibrahim, an ex-rebel leader, secured his ministerial position through a peaceful deal and hopes to keep it. He said that international support will gradually return over the next three to 6 months, and that bills can be paid while reforms continue.

Ibrahim stated that “basically we depend upon tax, customs, and gold revenues” and mentioned other (state-owned) companies in different fields in an interview with the Finance Ministry in Khartoum. He said that while imports of basic commodities such as fuel, flour and medicine are not possible to cover, the vast majority of strategic commodities can be covered by exports.

The government had been working hard to cut its trade deficit via tax and customs changes, but these revenues were damaged by the blockade of a tribe at Port Sudan just before the coup. Another blockade was threatened.

Ibrahim stated that the major impact of international aid being frozen would be felt in areas such as water supply, electricity and health. To lessen the effect of subsidy reform, a basic income program has been frozen that was internationally funded.

Ibrahim explained that Sudan’s budget 2022 had no international assistance allowance, and was designed with the goal of adhering at least to 1.5% deficit limits as stipulated in an IMF financing program. He said that the projected growth rate for 2022 might fall to 3% or 1.5-2 percent.

Ibrahim stated that Sudan will seek investments rather than grants from the wealthy Gulf Arab countries, who are facing their own economic problems.

He said that although there were no big promises from countries, Arab and non-Arab to support the country’s efforts, contacts continue with all friend states.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.