Sanctions are destroying the Russian financial system; The Kremlin says the economic reality has changed

KHARTOUM: Sudan is once again heading for economic collapse following a coup in October, with exports falling more than 85% in January according to central bank data and the currency slipping on the black market.
Cut off from billions in foreign aid, a military-led government is raising prices and taxes on everything from health care to cooking gas, but the increases have angered struggling citizens.
Sudan’s long economic crisis – a legacy of decades of war, isolation and sanctions – had shown signs of easing before the coup, but now poses a new humanitarian risk as its people face renewed violence and increased hunger.
Military leaders have yet to name a prime minister and protests have been raging for months. The political deadlock is paralyzing business, said Amin Shibeika, a banker in Khartoum.
“No one is making plans for the future, everything is on hold. There is a lack of transparency, with no light at the end of the tunnel,” he said.
The October 25 coup ended a military-civilian power-sharing deal struck after former leader Omar Al-Bashir was overthrown in a 2019 uprising. Designed to lead to democratic elections, he had seen a civilian government implement painful economic reforms and win foreign aid and debt relief. It is now frozen.
In the leaders’ latest effort to rally rare international support, Mohamed Hamdan Dagalo, deputy head of Sudan’s ruling council and commander of the Rapid Support Paramilitary Forces, visited Moscow last week accompanied by the finance minister and chief armed group Jibril Ibrahim.
While the delegation met with senior officials, including Foreign Minister Sergei Lavrov, no major deal has been announced and Russia itself now faces sweeping Western sanctions following the invasion of Ukraine. .
NO RESCUE IN SIGHT
A senior Sudanese official said the government saw no foreign bailouts on the horizon, and Ibrahim said Sudan would rely on its own resources for this year’s budget.
According to a copy of the draft budget seen by Reuters, it targets a 145% increase in tax revenue and a 140% increase in income from the sale of goods and services.
Among the tax measures to achieve this is what traders say is a four- or five-fold increase in annual business license fees. But companies are so used to not paying taxes that it would be difficult to impose increases, said Shibeika, the banker.
“Business has virtually ceased in the past few months, so these are additional charges in difficult circumstances,” said a business owner in central Khartoum. “This is the worst since I started trading 20 years ago.”
Revenue and expenditure are expected to rise by more than a third, with a deficit of 363 billion Sudanese pounds ($820 million).
Although the government has ratified the budget, a senior finance ministry official said it was unrealistic and not being applied on the ground.
Analysts say it would not be possible to pay salaries and meet other expenses without resorting to inflationary money printing, which Ibrahim denied last week.
The Department of Finance did not respond to a request for comment.
“WE DON’T HAVE THE MONEY”
A week-long blockade on Port Sudan before the coup and barricades along a trade route with Egypt by anti-military protesters restricted exports of goods such as sesame seeds, peanuts, cotton, and gum arabic that bring in much-needed dollars.
In January, Sudan exported just $43.5 million worth of goods, down sharply from $293 million in December, according to central bank data seen by Reuters, although this is of a peak season for agricultural exports.
Following the devaluation of the Sudanese currency a year ago, the exchange rate stabilized at around 450 pounds to the dollar. But in recent weeks, the black market has resurfaced and the pound was trading Wednesday at 530 against the dollar, against an official rate of 443.50.
Dollar auction results show the central bank selling lower amounts, hinting at depleted reserves. Inflation has eased slightly, but remains at one of the highest rates in the world, at 260% in January.
Gasoline and electricity prices rose following global trends after the subsidy reforms, as did the cost of government-issued documents and subsidized cooking gas.
In a decision that was later suspended, the cost of admitting patients to public health facilities rose from 250 pounds to 4,200 pounds overnight last month, said Ali Shakir, director of one of the biggest public hospitals in the country.
He said that although he asked for an increase in the budget, “we were surprised that they wanted us to take it out of citizens’ pockets”.
Sudan’s ruling council said in a statement that prices would be reviewed and that the government did not consider healthcare as a source of revenue.
But rising costs could fuel further resentment over the kind of economic hardship that sparked the uprising against Bashir, including increasingly scarce subsidized bread.
“Life has become really, really terrible,” said Amna, a resident of Khartoum since the coup. “The bakery sells a piece of bread the size of a marble and says it’s 30 Sudanese pounds ($0.07). We don’t have the money for that. »


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Don F. Davis