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Sudan to raise taxes, duties to plug budget deficit

Sudan plans to increase taxes in an attempt to control its widening budget deficit caused by the loss of oil revenues

Reuters, Friday 8 Jun 2012
Sudan
(Photo: Reuters)
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Sudan plans to increase taxes and customs duties and cut spending to plug a gaping budget deficit caused by the loss of oil revenues since the secession of South Sudan, its finance minister told state news agency SUNA.

Sudan lost three-quarters of its oil output when South Sudan became independent in July, plunging it into an economic crisis that has been made worse by border fighting with South Sudan and several insurgencies in its borderlands.

The loss of most of its oil - the main source of state revenues and hard currency - has also driven up annual inflation to 30 percent in May from about half that level in June 2011.

The International Monetary Fund (IMF) urged Sudan last week to launch an emergency programme to overcome its "daunting" economic challenges. The government says it needs to plug a budget deficit of $2.4 billion.

Sudan plans a range of measures to increase revenue, Finance Minister Ali Mahmoud told SUNA late on Wednesday.

"The measures include liberation of fuel prices, and an increase in taxes and customs duties for luxury and telecommunications products, with the exception of consumer goods," he said, without elaborating.

The government will also raise fees for travellers and air tickets and will stop importing government cars and funding new official buildings, he said.

The ruling party unveiled plans last week to cancel fuel subsidies, which would remove a big burden on the budget.

Several Sudanese newspapers have criticised the plans because they will hit ordinary people. The biggest daily, al-Intibaha, whose head is a relative of President Omar Hassan al-Bashir, wrote this week the government was "playing with fire".

Sudan has avoided an "Arab spring" uprising like those in Egypt and Syria but rising social pressures have triggered small protests in recent months.

It has effectively devalued its currency by allowing banks and foreign exchange bureaux to trade dollars at a rate close to the black market quotations.

The government hopes to stabilise the Sudanese pound and attract remittances from millions of Sudanese working abroad who used to change their hard currency on the black market because it offered much better rates.

Oil revenues are vital to both economies, but Sudan and South Sudan have not yet agreed how much the landlocked new nation should pay to export its crude through the north.

Negotiations on the issue quickly broke down, and in January South Sudan shut down its entire oil output of 350,000 barrels a day to stop Khartoum taking oil in lieu of what the latter called unpaid export fees. 

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