Sudan must implement radical reforms or seek a bailout from friendly nations to pull its economy out of the downward spiral that helped trigger the nationwide protests now rocking the country, economists and bankers say.
The government has run up enormous budget deficits by subsidizing the cost of fuel, bread and other products. To cover this deficit, it has expanded the money supply.
But that has served to debase the currency, causing inflation to soar and the value of the Sudanese pound against other currencies to plummet – in turn pushing up the cost of subsidies and widening the deficit even further.
Attempts to raise bread and fuel prices to reduce the cost of subsidies sparked protests that will soon enter their second month, marking the most prolonged challenge to President Omar al-Bashir’s nearly 30 years in office.
The government announced an emergency 15-month austerity program in October, but it still offers deep subsidies on basic goods.
The effect of subsidies on the deficit is hard to assess clearly, however, since the finance ministry has yet to post the 2018 or 2019 budgets on its website.
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